The Regional Provident Fund Commissioner,
Bombay Vs. Shree Krishna Metal Manufacturing Co., Bhandara  INSC 94 (14
14/03/1962 GAJENDRAGADKAR, P.B.
CITATION: 1962 AIR 1536 1962 SCR Supl. (3)
CITATOR INFO :
E&F 1964 SC 314 (4,5,8) F 1965 SC1076
(12) RF 1971 SC2577 (4,13,17)
Grammer-Context-Composite factory--Different industries-Whether
"factory"Determinative industry, which is-Employees' Provident Funds
Act, 1952 (19 of 1952), ss. 1(3) (a), (2) (g), Schedule I.
The respondent company in the first appeal
carried on the business of manufacturing brass, copper and 'kasa' circular
sheets for manufacturing utensils there from, milling paddy, a flour mill and a
saw mill in the same compound. it had a rolling mill for the first item of its
business and had other mills for the other for each of which it employed
different set of workmen, but there were common clerks and other employees for
the entire business. When the Employees Provident Funds Act came into force the
company was required to comply with its terms. It challenged the applicability
of the Act to it successfully by way of a writ petition before the High Court
of Bombay at Nagpur.
The respondent in the second appeal were
mills which manufactured Hydrogenated vegetable oil. They also manufactured tin
containers for marketing and storing and its product in a separate
establishment in which were employed only 31 workmen as against 211 employed
for the manufacture of oil. The mills were also asked to comply with the Act,
but contested the applicability of the Act to their industry which was
manufacture of oil and not tin containers. They also successfully challenged
the order of the appellant against them by a writ petition before the High
Court of Bombay, Nagpur Bench. In both the appeals it was contended that each
of the respondents was a factory' within the meaning of s. 1 (3) (a) of the Act
and that the High Court was in error in construing it otherwise.
Held, that the fact that the Act was
beneficent piece of legislation aimed at promoting the welfare of the employees
must he borne in mind in construing it and that there was no warrant in the
language or context to read into or imply into s. 1 (3) (a) the sense of
exclusive engagement in the schedule 816 industry and that composite factories
were well within the meaning of 'factory' which was comprehensively defined by
s.2(g) and later made clearer by the amendment by which establishments"
were included within the meaning of 'factory'.
Held, further, that in s. 1 (3) (a) the
qualification in which fifty or more persons are employed' though it
immediately followed the words industry' specified Schedule 1, properly applied
to 'factory' which proceeded the latter words and that the applicability of the
ordinary rules of grammer to a section is to be determind by the context and by
reference to other relative provisions of the Act.
Held, further, that the expression engaged in
any industry specified in Sch. I' means primarily or mainly engaged in any
industry as contrasted with incidentally and in that sense minor or subsidiary
activities for the purpose of feeding the main industry would not determine the
character of the industry with reference to the Schedule. When two
constructions are possible each of which leads to some anomolies that which is
on the whole consistent with common sense and the current understanding of the
expression used should be preferred.
Held, also that the respondent in the first
appeal Was commercially engaged in a scheduled industry among others and the
Act was applicable to it; further held that the respondent in the second appeal
was mainly engaged in an industry not included in the Schedule but was engaged
incidentally and only for the feeding that industry in manufacturing containers
and hence did not come within the Act.
CIVIL APPELLATE JURISDICTION : Civil Appeals
Nos, 361 and 387 of 1959.
Appeals from the judgment and order dated
March 1957, of the Bombay High Court at Nagpur in Miso. Petn. Nos. 282 and 335
B. Sen and P. D. Menon for the appellants.
I. N. Shroff, for the respondent (in C. A.
A. V. Viswnatha Sastri and V. J. Merchanr,
for respondent (in C. A. No. 387 of 1959).
817 1962. March 14. The Judgment of the Court
was delivered by GAJENDRAGADKAR, J.-These two appeals have been heard together
because they raise a common question of construction of section 1(3)(a) of the
Employee's Provident Funds Act, 1952 (No. 19 of 1952) (hereinafter called the Act).
