# M/s Torino Laboratories Pvt. Ltd v. Union of India & Ors

- **Citation:** 2025 INSC 849
- **Court:** Supreme Court of India
- **Decided:** 2025-07-15
- **Case number:** Civil Appeal No. 9540 of 2018
- **Bench:** K.V. Viswanathan, Joymalya Bagchi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-torino-laboratories-pvt-ltd-v-union-of-india-ors-38634
- **Pages:** 28

## Headnote

Whether the EPF Authorities were justified in treating the appellant
and the Respondent No.3 as one unit for the purpose of the
Employees' Provident Funds and Miscellaneous Provisions Act, 1952.
Headnotes†
Employees' Provident Funds and Miscellaneous Provisions
Act, 1952 - s.2A - Establishment to include all departments
and branches - Appellant's unit manufactured tablets and
syrups, while the Respondent No.3 manufactured injections
and capsules - Assistant Provident Fund Commissioner (APFC)
held that the appellant was part and parcel of the Respondent
No.3 for the purpose of applicability of the EPF Act on account of
having various common factors inter alia unity of management
with commonality of some Directors belonging to the same
HUF; unity of finance; both the units dealing with products of
pharmaceutical industry, etc. - Order upheld by the Appellate
Tribunal and High Court:
Held: Appellant and respondent No.3 were engaged in the same
industry i.e. pharmaceutical; they carried on business in premises
built on contiguous plots of land; shared common telephone and
facsimile numbers; had common website and e-mail IDs; their
Registered Office/Head Office and administrative office were the
same; both employed common security to guard the premises; there
was unity of management inasmuch as while the two brothers were
Directors of respondent No.3; one of them was also the Director
of the appellant while another brother and wife of one the brothers
were Directors in the appellant Company - There was also unity
of finance inasmuch as the HUF of one the brothers and his family
members funded both the companies - These findings by the APFC
cumulatively establish beyond doubt that the two entities were
* Author
[2025] 8 S.C.R.
175
M/s Torino Laboratories Pvt. Ltd. v. Union of India & Ors.
rightly treated as common for the purpose of the EPF Act - Plea
of the appellant that since the appellant and respondent No.3 are
two different juristic entities thus, s.2A cannot be applied and also,
the theory of clubbing cannot be invoked is rejected - Authorities
justified in seeking remittance of the dues from September 1995 -
No merit in the appeal - Theory of clubbing. [Paras 12, 31, 34-37]
Theory of clubbing - Determination of unity of ownership;
unity of management and control; features demonstrating the
presence of functional integrality - Tests for:
Held: No absolute and invariable test can be laid down for all cases -
The real purpose of the test is to find out the true relation between
the Parts, Branches and Units - If in their true relation they constitute
one integrated whole, it could be said that establishment is one and
if not, they are to be treated as separate units - Each case has to
be decided on its own peculiar facts, with regard to the scheme
and object of the statute under consideration and in the context
of the claim - In a given case, unity of ownership, management
and control may be the important test, while in certain other cases
Functional Integrality or general unity may be the determinative
consideration - In some instances, unity of employment could be
the most vital test - The employer/management's own conduct in
mixing up or not mixing up the capital, staff and management could
in a given case be a significant pointer - Mere separate registration
under the different statutes cannot be a basis to claim that the
units are separate - Similarly, maintenance of separate accounts
and independent financial statement is also not conclusive - Onus
lies on the employer/management to lead necessary evidence to
bring home their contention - Employees' Provident Funds and
Miscellaneous Provisions Act, 1952 - s.2A. [Para 34]
Employees' Provident Funds and Miscellaneous Provisions
Act, 1952 - s.2A - Establishment to include all departments
and branches - Plea of the appellant that since the appellant
and respondent No.3 are two different juristic entities thus,
s.2A cannot be applied and also, the theory of clubbing cannot
be

## Text

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[2025] 8 S.C.R. 174 : 2025 INSC 849
M/s Torino Laboratories Pvt. Ltd.
v.
Union of India & Ors.
(Civil Appeal No. 9540 of 2018)
15 July 2025
[K.V. Viswanathan* and Joymalya Bagchi, JJ.]
Issue for Consideration
Whether the EPF Authorities were justified in treating the appellant
and the Respondent No.3 as one unit for the purpose of the
Employees' Provident Funds and Miscellaneous Provisions Act, 1952.
