w w w . L a w y e r S e r v i c e s . i n


Regional Provident Fund Commissioner, Jaipur v/s M/s. Narayani Udyog

    Civil Special Appeal (Writ) No. 120 of 1990
    Decided On, 07 July 1993
    At, High Court of Rajasthan Jaipur Bench
    By, THE HONOURABLE MR. JUSTICE N.C. KOCHHAR & THE HONOURABLE MR. JUSTICE M.R. CALLA
    For the Appellant: Narendra Jain, Advocate. For the Respondent: N.L. Jain, Sr. Advocate with Subhash Jain, N.K. Maloo, Advocates.


Judgment Text
Kochhar, J.1. All these four appeals, under Section 18 of the Rajasthan High Court Ordinance, 1949, arise out of the common order dated 29.3.1990 passed by a learned Single Judge of this Court. The brief facts giving rise to these appeals are as under :M/s. Modern Steels is a firm with Shri Krishna Kumar Lohia son of Shri Narendra Kumar Lohia as 'karta' of Krishna Kumar Saurav Kumar H.U.F. and his sister Smt. Rama Goyal wife of Shri Kailash Nath Goyal as partners. This firm has established a factory at Kota in which cold rolling of steel is done. The factory came within the purview of the Employees Provident Fund & Misc. Provisions Act, 1952 (the Act) w.e.f. 18.8.1982 as it had fulfilled the conditions of applicability envisaged under clause (a) of sub-section (3) of section 1 of the Act. It was allotted Code No. RJ/3346 and it started depositing the provident fund dues w.e.f. September, 1982.2. M/s Narayani Udyog is a firm with Shri Narendra Kumar Lohia as'karta' of Narendra Kumar Krishna Kumar H.U.F., Smt. Manju Devi Lohia wife of Shri Krishna Kumar Lohia, and Shri Krishna Kumar Bagaria son of Shri Mahavir Prasad Bagaria as 'karta' of Krishna Kumar Bagaria & Sons (HUF), as its partners. This firm has established a factory at Kota at a distance of 3 kilometers from the factory of Modern Steels. In the factory of Narayani Udyog hot rolling of steel is done. This factory was provisionally covered under the Act w.e.f. 30.4.1983 and, on receipt of a report from the Provident Fund Inspector, the Regional Provident Fund Commissioner, Jaipur (the Commissioner) issued a notice to M/s Modern Steels directing it to show cause why it should not be dubbed along with M/s Narayani Udyog and be covered under the Act w.e.f. 15.1980. Vide reply dated 8.9.1983, M/s Modern Steels contended that it was different from M/s Narayani Udyog and both of them could not be dubbed together. The Commissioner held enquiry under section 7-A of the Act and vide the impugned order dated 8.8.1988 held the M/s Modern Steels and M/s Narayani Udyog constituted one establishment for the purpose of the Act and were liable to be covered thereunder w.e.f. 1.6.1980. The Commissioner assessed a sum of Rs. 85,499/- as the amount of provident fund and administrative charges payable by M/s Modern Steels for the period from June, 1980 to August, 1982 and a sum of Rs. 1,10,243/- payable in that *count by M/s Narayani Udyog for the period from June, 1980 to April, 1983 and directed that if the amount was not deposited within 15 days of the receipt of the order by M/s Modern Steels the same be recovered as arrears of land revenue as provided in section 8 of the Act. A copy of the said order was sent to M/s Modern Steels under letter dated 11.8.1988 (Annx. 1) with a direction to report compliance within the time specified in the order. The above said order passed by the Commissioner was challenged by M/s Modern Steels as also by M/s Narayani Udyog by filing writ petitions which were registered as Nos. 194/89 and 195/89 respectively. It was pleaded by the two firms that they could not be clubbed together as one establishment for the purpose of the Act. M/s Narayani Udyog further contended that no notice had been issued to it before the impugned order was passed by the Commissioner.3. M/s Rajasthan Central Stores Pvt. Ltd. (hereinafter to be referred as the company) was incorporated as a Private Limited Company in the year 1949 under the Companies Act, 1913 and Shri B.P. Periwal and Shri G.P. Periwal are its two Directors. The company has been engaged in the business of sale and service of Godrej products in the rented premises situated at Mirza Ismail Road, Jaipur. The company wrote to the Commissioner for being covered under sub-section (4) of section 1 of the Act and the Commissioner acceeded to the request, without prejudice to it being covered under sub-section (3) of section 1 of the Act, if it was so found and, consequently, the company started depositing the provident fund dues w.e.f. November, 1982. On receipt of a report from the Provident Fund Inspector it was found that the company had employed 20 persons on 16.1.1982 and, as such, was directed to provisionally pay the provident fund dues with effect from the said date pending verification of the record and the company complied with the said order.4. M/s Periwal Trading Corporation (hereinafter to be referred to as the firm) is a firm with Shri Rupendra Periwal son of Shri B.P. Periwal, Shri Hari Shankar son of Shri G.P. Periwal, Smt. Shakuntala Devi wife of Shri B.P. Periwal and Smt. Savitri Devi wife of Shir G.P. Periwal as its four partners. This firm carries on the business of