The Regional Provident Fund Commissioner, Bombay, is the appellant in both the
appeals, whereas Shree Krishna Metal Manufacturing Co., and Oudh Sugar Mills
Ltd. are the respondents 'respectively. Shree Krishna Metal Mfg. Co. is a
partnership firm which is registered the Indian Partnership Act. Its business
consists of (1) manufacturing brass, copper and `kasa' circular sheets a and
the preparation of utensils therefrom; (2) milling paddy, (3) a flour mill and
(4) a saw mill. The aforesaid four work,, are situated in the same compound.
For the manufacture of metal circular sheets, the company has a rolling
In order to carry on other works, a separate
rice mill, flour mill and saw mill, have, been installed by the Co. The
Company's case is that it employs different workers in each section of its
activities and these workmen are engaged either on a permanent or on a
temporary basis. Some workers, such as clerks and watchmen are common to the
four sections of the Co.'s works. After the Act came into force, the Co. was
required to comply with its provisions. The Co. protested and urged that it was
not a factory under s. 1(3)(a) of the Act and so, it could not be called upon
to comply with its provisions. The Regional Provident Fund Commr., however,
took a contrary view. He held that the Co. fell within the meaning of the word
"factory" as defined under s.1(3)(a) and so, be threatened to use
coercive processes to compel the Co. to comply with its requisitions issued
under the relevant provisions of the act.
818 At that stage, the Co. moved the High
Court of Bombay at Nagpur by a writ petition under Art. 226 of the Constitution
and it prayed that an appropriate writ should be issued restraining the
Commissioner from enforcing the relevant provisions of the Act against it. This
writ petition has been allowed and an appropriate writ has been issued at;
prayed for by the Co. It is against this
order that the Regional Commissioner has come to this Court with a certificate
granted by the High Court. For convenience, the Regional Provident Fund
Commissioner would hereafter be referred as the appellant and the Shree Krishna
Metal Manufacturing Co. would be called the Company.
The Oudh Sugar Mills Ltd. which is respondent
in C.A. No. 387 of 1959, is a public limited company registered under the
Indian Companies Act. It carries on the business of manufacturing hydrogenated
vegetable oil named "Vanasada" and its by-products, such as soap,
oil-cakes, etc. This business is carried on at Akola under the name 'and style
of 'Berar Oil Industries'. The Mills commenced manufacturing its products on
the 11th October, 1948. It also manufactures and Markets vegetable oil after
completing all the processes at Akola. The oil is then tinned in tin containers
of certain sizes. The said tin containers are fabricated by the mills in its
own precincts of the oil factory. These tin containers are used only for the
purpose of packing vegetable oil and for no other. They are not sold in the
market nor are the customers of oil charged separate price for the tins. The
work of fabricating these tins began on the 13th October, 1948. In this section
of the Works only 31 workmen are engaged, while in the Mills proper 211 workers
were working on the manufacture of oil and its by-products on the 1st of
819 The Central Government framed a scheme
under 5 of the Act and this scheme came into force partly on 2.9.1952 and
partly on 6.10.1952. Under this scheme, an employer is required to contribute
6-1/4% of the-total wage bill every year as his contribution towards the Fund
and 3% as the administrative charges on the total contribution of the employer
and his employees.
On the 8th of August, 1955, the Regional
Commissioner called upon the Mills to deposit its contribution and incidental
charges as required by the scheme. The amount thus required to be deposited was
of the order of Rs. 34,000/-. This deposit is required on the basis that the
whole of the factory run by the Mills is a factory under s. 1(3)(a). The Mills
declined to make the deposit on the ground that it was not a factory to which
the Act applied. The Regional Commr.
then threatened to take proceedings against
the Mills for the recovery of the said amount under section 8 of the Act.
At that stage, the Mill moved the High Court
of Bombay at Nagpur by a writ petition and its writ petition has been allowed
by the High Court. In the result, a direction has been issued restraining the
Regional Commissioner from enforcing the provisions of the Act against the
Mills. It is against this order that the Regional Commr. has come to this Court
with a certificate granted by the High Court.
For the sake of convenience, the Regional
Commissioner will hereafter be called the appellant, whereas the Oudh Sugar
Mills Ltd. will be described as the Mills.