Headnotes†
Employees' Provident Funds and Miscellaneous Provisions
Act, 1952 - s.2A - Establishment to include all departments
and branches - Appellant's unit manufactured tablets and
syrups, while the Respondent No.3 manufactured injections
and capsules - Assistant Provident Fund Commissioner (APFC)
held that the appellant was part and parcel of the Respondent
No.3 for the purpose of applicability of the EPF Act on account of
having various common factors inter alia unity of management
with commonality of some Directors belonging to the same
HUF; unity of finance; both the units dealing with products of
pharmaceutical industry, etc. - Order upheld by the Appellate
Tribunal and High Court:
Held: Appellant and respondent No.3 were engaged in the same
industry i.e. pharmaceutical; they carried on business in premises
built on contiguous plots of land; shared common telephone and
facsimile numbers; had common website and e-mail IDs; their
Registered Office/Head Office and administrative office were the
same; both employed common security to guard the premises; there
was unity of management inasmuch as while the two brothers were
Directors of respondent No.3; one of them was also the Director
of the appellant while another brother and wife of one the brothers
were Directors in the appellant Company - There was also unity
of finance inasmuch as the HUF of one the brothers and his family
members funded both the companies - These findings by the APFC
cumulatively establish beyond doubt that the two entities were
* Author
[2025] 8 S.C.R.
175
M/s Torino Laboratories Pvt. Ltd. v. Union of India & Ors.
rightly treated as common for the purpose of the EPF Act - Plea
of the appellant that since the appellant and respondent No.3 are
two different juristic entities thus, s.2A cannot be applied and also,
the theory of clubbing cannot be invoked is rejected - Authorities
justified in seeking remittance of the dues from September 1995 -
No merit in the appeal - Theory of clubbing. [Paras 12, 31, 34-37]
Theory of clubbing - Determination of unity of ownership;
unity of management and control; features demonstrating the
presence of functional integrality - Tests for:
Held: No absolute and invariable test can be laid down for all cases -
The real purpose of the test is to find out the true relation between
the Parts, Branches and Units - If in their true relation they constitute
one integrated whole, it could be said that establishment is one and
if not, they are to be treated as separate units - Each case has to
be decided on its own peculiar facts, with regard to the scheme
and object of the statute under consideration and in the context
of the claim - In a given case, unity of ownership, management
and control may be the important test, while in certain other cases
Functional Integrality or general unity may be the determinative
consideration - In some instances, unity of employment could be
the most vital test - The employer/management's own conduct in
mixing up or not mixing up the capital, staff and management could
in a given case be a significant pointer - Mere separate registration
under the different statutes cannot be a basis to claim that the
units are separate - Similarly, maintenance of separate accounts
and independent financial statement is also not conclusive - Onus
lies on the employer/management to lead necessary evidence to
bring home their contention - Employees' Provident Funds and
Miscellaneous Provisions Act, 1952 - s.2A. [Para 34]
Employees' Provident Funds and Miscellaneous Provisions
Act, 1952 - s.2A - Establishment to include all departments
and branches - Plea of the appellant that since the appellant
and respondent No.3 are two different juristic entities thus,
s.2A cannot be applied and also, the theory of clubbing cannot
be invoked:
Held: Rejected - While s.2A sets out that the establishment will
include all departments and branches it does not deal with a scenario
as to the tests for determining whether two juristic entities are set up
as an artificial device and subterfuge to sidestep the provisions of
the Act - Artificial devices, subterfuges and facades are commonly
176
[2025] 8 S.C.R.
Supreme Court Reports
resorted to, to create a smokescreen of separate entities for a variety
of purposes - Courts faced with such a scenario have a duty to
lift the veil and see behind applying the well-established tests to
determine whether the entities are really separate entities or are
they really a single entity - Hence, the contention that s.2A cannot
be applied if ostensibly two separately registered entities under the
Companies Act are involved is rejected, especially when the Court is
interpreting a beneficial legislation like the EPF Act. [Paras 12, 31]
Employees' Provident Funds and Miscellaneous Provisions Act,
1952 - s.16(1)(d) - Benefit of infancy protection for the period
26.09.1995 to 22.09.1997 u/s.16(1)(d) as it then stood, if to be given:
Held: No - In the present case, the claim for infancy protection
under the erstwhile s.16(1)(d) would not arise in view of the finding
of clubbing - Being an integrated unit of respondent no.3 since
1995, no separate infancy protection will enure to the benefit of
appellant. [Para 36]
Case Law Cited
Management of Pratap Press, New Delhi v. Secretary, Delhi Press
Workers' Union, Delhi and Another, AIR 1960 SC 1213; Regional
Provident Fund Commissioner and Another v. Dharamsi Morarji
Chemical Co. Ltd. (1998) 2 SCC 446; Regional Provident Fund
Commr. v. Raj's Continental Exports (P) Ltd. [2007] 3 SCR 636 :
(2007) 4 SCC 239; Associated Cement Companies Limited,
Chaibassa Cement Works, Jhinkpani v. Workmen [1960] 1 SCR
703 : AIR 1960 SC 56; L.N. Gadodia & Sons v. Regional Provident
Fund Commissioner [2011] 11 SCR 5008 : (2011) 13 SCC 517;
Shree Vishal Printers Ltd. v. Provident Fund Commissioner
[2019] 12 SCR 146 : (2019) 9 SCC 508; Regional Provident
Fund Commissioner v. Naraini Udyog [1996] Supp. 3 SCR 202 :
(1996) 5 SCC 522; Sayaji Mills Ltd. v. Regional Provident Fund
Commissioner [1985] 2 SCR 516 : (1984) Supp. SCC 610; The
Honorary Secretary, South India Millowners' Association and
Others v. The Secretary, Coimbatore Distruict Textile Workers'
Union [1962] Supp. 2 SCR 926; Management of Wenger and
Co. v. Their Workmen [1963] Supp. 2 SCR 862; Rajasthan
Prem Krishan Goods Transport Co. v. Regional Provident Fund
Commissioner, New Delhi and Others, [1996] Supp. 3 SCR 1 :
(1996) 9 SCC 454; Sumangali v. Regional Director, Employees'
State Insurance Corporation [2008] 10 SCR 1129 : (2008) 9 SCC
106 - referred to.
