The Associated Industries (P) Ltd. Vs.
The Regional Provident Fund Commissioner, Kerala Trivandrum  INSC 92 (9
09/04/1963 GAJENDRAGADKAR, P.B.
GUPTA, K.C. DAS SHAH, J.C.
AYYANGAR, N. RAJAGOPALA
CITATION: 1964 AIR 314 1964 SCR (2) 905
Provident Fund-Composite factory--Two
independent industries-One as falling under the schedule Whether Establishment-The
Employees' Provident Funds Act, 1952 (19 of 1952), ss. 1 (3) (a) 2,(g) &
(i), Schedule I.
The appellant runs a tile factory and an
engineering works at Quilon. These two industries are independent of each
other, but they arc carried on by the same company and on the same premises.
The tile factory was started in 1943 and the engineering works in 1950. The
engineering industry was included in Schedule I of the Act and it employed only
24 workers, whereas the tile industry employed more than 50.
The license issued to the appellant under the
Factories Act, 1948, was for the entire premises. The appellant moved a writ
petition in the High Court in which he alleged that its factory did not attract
the provisions of s. 1 (3) (a) of the Employees' Provident Funds Act 1952. The
'writ petition was dismissed with costs. It is against this order that the
appellant has come to this Court.
Held (i) that a factory is an
"establishment" within the meaning of s. 1 (3) (a) of the Act if it
satisfies the requirements of the section, namely, (1) that its one or all
industries fall under Schedule I of the Act, (2) that it satisfies the
numerical strength as prescribed under the section.
(ii)that the character of the dominant or
primary industry will determine the question of the application of s. I (3) (a)
if a factory carries on both the dominant and subsidiary industries.
(iii)That if the factory runs more industries
than one an of 'which are independent of each other, s. I (3) (a) will 906
apply to the factory even if one or more, but not all, of the industries run by
it fall under Shedule I.
(iv)that neither the tile industry was
dominant nor the engineering industry was subsidiary; rather both the
industries were independent of each other.
(v)that the factory of the appellant will be
deemed to be a composite factory and the provisions of s. 1 (3) (a) will be
attracted as one of its industries i.e. engineering industry, falls under
The Regional Provident Fund Commissioner,
Bombay v. Shree Krishna Metal Manufacturing Co. Bhandara  Supp.3 S. C.
R. 815, approved.
CIVIL APPELLATE, JURISDICTION: Civil Appeal
No. 324 of 1962.
Appeal from the judgment and decree dated
August 8, 1960 of the Kerala High Court, in O. P. No. 97 of 1953.
G.B. Pai, J. B. Dadachanji, O. C. mathur and
Ravinder Narain, for the appellant.
S.V. Gupte, Additional Solicitor-General of
India, R. Ganapathy lyer, P. D. Menon and R. H. Dhebar, for the respondent.
1963. April 9. The judgment of the Court was
delivered by GAJENDRAGADKAR J.-The short question which arises in this appeal
is whether the factory run by the appellant, the Associated Industries (P)
Ltd., Qulion, falls within s. 1 (3) of the employees' Provident Funds Act, 1952
(No. 19 of 1952) (hereinafter called 'the Act'). The appellant is a Company
which runs a tile factory and an engineering works at Quilon. The tile factory
began its career in July, 1943, and the engineering works in 907 September,
1950. It is common ground that these two industries are separate and distinct
and that they are carried on by the same Company and on the same premises. It
is also common ground that a licence issued under the Factories Act, 1948, has
been issued to the appellant for the entire premises and it is under this
licence that the said premises arc allowed to be used as one factory under the
said Act and the rules framed thereunder.
It appears that the respondent, the Regional
Provident-Fund Commissioner, Vanchiyoor, Trivandrum, intimated to the appellant
on March 10, 1953, that the Act as well as the scheme framed under it were
applicable to the appellant's factory, and so, the appellant was called upon to
deposit in the Sub Office of the Imperial Bank of India the contributions and
administrative charges as required by s. 6 of the Act. The same requisition was
repeated on March 25, 1953 and April 24, 1953. The appellant disputed the
correctness of the view taken by the respondent that the appellant's factory
fell under the purview of the Act, and so, it refused to comply with the
Thereupon, the respondent wrote to the
appellant on June 16, 1953 informing it that appropriate action would be taken
to compel the appellant to make the necessary deposit and submit returns as
required by the Act in case it failed to comply with the notices issued in that
behalf. At this stage, the appellant moved the High Court of Kerala by a writ
petition (O. P. No. 97/1953) in which it claimed a writ of certiorari quashing
the notices issued by the respondent against it, and restraining the respondent
from proceeding further in the matter and for other incidental reliefs.
The main contention raised by the appellant
before the High Court was that the appellant's factory was not an establishment
to which s. 1 (3) of the Act applied. The High Court 908 has rejected this
contention. Then it was urged before the High Court on behalf of the appellant
that the effect of the notices served on the appellant by the respondent was
retrospective in character and it was urged that the said notices were illegal.
This argument was also rejected by the High Court. 'I he appellant further
contended before the High Court that since for the relevant period the
employees had not made their contributions, it would be inequitable to enforce
the notices against the appellant.