The appellant contends that the High Court
was in error in coming to the conclusions that the company and the Mills did
not constitute a factory as defined by s. 1(3)(a) of the Act. Section 1 (3) at
the relevant period read thus:
"Subject to the provisions contained in
section 16, it (i.e., the Act) applies in the first 820 instance to all
factories engaged in any industry specified in Schedule I in which fifty or
more persons are employed, but the Central Government may, after giving not
less than two months' notice of its intention so to do, by notification in the
Official Gazette,apply the provisions of this Act to all factories employing
such number of persons less than fifty as may be specified in the notification
and engaged in any such industry." As a result of the amendment made in
1956, section 1(3) has become 1(3)(a) and so, it is referred to as such.
Before construing this clause, it may be
relevant to remember that the Act was passed to provide for the institution of
provident funds for employees in factories and other establishments. The object
of the Act, broadly staged, is to bring into existence a scheme to be called
"The Employees' Provident. Funds Scheme" for the establishment of
provident funds tinder the Act for employees to whom its provisions apply. This
object is specified by s. 5 of the Act., Section 6 provides for the
contributions to be made by the employers and a. 9 recognises the Fund
constituted under the Act for the purpose of income-tax.
Section 10 affords protection against
attachment in respect of the amount standing to the credit of any member in the
Fund and s. 11 prescribes for priority of payment of contributions over other
debts. In other words, the provisions of the Act constitute a welfare measure
intended for the benefit of the workmen to whom the Act applies, and this
beneficent purpose of the Act has to be borne in mind in construing the
relevant clause with which we are concerned in the present appeals.
The first question which calls for our
decision is whether s. 1(3)(a) excludes composite factories 821 from its scope.
It has been urged before us on behalf of the respondents that composite
factories are not intended to be covered by s.1(3)(a). It is only factories
which are exclusively engaged in any industry specified in Schedule I to which
the Act applies, provided, of course, they satisfy the other test that there
are 50 or more persons employed in them. This argument is based on the 'fact
that, when the Act was originally passed in March, 1952, the Legislature had
provided for only six industries in Schedule T. The intention of the
Legislature was to extend the benefits of the Act to the workmen industry-wise
step by step. The Legislature was conscious that the relevant provision,; of the
Act imposed a burden on the employer and so, it took the precaution of
confining the operation of the Act only to six important industries specified
in Schedule 1. Section 1 (3) (a) no doubt confers power on the Central
Government to extend the provision of the Act to other factories by issuing a
notifications, as contemplated by it and so, whenever the Central Government
comes to the conclusion that the benefits of the Act should be extended to
workmen engaged in additional in that behalf and by issuing a notification,
bring within the scope of the Act such factories. But this has to be done
factory-wise in the sense that it has to be done by reference to the factories
engaged in industries included in Schedule I and that shows that it is only
factories exclusively engaged in the said industries that, are included within
the purview of s. 1. (3 (a).
In our opinion, this argument is not well
founded. The expression "all factories engaged in any industry specified
in Schedule I" does not lent itself to the construction that it is
confined to factories exclusively engaged in any industry specified in Schedule
I. What exactly is meant by the categories of factories, it could exercise its
power 822 clause, we will have occasion to deal with later on. For the present,
it would be enough to say that when the Legislature has described factories as
factories engaged in any industry, it did not intend that the said factories
should be exclusively engaged in the industry specified in Schedule I. The
construction for which the respondents contend requires that we should add the
word "exclusively" in the clause and that clearly would not be
The definition of the word
"factory" prescribed by s. 2(g) of the Act shows that a
"factory" means any premises.
including the precincts thereof, in any part
of which a manufacturing process is being carried on or is ordinarily so
carried on, whether with the aid of power or without the aid of power. Thus,
the word ,factory" used in s. 1(3)(a) has a comprehensive meaning and it
includes premises in which any manufacturing process is being carried on as
described in the definition. This definition of the word "factory"
shows that the factory engaged in any industry specified in Schedule I cannot
necessarily mean a factory exclusively engaged in the particular industry
specified in the said Schedule.