[2025] 8 S.C.R.
177
M/s Torino Laboratories Pvt. Ltd. v. Union of India & Ors.
List of Acts
Employees' Provident Funds and Miscellaneous Provisions Act,
1952.
List of Keywords
Establishment to include all departments and branches; One unit for
the purpose of the Employees' Provident Funds and Miscellaneous
Provisions Act, 1952; Two entities treated as common for the
purpose of the EPF Act; Common factors; Both units dealing with
products of Pharmaceutical industry; Both units engaged in the
same industry; Part and parcel; Tablets and syrups, Injections
and capsules; Assistant Provident Fund Commissioner (APFC);
Business in premises built on contiguous plots of land; Common
telephone and facsimile numbers; Common website and e-mail
IDs; Same registered Office/Head Office and administrative office;
Common security to guard the premises; Unity of ownership; Unity
of finance; Unity of management; Two different juristic entities;
Theory of clubbing invoked; Remittance of the dues; Functional
integrality; General unity; Unity of employment; Mixing up/not
mixing up the capital, staff and management; Separate registration
under different statutes; Separate units; Maintenance of separate
accounts; Independent financial statement; Artificial devices,
subterfuges and facades; Duty to lift the veil; Infancy protection;
Integrated unit; Beneficial legislation; Unity of labour; Transferability
of employees.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9540 of 2018
From the Judgment and Order dated 22.04.2016 of the High Court
of Madhya Pradesh at Indore in WP No. 2503 of 2011
Appearances for Parties
Advs. for the Appellant:
Gagan Gupta, Sr. Adv., Ananta Prasad Mishra.
Advs. for the Respondents:
Brijender Chahar, A.S.G., Vishnu Jain, Ms. Mani Munjal, Shantanu
Sharma, Aaditya Dixit, Amrish Kumar, Raj Bahadur Yadav,
Siddharth, Prateek Goyal, Harshit Manwani, Ujjwal Singh.
178
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Judgment / Order of the Supreme Court
Judgment
K.V. Viswanathan, J.
1.
The present appeal arises out of a judgment and order of the
Division Bench of the High Court of Madhya Pradesh, Bench at
Indore dated 22.04.2016 in Writ Petition No. 2503 of 2011. By the
said judgment and order, the High Court dismissed the writ petition
under Article 227 of the Constitution of India filed by the appellantherein and upheld the order of the Employees' Provident Fund
Appellate Tribunal, (for short 'the Appellate Tribunal') New Delhi
dated 24.01.2011 which order had, in turn, upheld the order dated
17.02.2006 passed by the Assistant Provident Fund Commissioner,
(for short 'APFC') Indore. The APFC had held that the appellant
was part and parcel of M/s Vindas Chemical Industries Private
Limited (hereinafter referred to as 'Vindas') - the third respondent
herein for the purpose of applicability of the Employees' Provident
Funds and Miscellaneous Provisions Act, 1952 (for short the 'EPF
Act') with effect from September, 1995. Appropriate consequential
directions to remit the dues were also passed. Aggrieved by the
judgment and order of the High Court, the appellant has preferred
this appeal, by way of special leave.
BRIEF FACTS: -
2.
Indisputably, on 22.11.1988, Dr. Darshan Kataria and his brother
Niranjan Kataria set up the respondent No.3-Vindas for manufacturing
injections and capsules of certain specified drugs.
