Cem
India Co. Ltd. V. Bachubhai N. Raval [1987] INSC 199 (4 August 1987)
VENKATARAMIAH,
E.S. (J) VENKATARAMIAH, E.S. (J) SINGH, K.N. (J)
CITATION:
1987 AIR 1956 1987 SCR (3) 784 1987 SCC (4) 38 JT 1987 (3) 213 1987 SCALE
(2)187
ACT:
Employees'
Provident Funds and Miscellaneous Provisions Act, 1952: Section
1(3)(b)--Notification No. GSR 1398---Company engaged in 'building and
construction industry' Whether Act applies to workshop set up by such company
for maintenance and repairs of its equipment--Whether all business operations
to be taken in totality to determine if company is engaged in such activity
exclusively.
Words
& Phrases: 'Building and construction industry' Meaning of.
HEADNOTE:
By
a Notification dated 26-9-1964 issued under Section 1(3)(b) of the Employees'
Provident Funds Miscellaneous Provisions Act, 1952, the Act was made applicable
to the establishments of engineers and engineering contractors not being
exclusively engaged in building and construction industry. The Regional Provident
Fund Commissioner called upon the appellant company carrying on business as
"engineers and engineering contractors" and engaged in building and
construction industry, to show cause why it should not be directed to comply
with the Act in respect of the workmen employed at its workshop in Bombay. The
appellant contended that the Act was not applicable since it was exclusively
engaged in building and construction industry and that the workshop had been
set up only for the purpose of carrying out its work, ancillary to the building
and construction industry, and not any work for others. The respondent negative
the contention and directed the appellant to make contributions with effect
from 1st December, 1963 in respect of the workmen employed at its workshop.
The
appellant assailed the validity of this notice in the Bombay High Court, which
declined to follow the decision of the Calcutta High Court quashing a similar
notice issued by the department in respect of the appellant's workshop in
Calcutta, dismissed the petition and upheld the demand of the department. It
held that the Act applied as the appellant was not only engaged in building and
construction industry 785 but was also engaged in running workshops for
maintaining and repairing equipment such as piling machines, drills, etc., and
hence it was an establishment of engineers and engineering contractors which
was not ' 'exclusively engaged in building and construction industry."
Allowing the appeal by special leave, this Court,
HELD:
1.1 Where an establishment is engaged exclusively in carrying on a particular
type of business by setting up any place of work with a view to carrying on the
work of repairs etc. to the tools, equipment, vehicles etc. used in its
business or to carry on any other activity which is essential for its business
effectively and which is not used to carry on the work for the benefit of any
third party but utilised exclusively for the business of the establishment,
such establishment does not cease to carry on exclusively the business in which
it is engaged. It cannot also be said that the establishment had commenced to
carry on another industry by the setting up of such a place of work. [790B-C]
1.2
Any such establishment which carries on an activity which forms part of the building
and construction industry should be exempted from the operation of the Act
because the expression "building and construction industry" refers
collectively to all activities which have to be performed in connection with
the building and construction industry.
[789F]
In order to discharge effectively its functions as engineers and engineering
contractors engaged in building and construction industry, an establishment has
to maintain a workshop or workshops where the work of smithy, welding, cutting,
carpentry etc. are carried on. Without these operations it is not possible for
any person to carry on satisfactorily the work of building and construction
industry.
[789G]
1.4
Such a workshop in which works connected with the business of building and
construction industry were being carried on in connection with such business
for the owner cannot be construed as a separate establishment for purposes of
the Act. [790H] In the instant case, the work that is being carried on at the
appellant's workshop is work of maintaining and repairing of the equipment
belonging to the appellant only.