Besides, s.1(3)(a), is it has been amended in
1956, now refers to every establishment which is a factory engaged in any
industry specified in Schedule I and the introduction of the word
,establishment" clearly shows that it may consist of different factories
dealing with different industries and yet considered as one establishment, it
may fall under section 1(3)(a), provided the other requirements of the said
section are satisfied. Section 2A which has been added in the Act by the
Amending Act 46 of 1960 makes it clear that an establishment may consist of
different departments or may have different branches, whether situate in the
,same place or in different places, and yet all such departments or branches
shall be treated as parts 823 of the same establishment. Therefore, the concept
of establishment being, of such a comprehensive character, the insertion of the
word "establishment" in s1(3)(a) by the Amending Act of 1956 helps to
negative the argument that the factory therein contemplated cannot be a
Besides, the explanation to Schedule I which
has been added by Act 37 of 1953 clearly shows that one of the industries
originally included in Schedule I in 1952 definitely suggests the idea of a
composite factory and would, thus, assist the interpretation of the word
"factory" as including a composite factory Under s.1(3)(a). The
industry in question is electrical, mechanical or general engineering products
and the explanation of this industry shows that it includes 25 different items,
and so any factory carrying on the work of producing one or more of these items
would not be exclusively engaged in producing one or the other of those, items
and would be in the nature of a composite factory and yet it would definitely
fall under s.1 (3)(a).
Therefore in our opinion,' the argument that
a composite factory carrying (in different industrial operations is outside the
purview of s.1(3)(a) cannot be accepted.
The next question which falls to be
considered is whether the requirement that the workmen employed should be 50 or
more, governs the word "Industry" or the word "factor" is
under s. 1 (3)(a). The respondents' contention is that this numerical test must
be satisfied by the industry and not by the factory. In other words, even if a
composite factory is included in s.1(3)(a), before the provisions of the Act
can be applied to it, it must be shown that 50 or more persons are employed in
that unit of the factory which is engaged in the industry specified in schedule
I. if this is the and correct position, neither the Mills nor the Company would
fall within the mischief of the. Act. The 824 argument in support of this
construction is that the pronoun "which" must under the ordinary
rules of grammar qualify the noun immediately preceding it and that takes it to
the word "Industry" rather than to the word "factories".
We are not inclined to accept this
construction. The ordinary rule of grammar on which this construction is based
cannot be treated as an invariable rule which must always and in ever ease be
accepted without regard to the context.
If the context definitely suggests that the
relevant rule of grammar is inapplicable, then the. requirement of the context
must prevail over the rule of grammar. As the provision stands, the word
'factories' is qualified by two clauses. The first adjectival clause is
'engaged in any industry specified in Schedule I' and the second clause is
"in which 50 or more persons are employed". In other words, in order
that the factories should fall within the scope of the pro. vision, they must
satisfy two tests they must be engaged in any industry specified in Schedule I'
they must, have employed 50 or more persons. The first adjectival clause is in
the nature of a parenthetical clause and so the clause beginning with the words
"in which" must necessarily qualified the word "factories"
and not the word "Industry".
Therefore in our opinion, the requirement as
to the prescribed number qualifies the word "factories" and does not
qualify the word "industry" that, means the question to ask is : does
the factory employ 50 or more persons ? The question is not: does the industry
employ 50 or more persons ? This conclusion is strengthened by the provision
contained in the latter part of s.1(3)(a). This latter clause empowers the
Central Government to bring within the purview of the Act other factories in
the manner specified by it. While referring to the factories which may thus be
brought within the purview of the Act, the clause provides that those 825
factories must be such as employ such number of persons less than fifty as may
be specified the notification and they must be engaged in any such industry. In
other words, this latter clause makes it clear that it is the factories which
have to satisfy two tests-(i) that the number of their employees should not be
less than 50 and (ii) that they must be engaged in any such industry as is
specified in Schedule I.
This position has been placed beyond all doubt
by the amended clause as it now stands as a proviso to s. 1(3)(a) and (b) after
the amendment of 1956. This proviso reads that the Central Government, may,
after giving not less than two months' notice of its intention so to do, by
notification in the Official Gazette, apply the provisions of the Act to any
establishment employing such number of persons less than fifty as may be
specified in the notification. This proviso makes it absolutely clear that the
requirement as to the number of the employees applies to the establishment and
not to the industry. We may incidentally and that the requirement of fifty has
now been reduced to twenty by the Amending, Act 46 of 1961).