2.1 The factory was situated at Plot No.65, Sector-1, Pithampur,
District Dhar, Madhya Pradesh. Vindas was incorporated with
the Registrar of Companies, Madhya Pradesh.
2.2 Subsequently, on 05.09.1990, Shri Vasudev Kataria and
Smt. Rajni Kataria, wife of Darshan Kataria incorporated the
appellant-Company with the Registrar of Companies in the
State of Maharashtra. Later it transpires from the record that
Mr. Darshan Kataria was also a director in the appellantCompany.
[2025] 8 S.C.R.
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M/s Torino Laboratories Pvt. Ltd. v. Union of India & Ors.
2.3 However, the factory of the appellant was set up and business
of production of tablets and later liquid syrups was set up at
Plot No. 65/1, Sector-1, Pithampur, Dhar, Madhya Pradesh. It
is also undisputed that Vindas was covered under the EPF Act.
2.4 Inspections were carried out at the appellant's premises on
17/20.01.2005 and a communication was sent on 24.01.2005
to deposit the provident fund contribution and administrative
charges w.e.f. 01.04.2004, though it was mentioned that the
date was liable to change and a final decision would be taken
after the inspection of previous records.
2.5 The appellant, by its reply of 04.02.2005, opposed the
applicability of the EPF Act on the ground that the workers/
employees did not exceed the prescribed number. It must also
be pointed out that in the communication of 20.01.2005, the
issue that was highlighted by the Department was about the
number of employees exceeding twenty.
2.6 Another inspection was carried out on 28.03.2005 and in the
inspection note it was categorically stated that the establishment
of the appellant was situated within the premises of Vindas-the
third respondent and common security was employed for both
the establishments and that the Managing Director of Vindas
was Dr. Darshan Kataria.
2.7 Thereafter, on 29.04.2005, a summons to appear in person
under Section 7A of the EPF Act was issued to the appellant.
Section 7A empowers the authorities to conduct such enquiry
as they may deem necessary and pass orders with regard to
disputes about coverage of establishments under the EPF Act.
The appellant was asked to produce all the attested copies of
the relevant records to determine the amount due for the period
April, 2004 to March, 2005.
2.8 The appellant, though by its reply dated 03.05.2005, denied
any liability however, stated that they were voluntarily accepting
coverage of the unit and will start contributing from 01.04.2005.
Hence, this appeal really concerns the period prior to 01.04.2005
and the liability thereon. The appellant also responded to
the summons by its letters of 13.06.2005, 10.10.2005 and
17.10.2005.
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2.9
What is significant is in the submission of 10.10.2005, the
appellant adverted to the proceedings at the hearing on
23.09.2005 wherein they were informed that the authorities are
evaluating the possibility of clubbing the unit of the appellant
with Vindas-respondent No.3 and that the appellant was
provided with the inspection reports of the unit of VindasRespondent No.3. The appellant also in the submission of
10.10.2005 dealt with in detail as to how clubbing with VindasRespondent No.3 was not warranted and how the appellant
was an independent and separate entity.
2.10 It is also not in dispute that the Inspection Report of 28.03.2005
along with the Inspection Report of 17.01.2005 and 20.01.2005
have been furnished to the appellant on 10.10.2005, as set
out in the written submissions filed before us.
2.11 When matters stood thus, it appears that there was a further
report of 10.11.2005 where again clubbing of the two units,
namely, of the appellant and of Vindas was adverted to by
the Department to which the appellant filed its submission on
20.12.2005 disputing the said position.
2.12 On 17.02.2006, the APFC passed an order rejecting the
contentions of the appellant, including the contention on the
locus standi of the Trade Union which had raised the issue of
the two units being the same by holding that the issue of locus
standi was immaterial if otherwise a case for clubbing was
established. The APFC found the following common factors:-
a)
that both the units dealt with products of pharmaceutical
industry;
b)
that both worked from the same premises with the
common entry and without any visible demarcation with
addresses of the appellant being Plot No. 65/1, Sector-1,
Pithampur and of Vindas - Respondent No.3 being Plot
No. 65, Sector-1, Pithampur, District Dhar;
c)
that the telephone nos. of both the appellant and Vindasrespondent No.3 were common and the order set out the
actual telephone no. That the entire factory was guarded
by the same security personnel, namely, M/s Benaras
Security Services;
[2025] 8 S.C.R.