The
appellant is not earning any income or profit by carrying on the work of any
other establishment. It cannot, therefore, be said that the workshop
established by the appellant is an independent establishment of engineers and
engineering contractors which is not exclusively engaged in building and
construction industry. [790D-E]
1.5
The High Court was in error in treating the workshop in question as a separate
unit of the business of the appellant forming a separate establishment for
purposes of deter- mining whether the Act is applicable or not. It should have
taken all the business operations carried on by the appellant in their totality
into consideration in order to ascertain whether the appellant is engaged
exclusively in building and construction industry or not. By splitting up the
several operations carried on by the appellant in connection with the building
and construction industry into separate units and thereby treating the workshop
alone as a separate establishment, the High Court misled itself into thinking
that the workshop of the appellant was governed by the Act and thus committed
the error of declaring the said workshop as an establishment governed by the Act.
[790F-G]
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 3029 of 1986.
From
the Judgment and Order dated 8.7.1985 of the Bombay High Court in Misc.
Petition No. 488 of 1968.
R.P.
Bhatt, D.N. Mishra and Mrs. A.K. Verma for the Appellant. C.V. Subba Rao for
the Respondent.
The
Judgment of the Court was delivered by VENKATARAMIAH, J. This appeal by special
leave is filed against the Judgment dated 8.7.1985 in Miscellaneous Petition
No. 488 of 1968 on the file of the High Court of Bombay holding that the appellant
was bound to comply with the provisions of the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952 (hereinafter referred to as 'the Act') and
the scheme there under and to make contributions in respect of its employees
working in its workshop at Antop Hill, Wadala in Bombay.
The
appellant is a company which is carrying on business as "engineers and
engineering contractors" and is engaged in building and construction
industry. By the Notification bearing No. GSR 1398 787 published in the Gazette
of India dated 26.9.1964 (Part II, Section 3(i), page 1546) issued under
section 1(3)(b) of the Act, the Act was extended to establishments of engineers
and engineering contractors not being exclusively engaged in building and
construction industry. By the notice dated 11th October, 1967 the Regional
Provident Fund Commissioner of Bombay called upon the appellant-company to show
cause why it should not be directed to comply with the Act in respect of the
workmen employed at its workshop at Antop Hill, Wadala in Bombay. The appellant
submitted its representation on 13th October, 1967 claiming that the Act was
not applicable to it since the appellant was exclusively engaged in building
and construction industry and the workshop in question had been set up only for
the purpose of carrying out work ancillary to the building and construction
industry in which it was engaged and that the appellant was not carrying on any
work for others at the said workshop. The Regional Provident Fund Commissioner
negative the contention of the appellant and directed that the appellant should
make contributions with effect from 1st December, 1963 in accordance with the
scheme framed under the Act in respect of the workmen employed at its workshop
who were just 70 or 80 in number while the total working force of the appellant
in its building and construction industry was in the order of 2,000. The
appellant had established another workshop for its own purpose at Calcutta. On
being served with a similar demand it had filed a writ petition in Writ
Petition No. 614 of 1967 in the Calcutta High Court contending that the Act did
not apply to such an establishment. In view of the above writ petition which
was pending on the file of the Calcutta High Court, the appellant represented
to the Regional Provident Fund Commissioner, Bombay to stay further action
under the Act till the disposal of the writ petition filed in the Calcutta High
Court. The Regional Provident Fund Commissioner rejected the said request of
the appellant and directed it to comply with the demand already made in respect
of the workshop at Bombay. After some correspondence, the appellant filed
Miscellaneous Petition No. 488 of 1968 on the file of the High Court of Bombay,
out of which this appeal by special leave arises, questioning the validity of
the notice issued to it calling upon it to comply with the provisions of the
Act and the scheme made there under in respect of its workshop at Bombay.
It
should be stated at this stage that the writ petition filed before the Calcutta
High Court was allowed and the notice issued to the appellant to comply with
the Act and the scheme made there under in respect of the workshop at Calcutta
was quashed by the judgment of the High Court dated January 6, 1970 and that
judgment has become 788 final..When the writ petition, out of which this appeal
arises was taken up for hearing by the High Court of Bombay, it was brought to
the notice of the High Court of Bombay that a similar notice issued in respect
of the workshop at Calcutta had been quashed and a similar order should be
passed on the petition before the Bombay High Court also.