There is yet another provision in the Act
which supports the same conclusion. Section 19A provides, inter alia, that if
any difficulty arises in giving effect to the provisions of the Act, and in
particular, if any doubt arises as to whether 50 or more persons are employed
in a factory, the Central Government may, by order, make such provision or give
such direction, not inconsistent with the provisions of the Act, as appears to
it to be necessary or expedient for the removal of the doubt or difficulty; and
the order of the Central Government, in such cases, shall be final. This clause
has been subsequently amended, but for our present purpose those ,amendments do
not matter. The point about the provision is that the (central Government has
826 been given power to resolve a doubt as to whether fifty or more persons are
employed in a factory or in an establishment and that shows that the
requirement as to the number of employees governs the factory or the
establishment but not the industry.
That takes us to the question as to the
meaning of the expression, "engaged in any industry specified in Schedule
I' , and this question no doubt, presents some difficulty.
We have already rejected the argument' that
the composite factory is not included in s. 1(3)(a). That means that the clause
"engaged in any industry" does not mean "exclusively engaged in
any industry". If that is so, what exactly is the meaning and significance
of this clause ? Two views are possible. It may be said that even if a factory
is only partially engaged in any industry specified in Schedule 1, it would
satisfy the test however small or insignificant may be the extent of its
operation in the said industry. On this construction, it would follow that if a
factory is engaged in several industrial operation one of which relates to an
industry specified in Schedule I, the factory would fail under R. 1(3)(a) even
though its relevant activity in the specified industry may be of a minor,
incidental or subsidiary. The other construction would be that the expression
"engaged in any industry" means "primarily or mainly engaged in
any industry". On this construction, if a factory is in several industrial
activities one of which related to the industry specified in Schedule 1, it
would be necessary to enquire, whether the said specified activity is
subsidiary or minor; if it is subsidiary, incidental or minor, the factory
cannot be said to be engaged in that industry. Cases may occur where a factory
is primarily or mainly engaged in others industrial activities and it is only
for feeding one or more of such activities that the factory may undertake an
activity in respect of the specified industry. But each if undertaking is
merely for the purpose of feeding its 827 major activity; it is subsidiary,
incidental and minor. In that case, the factory cannot be said to be engaged in
the industry specified in Schedule 1. Both construction,% are possible and each
one of them presents some anomalies. On the first construction, it would follow
that even if half a dozen employees are engaged by the factory in regard to its
activity in the industry specified in Schedule 1, the provisions of the Act
would apply to all the workmen engaged in the whole of the factory because the
factory would be deemed to have satisfied the test that it is engaged in the
industry specified in Schedule I and that, no doubt, looks anomalous. On the
other hand if the second construction is accepted, though more then 50 persons
may be employed in the incidental and subsidiary activity relating to an
industry specified in Schedule I, the provisions of the Act will not apply to
such workmen because the factory, as a whole, does not satisfy the test that it
is engaged in the said industry and that also is anomalous.
It is true that in dealing with the
construction of a clause which is capable of two reasonably possible
construction it is not easy to make a choice particularly which both
constructions seem to lead to some anomalies. On the whole, however, we are
inclined to take the view that the clause "engaged in any industry
specified in Schedule I" should be interpreted to mean mainly engaged in
any industry specified in Schedule I". If a factory is engaged in two
industrial activities one of which is its primary, principal or dominant
activity and the other is a purely subsidiary, incidental minor or feeding
activity, that it is the primary or the dominant activity which should
determine the character of the factory under s. I (3) (a). This view doer, not
purport to add any word to the section; it merely interprets relevant
expression "engaged in any industry specified in Schedule -1".
828 When it is said that a person is engaged
in any business, it usually means he is engaged mainly or principally in that
business; and the same would be the position when the relevant clause refers to
an establishment engaged in the specified industry. That is the common-sense
view which is consistent with the current and accepted denotation of the words
One of the tests which can sometimes be
applied is whether the product of the incidental activity is intended for the
market or exclusively for use by the factory in its other department only. If
the answer to this question is that the said product is sent out in the market
for sale, then the activity in question cannot be treated as incidental. In
such a case, it may be said that the factory is engaged in both the activities
and as such, it is engaged in the industry specified in Schedule 1. But the
test of sending the product in the market cannot be treated as decisive or even
very significant because the definition of the word "manufacture"
given in s.2(1)(a) shows that a commodity may be produced by the factory as
much for sale transport delivery or disposal as for its own use. Therefore the
fact that the a commodity is produced only for the use of the factory in its
other department may not necessarily show that the activity which leads to the
production of the said commodity is not the main activity of the factory.