The High Court noticed the fact that it had
been conceded by the respondent that he did not propose to collect the
employees' share of the contribution to the fund for the relevant period from
the appellant, and it held that the concession so made was proper and fair and
so, there was no substance in the grievance made by the appellant that giving
effect to the notices served on it by the respondent would be inequitable and
unjust. On these findings, the writ petition filed by the appellant was
dismissed with costs, It is against this order that the appellant has come to
this Court with a certificate granted by the High Court.
The principal point which is sought to be
raised by Mr. Pai on behalf of the appellant in this appeal is concluded by a
recent decision of this Court in The Regional Provident Fund Commissioner,
Bombay v. (1) Shree Krishna Metal Manufacturing Co., Bhandra, and (2) Oudh
Sugar Mills Ltd.
(1). It would be noticed that the relevant
sections which fell to be construed in dealing with the appellant's contention
are s. 1 (3), s. 2 (g) and (i) and s. 6 of the Act. Section 1 (3) (a) provides,
inter alia, that subject to the provisions contained in s. 16, the Act applies
to every-establishment which is a factory engaged in any industry specified in
Schedule I and in, which 50 or more persons are employed; the numerical
requirement of 50 has been reduced to 20 by an Amending Act of 1960. Section
(2) (g) (1) A.1,R. (1962) B.C. 1536.
909 defines a 'factory' as meaning 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;
and s. 2 (i) defines an 'industry' as meaning
any industry specified in Schedule I, and includes any other industry added to
the Schedule by notification under section 4.
Section 6 prescribes for the levy of
contributions and deals with other matters which may be provided for in
Schemes; and in accordance with the provisions of this section, the Employees'
Provident Fund Scheme of 1952 has been framed.
In the case of the Regional Provident Fund
Commissioner, Bombay, (1) this Court has held that s. 1 (3) (a) does not lend
itself to the construction that it is confined to factories exclusively engaged
in any industry specified in Schedule I. It was observed in that connection
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 Sch. I. Consistently with this view, this
Court further observed that 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, and so the factory
engaged in any industry specified in Sch. I does not necessarily mean a factory
exclusively engaged in the particular industry specified in the said Schedule.
in construing the scope of s. 1 (3) (a) this Court held that composite
factories came within its purview and that the fact that a factory is engaged
in industrial activities some of which fall under the Schedule and some do not,
will take the factory out of the purview of s. 1 (3) (a) having dealt with this
aspect of the matter, this Court proceeded to consider the question as to (1) A
I. R. 1962 S. C. 1536.
910 whether numerical requirement of the
employment of 50 persons, as the section then stood, applied to the factory or
to the industry, and it held that the said test applied not to the industry but
to the factory. Thus, the conclusion was that in order that a factory should
fall under s. 1 (3) (a), it must be shown that it is engaged in any such
industry as is specified in Sch. I and the number of its employees should not
be less than 50.
This decision makes it clear that s. 1 (3)
(a) is not confined only to factories which are exclusively engaged in industrial
work to which Sch. I applies but it also takes in composite factories which run
industries some of which fall under Sch. I and some do not. In order to make
the position clear let us state the true legal position in respect of the scope
of the application of s. 1 (3) (a) in categorical terms. If the factory carries
on one industry which falls under Sch. I and satisfies the requirement as to
the number of employees prescribed -by the section, it clearly falls under s. 1
(3) (a). If the factory carries on more than one industry all of which fell
under Sch. 1 and its numerical strength satisfies the test prescribed in that
behalf, it is an establishment under s. 1 (3) (a). If a factory runs more
industries than one, one of which is the primary and the dominant industry and
the others are its feeders and can be regarded as subsidiary, minor, or
incidental industries in that sense, then the character of the dominant and
primary industry will determine the question as to whether the factory is an
establishment under s. 1 (3) (a) or not. If the dominant and primary industry
falls under Sch. I, the fact that the subsidiary industries do not fall under
Sch. I will not help to exclude the application of s. 1 (3) (a). If the
dominant and primary industry does not fall under Sch. 1, but one or more
subsidiary, incidental, minor and feeding industries fall under Sch. I, then S.
1 (3) (a) will not apply. If the factory runs more 911 industries than one all
of which are independent of each other and constitute separate and distinct
industries, s. 1 (3) (a) will apply to the factory even if one or more., but
-not all, of the industries run by the factory fall under Sch. I. The question
about the subsidiary, minor, or feeding industries can legitimately arise only
where it is shown that the factory is really started for the purpose of running
one primary industry and has undertaken other subsidiary industries only for
the purpose of sub serving and feeding the purposes and objects of the primary
in such a case, these minor industries merely
serve as departments of the primary industry; otherwise if the industries run
by a factory are independent, or are not so integrated as to be treated as part
of the same industry, the question about the principal and the dominant
character of one industry as against the minor or subsidiary character of
another industry does not fall to be considered.