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M/s Torino Laboratories Pvt. Ltd. v. Union of India & Ors.
d)
that both the companies maintained their common
Administrative Office at 102, Prabhudeep Apartment, 11
Indrapuri Colony, Indore and the Administrative Office
had common telephone nos. and facsimile no.;
e)
That the two companies shared the same website and
same e-mail IDs;
f)
that the Registered Office of the appellant at 210, Adamji
Building, 413, Narsi Natha Street, Masjid Bunder Road,
Mumbai was the Head Office of Respondent No.3-Vindas
with same telephone no. and facsimile no.
g)
That there was commonality of some Directors and that
too belonging to the same Hindu Undivided Family.;
h)
That the source of finance was the same Hindu Undivided
Family in the name of Director, Creditor or Shareholder;
2.13 In view of this, the APFC found that there was Unity of
Purpose and Functional Integrality as there was common
factory, common administration/Head Office/Registered Office,
common e-mail ID/website and common source of finance.
The APFC disregarded the aspect of separate registration
with the Registrar of Companies and different Government
Departments and held that the two units are one and the
same for the purpose of the EPF Act.
2.14 The appellant filed an appeal under Section 7-I of the EPF Act
before the Appellate Tribunal. According to the appellant, after
the Appellate Tribunal adjourned the hearing to 09.12.2010,
the files were not traceable and no further notice of hearing
after 09.12.2010 was received. In spite of that, on 24.01.2011,
the Appellate Tribunal dismissed the appeal.
2.15 A Writ Petition being W.P. No. 2503 of 2011 filed before the High
Court of Madhya Pradesh, Indore Bench was unsuccessful.
That is how the case presents itself before us.
CONTENTIONS OF LEARNED COUNSEL: -
3.
We have heard Mr. Gagan Gupta, learned Senior Advocate, for
the appellant and Mr. Siddharth, learned counsel for the APFCRespondent No. 2 Authorities and Mr. Brijender Chahar, learned
Additional Solicitor General for the Union of India.
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4.
Mr. Gagan Gupta, learned Senior Advocate, contends that initially
the Authorities proceeded on the basis of the numerical strength of
the employees being in excess of 20 at the appellant's unit and the
aspect of clubbing was introduced as an afterthought. That notice
of clubbing ought to have been issued to Vindas-respondent No.3
instead of issuing to the appellant; that Section 2A of the EPF Act
cannot apply to two juristic entities; that both the appellant and the
respondent No.3-Vindas are separately registered under the Drugs
and Cosmetics Act, 1940, the Factories Act, 1948 and the two entities
hold separate account numbers/registrations under the Central Sales
Tax, Central Excise, Service Tax, ESI and also hold separate PAN
and Corporate Identification Nos.
5.
Learned Senior Advocate contends that the electricity and water
connections for both the establishments are separate and that
the Municipal Corporation Property Tax is being separately levied.
Learned Senior Advocate further contends that the summon issued
was for the period April, 2004 to March, 2005. However, the APFC,
by its order, has directed compliance from September, 1995. Learned
Senior Advocate contents that admittedly there was no interchange
of employees. Learned Senior Advocate relied on the award of the
Labour Court dated 21.07.2010 where the stand of the employees of
the appellant that they should be permitted to work at Respondent
No.3-Vindas was rejected. Learned Senior Advocate contended that
there was no functional integrality or interdependence between the two
establishments and that while the appellant manufactures tablets and
syrup, respondent No.3-Vindas manufactures injections and capsules.
Without prejudice, learned Senior Advocate contends that in the event
of the submissions being rejected, the benefit of infancy protection be
given for the period 26.09.1995 to 22.09.1997 under Section 16(1)(d)
of the EPF Act as it then stood. Learned Senior Advocate relied on the
judgments of this Court in Management of Pratap Press, New Delhi
vs. Secretary, Delhi Press Workers' Union, Delhi and Another,
AIR1960 SC 1213, Regional Provident Fund Commissioner and
Another vs. Dharamsi Morarji Chemical Co. Ltd., (1998) 2 SCC
446 and Regional Provident Fund Commr. vs. Raj's Continental
Exports (P) Ltd, (2007) 4 SCC 239 in support of his submissions.
6.
Mr. Siddharth, learned counsel for the EPF Authorities countered the
submissions by contending that the question as to what constitutes
an establishment is a mixed question of fact and law which ought to
[2025] 8 S.C.R.