distribution of Usha Water Coolers and Electric Accessories besides of service and repair work of the Godrej products sold by the company. Vide letter dated 19.3.1983 the firm requested the Commissioner for its voluntary coverage under sub-section 4 of section 1 of the Act w.e.f. 1.4.1983 stating that it had never employed more than 19 persons to come under the provisions of the Act otherwise. The Commissioner acceeded to the request of the firm and allotted it Code No. RJ/3490 and the firm started depositing the provident fund dues from April, 1983. The Commissioner received a report from the Provident Fund Inspector to the effect that both the company and the firm were part and parcel of the same establishment and that the total number of persons employed by the said combined establishment was 21 as on 30.4.1976 and, as such, on that date the condition for coverage under clause (b) of sub-section (3) of section 1 of the Act had been fulfilled. After issuing notice, the Commissioner conducted an enquiry under section 7-A of the Act and, vide the impugned order dated 18.8.1988, held that the company as well as the firm were the family concerns of Shri B.P. Periwal and Shri G.P. Periwal, the two Directors of the company and were one establishment for the purpose of the Act. He further held that a sum of Rs. 77,915/- was payable by the company as provident fund dues and administrative charges for the period from May, 1976 to January, 1982 and a sum of Rs. 59,858/- was payable in the same account by the firm for the period from May, 1976 to March, 1983 and directed that if the amounts were not deposited within 15 days of the receipt of the order the same be recovered as arrears of land revenue. The copies of the order were sent to the company as well as to the firm vide letter dated 20.8.1988 (Annx. P-1) with a direction to report compliance within the period specified in the order. The company as well as the firm challenged the impugned order dated 18.8.1988 by filing writ petitions No. 697/89 and 342/89 respectively, on the g unds that they were separate establishments independent of each other and had no functional integrality and further that the establishment owned by the company could not be clubbed with the establishment owned by the firm.5. All the four writ petitions were contested by the Commissioner. After hearing the learned counsel for the parties, vide the impugned order dated 29.3.1990, a learned Single Judge of this Court has dismissed the writ petitions filed by the company and the firm by observing that there was no reason to interfere in the view taken by the Commissioner but has allowed the writ petitions filed by M/s Modern Steels and M/s Narayani Udyog and has quashed the impugned order dated 8.8.88 and the notice demanding the dues from the said two firms. In these circumstances, these four special appeals have been filed under section 18 of the Rajasthan High Court Ordinance, 1949; the former two appeals by the Commissioner and the letter two appeals by the company and the firm respectively.6. Before dealing with the questions involved in these appeals, it is necessary to refer to the relevant provisions of the Act. The Act, as its preamble shows, is to provide for the institution of provident fund for employees in factories and other establishments. Sub-section (3) of section 1 of the Act provides for the applicability of the Act to the establishments mentioned therein and sub-section (4) provides for the coverage of any establishment on request being received even if the provisions of the Act are otherwise not applicable to such an establishment. Section 2 defines various expressions and section 2-A makes it clear 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 part of the same establishment. Section 5 deals wih the framing of Employee's Provident Fund Scheme and for setting up a Fund thereunder. Section 6 deals with the contribution to be paid in the fund by the employer and the employees. Sections 6-A and 6-C deal with the framing of Employees' Family Pension Scheme and Employees' Deposit Linked Insurance Scheme respectively for setting up funds thereunder and in regard to the payments to be made therein. Section 7-A empowers the officers concerned to decide the disputes, if any, regarding the applicability of the Act to an establishment and to determine the amount due from any employer under any provision of the Act and section 8 deals with the manner of recovery of the amount due from the employer. Section 16 mentions the infancy period i.e. the period during which the provisions of the Act would not apply to an establishment from the date that it is set-up. The scheme of the Act shows that for its applicability, the unit to be considered is "the establishment", including its departments and branches, as they are considered to be the parts of "the establishment", and further that the employer of "the establishment" will have to contribute to the provident fund and other funds, created under the Act. An entrepreneur; whether an individual proprietor, or a partnership firm, or an incorporated company; may be engaged in various