If a factory is engaged simultaneously in
different industrial activities and one of these is in relation to all industry
specified in Schedule 1, then it can be said that the factory is engaged in the
industry specified in Schedule
1. The fact that the factory engaged in other
industrial activities will not necessarily take it out of the purview of
s.1(3)(a). The broad test which may safely be applied in dealing with this
question is: is the 829 factory engaged in the industry specified in Schedule I
from a business point of view?, and the answer to this question would generally
give a satisfactory solution to the problem posed by s. 1(3)(a). Whether or not
a factory is engaged in any industry specified in Schedule I would, thus, be a
question of fact to be determined in the facts and circumstances of each case.
That appears to be the view taken by Balakrishna Ayyar J. in the Madras Pencil
Factory by its Properties v. Perumal Chetty & Sons by its partner V. Ananthakrishna
Chetty v. The Regional Provident Fund Commissioner,(1) and with the view we are
in general agreement.
What remains now is to consider whether the
High Court was right in holding that the company and the Mills are outside the
purview of s.1(3)(a). As we have already seen, company carries on four
different kinds of industrial activities, one of which is the manufacturing of
brass copper and 'kasa' circular sheets and the preparation of utensils there from.
For the manufacture of metal circular sheets, the Co. has a rolling machine. It
is common ground that this work would fall within Schedule I of the Act and so,
if it can be held that the Co. is a factory engaged in the industry represented
by this work, the first test is satisfied. As we have already observed this Co.
carries on four different kinds of activities and it is impossible to hold that
the activity in relation to the industry which falls in Schedule I is either
minor, subsidiary or incidental to the other activities. This activity is as
much the work of the Co. as the other activities are and so, the Co. must be
hold to be a factory under s.1(3)(a) so far as the first test is concerned. In
regard to the test of the number of employees engaged in the factory it appears
to be the Co.'s case that at the relevant time, the number of its total
employees in all the (1) A.I.R.. 1959 Mad. 235.
830 four activities did not consistently
exceed 50; but that it is a point on which the High Court has expressed no
opinion, and rightly, because it is a disputed question of fact which cannot be
tried in writ proceedings. The appellant's case is that the total number of
employees engaged by the Jo.
exceeded 50 at the relevant time and it is on
that footing that the present writ petition has been tried in the High Court.
Therefore, without deciding this dispute question of fact, it may be assumed
that for the purpose of the present writ proceedings, the test of the numerical
strength can be said to have been satisfied. The result is, the view taken by
the High Court that the company is outside s. 1(3)(a) is erroneous in law and
must be reversed; and that means that appeal No. 361 of 1959 filed by the
regional Commissioner is allowed and the writ petition filed by the Co. is
dismissed with costs Throughout. In the result, the respondent will have to
comply with the requisition issued by the appellant against it under the
relevant provisions of the Act. In regard to the date from which the respondent
should make its statutory contribution to the Provident Fund the appellant may
have to give a direction after consulting the workmen, because from the date so
specified by the appellant both the respondent and its workmen will have to
make their respective contribution.
The position with regard to the Mille is,
however, different. The main industrial activity of the Mills is the
manufacture of hydrogenated vegetable oil named 'Vanasada' and its by-products,
such as soap, oil-cakes etc. It 'is true that in the mills tin containers are
fabricated and this, no doubt, is an activity covered by Schedule I. But it is
obvious that this branch of the activity of the mills forms a very minor
portion of its activity. The number of employees engaged in this branch is 31,
whereas the total number of employees is 211.
831 Besides; the containers are produced only
for the use of the Mills. They, were not intended to be sold in the market at
ill. Price for the containers is not also charged from the customers. Indeed,
containers are required even for the purpose of storage of the vegetable oil.
It is thus clear that the fabrication of tin containers has been undertaken by
the Mills only as a feeder activity ; it is integrally connected with its main
business of producing and marketing vegetable oil and as such, it is a minor
part of the said activity. Having regard to the relevant facts admitted or
proved in the present case, we are satisfied that the High Court, was right in
coming to the conclusion that the Mills was not a factory within the meaning of
The result is, the appeal No. 387 of 1959
fails and is dismissed with costs.
C.A. 361 of 1959 allowed.
C. A.387 of 1959 dismissed.