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M/s Torino Laboratories Pvt. Ltd. v. Union of India & Ors.
be answered in the context of the facts of the given case, keeping in
mind the object of the statute. The learned counsel contended that
the appellant and Vindas-Respondent No.3 constituted a common
establishment for the purpose of the EPF Act and that the findings
of the APFC on the aspect of the two entities being engaged in
the pharmaceutical business, carrying on the business in the same
factory premises by sharing the common telephone/facsimile nos.,
same website and e-mail ID called for no interference. According to
the learned counsel the unity in management and unity in finance
and the existence of common administrative/Head Office/Registered
Office also pointed to the functional integrality. Learned counsel
contended that the burden to establish that there was no unity was
on the appellant which the appellant failed to discharge; that since
the appellant and respondent No.3 would be collectively assessed
but since the liability will be only for the respective employees of
the units there was no need to issue separate summons to VindasRespondent No.3; that the order of the Labour Court cannot bind
the authorities under the EPF Act as the rights under the two Acts
are different and that the Labour Court when it decided that there
was no unity of employment did not have occasion to deal with the
other aspects dealt with by the APFC. Learned counsel refuted the
arguments of the appellant that they were not heard by the Tribunal
since no document was placed to establish the fact that no notice
was issued to the appellant by the Tribunal and that, in any event,
the said argument was not raised before the High Court. Learned
counsel relied on the judgments of this Court in Associated Cement
Companies Limited, Chaibassa Cement Works, Jhinkpani vs.
Workmen, AIR 1960 SC 56, L.N. Gadodia & Sons vs. Regional
Provident Fund Commissioner, (2011) 13 SCC 517, Shree Vishal
Printers Ltd. vs. Provident Fund Commissioner, (2019) 9 SCC 508
and Regional Provident Fund Commissioner vs. Naraini Udyog,
(1996) 5 SCC 522 to make good his submissions.
7.
We have considered the submissions of the respective parties and
carefully perused the records of the case.
QUESTION FOR CONSIDERATION: -
8.
The question that arises for consideration is whether the EPF
Authorities were justified in treating the appellant and the VindasRespondent No. 3 as one unit for the purpose of the EPF Act?
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CERTAIN PRELIMINARY ASPECTS: -
9.
Before we deal with the main issue, we would, at the outset, dispose
of certain preliminary points raised for consideration. The aspect
of violation of natural justice before the Tribunal was not argued
before the High Court. In any event, we are considering the matter
in detail on merits here and, as such, that aspect need not detain us
any further. The contention based on the award of the Labour Court
dated 21.07.2010 also does not carry the case of the appellant any
further. First of all, the APFC, by its order of 17.02.2006, elaborately
considered the matter applying the various tests and concluded that
the two units are the same for the purpose of the EPF Act. The issue
before the Labour Court was about the entitlement of the workers of
the appellant to claim employment in Vindas-respondent No.3 and
while answering that reference the Labour Court held that there was
no clear evidence regarding the aspect of the workers of the appellant
having worked in the unit of respondent No.3-Vindas. None of the
other indicia for clubbing referred to by the APFC were considered
relevant. In any case, in view of the multiplicity of factors adverted
to by the APFC, the award has no bearing for the determination of
the issue.
ANALYSIS AND REASONS: -
EPF ACT - A BENEFICIAL LEGISLATION
10. The EPF Act is a beneficial legislation intended to provide for the
institution of provident funds, pension fund and deposit-linked
insurance fund for employees in factories and other establishments.
It is a welfare legislation intended to ameliorate the conditions of
workmen in factories and other establishments. This Court in Sayaji
Mills Ltd. vs. Regional Provident Fund Commissioner, 1984 Supp.
SCC 610 has held that the EPF Act should be construed so as to
advance the object with which it is passed and any construction
which would facilitate evasion of the provisions of the Act should
be avoided.
LAW ON CLUBBING: -
11. The crucial issue that arises for consideration in this case is - whether
the authorities were justified in treating the appellant and Vindasrespondent No.3 as one unit for the purpose of the EPF Act and
[2025] 8 S.C.R.
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M/s Torino Laboratories Pvt. Ltd. v. Union of India & Ors.
were the correct tests to determine the same applied? Section 2-A
of the EPF 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."
12. The argument of the learned Senior Counsel for the appellant that
since the appellant and Vindas-respondent No.3 are two different
juristic entities and that would not be covered within the sweep of
Section 2A is only stated to be rejected. While Section 2A sets out
that the establishment will include all departments and branches it
does not deal with a scenario as to the tests for determining whether
two juristic entities are set up as an artificial device and subterfuge
to sidestep the provisions of the Act.
13. The question in this case has to be answered by applying the wellestablished theories to determine what would constitute unity of
ownership or unity of management and control and the features
that will demonstrate the presence of functional integrality. This
issue is no longer res integra and has been settled by a long line
of judgments of this Court.