business activities and may set up several units in the form of establishments, and question often arises as to whether such units/establishments form parts of each other for the purposes of the Act or not, and such questions have been considered by the Apex Court as also by this Court and other High Courts, and various tests have been applied for deciding such questions, and some of the decisions have been noted in the impugned orders of the Commissioner as well as of the learned Single Judge. It, however, is not disputed that unless the two establishments have one and the same employer, they cannot be considered as a department or branch of each other. In other words, in the absence of a common employer, no test can be applied to consider whether any two establishments are parts of each other or not. The Commissioner appears to have been conscious of this position, but while clubbing the establishment of M/s Modern Steels with that of M/s Narayani Udyog, and the establishment of the company with that of the firm, has held that M/s Modem Steels and M/s. Narayani Udyog were owned by the members of the same family, headed by Narendra Kumar Lohia as head of the HUF, and that the company as well as the firm were the family concerns of B.P. Periwal and G.P. Periwal, the two Directors of the company.7. The establishments of the two firms are the factories set up in their names "M/s. Modern Steels" and "M/s. Narayani Udyog". No evidence has been brought to our notice to show that the factories concerned are not owned by the firm concerned, but, are in fact, owned by the HUF headed by Narendra Kumar Lohia. It, therefore, cannot be disputed that the firm concerned is the owner of the factory concerned and is the employer of the employees employed therein. Although the partners of these two firms, owning the establishments concerned, may be interested in each other; being closely related; the two establishments cannot be said to have a common employer and, therefore, the establishment of one firm cannot be considered to be the department or branch of the establishment of the other firm and, as such, its part.8. It is now well-settled that a company incorporated under the Companies' Act, is a legal person distinct from its members, and the property acquired by the company vests in it and not in its members. If any authority is needed for this purpose, referency may be made to the cases : Salomon Vs. Salomon Company Limited (1897 AC 22) and Bacha F. Guzdar Vs. Commissioner of Income-Tax (AIR 1955 SC 74). This position has been recognised by Section 34 of the Companies Act, 1956, which corresponds to Section 23 of the Indian Companies Act, 1913. It is also not disputed before us that the Directors of the company cannot be said to be the proprietors thereof, but are its agents, and the property of the company cannot be said to be the property of its Director. It is thus clear that B.P. Periwal and G.P. Periwal cannot be said to be the employers of the employees employed in the establishment of the company. The firm, admittedly, has four partners, who, though closely related to the two Directors of the company, are separate individuals, and no evidence has been brought to our notice to show that the establishment, set up by the firm, is not, in fact, owned by it. It, therefore, has to be held that the firm is the owner of its establishment and is the employer of the employees employed therein, and not the two said Directors of the company. In these circumstances, the establishment owned by the c

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ompany and the one owned by the firm cannot be said to have a common employer, and neither of the two establishments can be considered to be the department or branch or part of the other.9. The impugned orders dated 8th August, 1988 and 18th August, 1988, passed by the Commissioner, which are the subject-matter of these four appeals, are, therefore, not legal and cannot be upheld, and the appeals can be decided on this ground itself.10. In this view of the matter, the other contentions raised at the Bar supporting or assailing the impugned order passed by the learned Single Judge, need not be dealt with.11. For the above-said reasons, D.B. Civil Special Appeals (Writ) Nos. 120/90 and 121/90 styled as "Regional Provident Fund Commissioner, Jaipur Vs. M/s. Narayani Udyog, Kota"; and "Regional Provident Fund Commissioner, Jaipur Vs. M/s. Modern Steels, Kota", respectively, fail and are dismissed, but, the other two D.B. Civil Special Appeals (Writ) Nos. 122/90 and 123/90, styled as, "M/s. Rajasthan Central Stores Private Limited, Jaipur vs. Regional Provident Fund Commissioner, Jaipur"; and "M/s. Periwal Trading Corporation, Jaipur vs. Regional Provident Fund Commissioner, Jaipur", respectively, are allowed, the impugned orders passed by the learned Single Judge as also by the Commissioner, in their cases, are set aside, and the notice of demand dated 20th August, 1988 (Annexure-P. 1) is quashed. The four appeals are decided accordingly, leaving the parties to bear their own costs.
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