It is in the light of this position that we
may revert to the actual decision in The Regional Provident Fund Commissioner,
Bombay (1). In that case, this Court was dealing with the cases of Shree
Krishna Metal Manufacturing Co., and Oudh Sugar Mills Ltd. The Metal Company
carried on four different kinds of activities and it was held that its
industrial activity which fell under Sch. I was neither minor, nor subsidiary,
nor incidental to the other activities. In other words, the industry which the
company ran and which fell under Sch. I was independent of the other industries
conducted by the Company, and so, it was held that the question about one
industry being subsidiary, minor, or incidental did not arise. In the result,
the Company's factory was found to fall under s. 1 (3) (a).
On the other hand, the case of the Oudh Sugar
Mills stood on a different basis. The primary activity (1) A. I. R. 1962 S C.
912 of the mills was the manufacture of
hydrogenated vegetable oil named 'Vanasada' and its by-products, such as soap,
oilcakes, etc. It appeared that a department of the Mills manufactured
containers and -this part of the industrial activity of the Mills fell under
Sch. I. Evidence, however, showed that the fabrication of the containers had
been undertaken by the Mills only as a feeder activity which was integrally
connected with its primary business of producing and marketing vegetable oil,
and since the primary business was. outside Sch. 1, the factory as a whole was
held to be outside s. 1 (3) (a).
It is true that since this Court dealt with
the two respective cases of the Company and the, Mills in one judgment, the
test as to the principal character of the industrial activity of one industry
in relation to the character of the minor industry came to be considered ; but
the application of the said test became necessary essentially because of the
case of the Oudh Sugar Mills. In the case of the Company, however, the several
activities were not minor or subsidiary, but were independent , and it was held
that the factory of the company fell under s. 1 (3) (a). Therefore, in our
opinion, there is no scope for the argument in the present case that the
engineering industry which the appellant runs is not the primary or dominant
industry but the manufacture of tiles is. Mr. Pai attempted to argue that
though engineering industry run by the appellant's factory falls under Sch.
I,it employs only 24 workers whereas the tiles industry employs more than 50.
He also relied on that fact that the tiles factory was started in 1943 and the
engineering works in 1950, and his argument was that judged in the light of the
fact that the tiles industry was started first, as well as considered by the
application of the test of the strength of the employees working in the two
industries tiles industry should be treated to be the main, dominant and
primary industry of the factory, and so, the factory, as a 913 whole, should be
held to be outside s. 1 (3) (a). In our opinion, this argument is plainly
untenable. If the tiles industry and the engineering industry are independent
of each other, then no question arises as to which is principal and which is
subsidiary. As soon as it is shown that the factory is carrying on two
industries independent of each other one of which falls under Sch. I, it
becomes a composite factory to which s. 1 (3) (a) applies. When s. 1 (3) (a)
requires that the factory should be engaged in any industry specified in Sch.
I, considerations as to whether the industrial activity is major or minor can
arise only where some activities are dominant and others are of the nature of
feeding activities, but not otherwise. Where the industrial activities are
independent and the factory is running separate industries within the same
premises and as part of the same establishment and under same licence, it is
difficult to accept the argument that in dealing with such a factory, enquiry
would be relevant as to which of the industries is dominant and primary, and
which is not.
Therefore, in our opinion, the High Court was
plainly right in rejecting the appellant's case that its factory did not
attract the provisions of s. 1 (3) (a) of the Act.
Mr. Pai wanted to contend that if the
appellant's factory is treated as falling under s. 1 (3) (a), complications may
arise by reason of the fact that the rate of contribution initially prescribed
by s. 6 has been amended in 1962 by the Amending Act No. 48 of 1962. Section 6
of the unamended Act provides, inter alia, that the contribution to be paid by
the employer to the fund shall be 6-1/4% of the basic wages, dearness allowance
and retaining allowance, if any, for the time being payable to each of the
employees, and the employees' contribution shall be equal to the contribution
payable by the employer in respect of him. This section further provided that
the employee was competent to 914 make a higher contribution not exceeding 8
and one-third per cent of his emoluments specified in the said section. By the
amendment made in 1962, this rate has been enhanced to 8% in respect of any
establishment or class of establishments which the Central Government, after
making such enquiry as it deems fit, may by notification in the official
Gazette specify. We were told that in regard to the engineering industry., this
amended sub-section has been extended by a notification, and Mr. Pai's
apprehension is that if the factory of the appellant is held to be an
establishment to which s. 1 (3) (a) applies on the ground that it is a
composite factory Which runs several industries one of which falls under Sch.
I, it is likely that the increased rate may be made applicable to the factory as
a whole. We ought to add that Mr. Pai conceded that subsequent to the decision
of the appellant's writ petition in the High Court, the tiles industry has also
been included in Sch. I.. but the revised rate has been made applicable to it.
Mr. Pai contends that if the factory is treated as falling under s. 1 (3) (1),
a distinction should be made in the different industries run by the factory for
the purpose of calculating the contribution of the employer to the Provident
Fund. We do not propose to deal with this contention in the present appeal.
That is a matter which may well have to be decided by the respondent, and it is
not open to Mr. Pai to request this Court to decide such a hypothetical
question in the present proceedings.
The result is,, the appeal fails and is
dismissed with costs.