14. The earliest case where this issue was discussed was in Associated
Cement Companies Ltd. (supra) where this Court had to examine the
question whether the lay off of the workers in certain sections of the
Chaibasa Cement Works due to a strike on the part of the workmen
at the Rajanka limestone quarry was justified under Section 25-E (iii)
of the Industrial Disputes Act, 1947. Section 25-E (iii) of the I.D. Act
stated that no compensation was to be paid to workmen who have
been laid off due to a strike or slowing-down of production on the
part of workmen in another part of establishment. In the process of
examining the said question, this Court held as under:-
"11. The Act not having prescribed any specific tests for
determining what is 'one establishment', we must fall
back on such considerations as in the ordinary industrial
or business sense determine the unity of an industrial
establishment, having regard no doubt to the scheme and
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object of the Act and other relevant provisions of the Mines
Act, 1952, or the Factories Act, 1948. What then is 'one
establishment' in the ordinary industrial or business sense?
The question of unity or oneness presents difficulties
when the industrial establishment consists of parts, units,
departments, branches etc. If it is strictly unitary in the
sense of having one location and one unit only, there is
little difficulty in saying that it is one establishment. Where,
however, the industrial undertaking has parts, branches,
departments, units etc. with different locations, near or
distant, the question arises what tests should be applied for
determining what constitutes 'one establishment'. Several
tests were referred to in the course of arguments before
us, such as, geographical proximity, unity of ownership,
management and control, unity of employment and
conditions of service, functional integrality, general unity
of purpose etc. To most of these we have referred while
summarising the evidence of Mr Dongray and the findings
of the Tribunal thereon. 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 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 organisation; many enterprises may
have functional integrality between factories which are
separately owned; some may be integrated in part with
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units or factories having the same ownership and in part
with factories or plants which are independently owned.
In the midst of all these complexities it may be difficult to
discover the real thread of unity. In an American decision
(Donald L. Nordling v. Ford Motor Company, (1950) 28
AIR, 2d 272 there is an example of an industrial product
consisting of 3800 or 4000 parts, about 900 of which came
out of one plant; some came from other plants owned
by the same Company and still others came from plants
independently owned, and a shutdown caused by a strike
or other labour dispute at any one of the plants might
conceivably cause a closure of the main plant or factory."
15. As was rightly pointed out, it is impossible to lay down any one test
as an absolute and invariable test for all cases.
16. Associated Cement Companies Ltd. (supra) was followed in
Pratap Press (supra). In Pratap Press (supra), the issue was
whether the profit or loss of the Press and the publications "Vir
Arjun" and "Daily Pratap" were to be pooled for the question of
deciding bonus. While the employer contended that the press and
Vir Arjun were one establishment and Daily Pratap was a separate
partnership firm, the workers contended that the accounts of all the
three should be taken into account or alternatively only the Press
should be taken into account. While answering the issue, the Court
acknowledged that the question whether the two activities in which
the single owner is engaged are one industrial unit or two distinct
industrial units was not always easy of solution and no hard and fast
rule could be laid down. It was also acknowledged that each case
has to be decided on its own peculiar facts. It was held that in some
cases, two activities would be so closely linked that no reasonable
man would consider them as independent industries. Para 2 of the
said judgment is set out hereunder:-
"2. The question whether the two activities in which the
single owner is engaged are one industrial unit or two
distinct industrial units is not always easy of solution. No
hard and fast rule can be laid down for the decision of
the question and each case has to be decided on its own
peculiar facts. In some cases the two activities each of
which by itself comes within the definition of industry are
so closely linked together that no reasonable man would
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consider them as independent industries. There may
be other cases where the connection between the two
activities is not by itself sufficient to justify an answer one
way or the other, but the employer's own conduct in mixing
up or not mixing up the capital, staff and management
may often provide a certain answer".
17. This Court first examined the question whether the Press and the
paper were so interdependent that one could not exist without the
other. It concluded that there was no functional interdependence
between the press unit and the paper unit for the two to be considered
one industrial unit. Not stopping there, this Court also held that it
was necessary to further consider the conduct of the businessman
himself to see whether he mixed up the capital of the two, the profits
of the two and the labour force of the two units. This Court also
considered whether there was evidence to show as to whether the
capital employed in the two units came out from one fund. Para 6
and 7 of Pratap Press (supra) are extracted hereinbelow:-
"6. Coming now to the facts of the present appeals we
find that the functions of the Press and the Vir Arjun paper
cannot be considered to be so interdependent that one
cannot exist without the other. That many presses exist
without any paper being published by the same owner is
common knowledge and is not seriously disputed. Nor
is it disputed that an industry of publishing a paper may
well exist without the same owner running a press for
the printing of the paper. The very fact that Daily Pratap
owned by a partnership firm, was being printed at the
Pratap Press belonging to Shri Narendra itself shows this
very clearly. It cannot therefore be said that there is such
functional interdependence between the press unit and the
paper unit that the two should reasonably be considered
as forming one industrial unit.
7. Along with this it is necessary to consider the conduct
of the businessman himself. Has he mixed up the capital
of the two, the profits of the two and the labour force of
the two units? These are matters on which the employer
is the best person to give evidence from the records of
his concerns. No evidence has however been produced
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to show that at any time before the dispute was raised he
treated the capital employed in the two units as coming
from one single capital fund, nor anything to show that
he pooled the profits or that the workmen were treated as
belonging to one establishment. It is interesting to note that
there is no record showing whether for his own purposes
he treated the assets of the two units as forming one
composite whole or the assets of two distinct units has
been produced. The profit and loss accounts which we find
on the record appear to have been prepared sometime in
26-12-1951, - apparently after the reference had been
made and the dispute whether these units were one or
two, had arisen. No weight can therefore be attached to
the fact that in this profit and loss account - both the
receipts from the press and the receipts from the Vir Arjun
were shown as the income."
Ultimately, this Court concluded that the Press was a standalone unit.
18. The Honorary Secretary, South India Millowners' Association and
Others vs. The Secretary, Coimbatore Distruict Textile Workers'
Union, [1962] Supp. 2 SCR 926, was a case that arose in the context
of award of bonus to employees. This Court considered the question
whether Saroja Mills Ltd. Coimbatore and Thiagaraja Mills, Madurai
run by Saroja Mills Ltd. constituted separate units or they were to
be treated as one. While the Management contended that the units
were separate, the workmen contended to the contrary. Answering
the question, this Court while acknowledging that the issue has to
be determined in the light of the facts of each case (at page 943)
set out the following principles:-
"The question thus raised for our decision is not always
easy to decide. In dealing with the problem, several
factors are relevant and it must be remembered that the
significance of the several relevant factors would not be the
same in each case nor their importance. Unity of ownership
and management and control would be relevant factors.
So would the general unity of the two concerns; the unity
of finance may not be irrelevant and geographical location
may also be of some relevance; functional integrality can
also be a relevant and important factor in some cases. It is
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also possible that in some cases, the test would be whether
one concern forms an integral part of another so that the
two together constitute one concern, and in dealing with
this question the nexus of integration in the form of some
essential dependence of the one on the other may assume
relevance. Unity of purpose or design, or even parallel or
co-ordinate activity intended to achieve a common object
for the purpose of carrying out the business of the one or
the other can also assume relevance and importance, vide
Ahmedabad Manufacturing & Calico Printing Co. Ltd. v.
Their Workmen [1951] 2 LLJ 657."
19. It will be seen that this Court held that several factors are relevant
and the significance and importance of the several relevant factors
would not be the same in each case. It was also held that unity of
ownership and management and control, general unity of the two
concerns; unity of finance; geographical location, functional integrality
would all be relevant factors depending on the facts of each case.
It was further held that unity of purpose or design or even parallel
or coordinate activity intended to achieve a common object for the
purpose of carrying out the business of the one or the other would
also assume relevance and importance.
20. Specifically repelling the argument of the Management that the
test of functional integrality was the only test and absent functional
integrality the units will have to be considered separate, this Court
in South India Millowners' Association (supra) held as under: -
"Mr Sastri, however, contends that functional integrality
is a very important test and he went so far as to suggest
that if the said test is not satisfied, then the claim that
two mills constitute one unit must break down. We are
not prepared to accept this argument. In the complex
and complicated forms which modern industrial enterprise
assumes it would be unreasonable to suggest that any
one of the relevant tests is decisive; the importance and
significance of the tests would vary according to the facts in
each case and so, the question must always be determined
bearing in mind all the relevant tests and corelating them
to the nature of the enterprise with which the Court is
concerned. It would be seen that the test of functional
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integrality would be relevant and very significant when
the Court is dealing with different kinds of businesses run
by the same industrial establishment or employer. Where
an employer runs two different kinds of business which
are allied to each other, it is pertinent to enquire whether
the two lines of business are functionally integrated or
are mutually inter-dependent. If they are, that would, no
doubt, be a very important factor in favour of the plea
that the two lines of business constitute one unit. But the
test of functional integrality would not be as important
when we are dealing with the case of an employer who
runs the same business in two different places. The fact
that the test of functional integrality is not and generally
cannot be satisfied by two such concerns run by the same
employer in the same line, will not necessarily mean that
the two concerns do not constitute one unit. Therefore, in
our opinion, Mr Sastri is not justified in elevating the test
of functional integrality to the position of a decisive test
in every case. If the said test is treated as decisive, an
industrial establishment which runs different factories in
the same line and in the same place may be able to claim
that the different factories are different units for the purpose
of bonus. Besides, the context in which the plea of the
unity of two establishments is raised cannot be ignored.