The
High Court of Bombay declined to follow the decision of the Calcutta High Court
and proceeded to pass the judgment upholding the demand made by the Regional
Provident Fund Commissioner. Aggrieved by the decision of the High Court of
Bombay, the appellant has filed this appeal by special leave.
The
following basic facts are not in dispute in this appeal:
(i)
that the appellant is engaged in building and construction industry and the
appellant does not carry on any other business or profession;
(ii)
that the workshop in Bombay is established only for the purpose of maintaining
and repairing the equipment used by the appellant in its building and construction
industry; and (iii) that the workshop in question does not undertake any job
other than maintaining and repairing the equipment of the appellant.
The
High Court in the course of its common judgment delivered in two writ
petitions, one filed by the appellant out of which this appeal arises and
another Writ petition filed by a company called Patel Engineering Co. Ltd., has
observed thus:
"In
our view, on their own showing, the petitioner companies are not only engaged
in building and construction industry, but are also engaged in running
workshops for maintaining and repairing equipment such as piling machines,
drills, air compressor pumps, concrete miners and allied tools. In each of
these workshops twenty or more persons are employed. The said workshops by
themselves are not ones engaged in building and construction industry. Though
it is true that these work- shops do not undertake any job other than
maintaining and repairing the equipment of the petitioner-companies, still
these workshops are not engaged in building and construction industry. They 789
are only aiding and facilitating the petitioner companies which are carrying on
building and construction industry. No doubt they do not undertake any job of
maintaining and repairing equipment which does not belong to the
petitioner-companies. Nonetheless these workshops themselves constitute
establishment which employ more than twenty persons to do jobs which do not
constitute building and construction industry. The petitioner-companies are
thus engaged not only in building and construction industry but also running
either respective work shops. The said workshops themselves thus constitute
establishments of engineers and engineering contractors. The workshops are not
engaged in building and construction industry at all. That is sufficient to
hold that the petitioner-companies are engineers and engineering contractors
which are not 'exclusively engaged in building and construction industry'. Once
it is shown that they are engineers and engineering con- tractors not being
exclusively engaged in building and construction industry, by virtue of the
notification of the Central Government under clause (b) of sub-section (3) of
section of the Act, the Act applies to them." The notification issued
under section 1(3)(b) of the Act makes the Act applicable to establishments of
"engineers and engineering contractors, not being exclusively engaged in
building and construction industry". It follows that any establishment
carrying on the business of engineers and engineering contractors which is
exclusively engaged in building and construction industry does not fall within
the scope of the notification and hence the Act would not be applicable to such
an establishment. Any such establishment which carried on an activity which
forms part of the building and construction industry should naturally be
exempted from the operation of the Act because the expression 'building and
construction industry' refers collectively to all activities which have to be
performed in connection with the building and construction industry. In order
to discharge effectively its functions as engineers and engineering contractors
engaged in building and construction industry, an establishment has to maintain
a workshop or workshops where the work of smithy, welding, cutting, carpentry
etc.
are
carried on. Without these operations it is not possible for any person to carry
on satisfactorily the work building and construction industry. The reason for
taking this view is obvious. An establishment exclusively engaged in running a
hospital does not cease to be an establishment exclusively carrying on the said
business merely 790 because it sets up a Pharmacy Section for preparing and
compounding medicines to be used exclusively by the patients at its hospital.
Similarly an establishment which is exclusively engaged in providing shipping
transport facilities does not cease to be an establishment exclusively
carrying- on the said business merely because it sets up an on-shore workshop
for effecting repairs exclusively to its own ships.
Such
illustrations may be multiplied. The point which is made out by these
illustrations is that where an establishment is engaged exclusively in carrying
on a particular type of business by setting up any place of work with a view to
carrying on the work of repairs etc. to the tools, equipment, vehicles etc.
used in its business or to carry on any other activity which is essential for
its business effectively and which is not used to carry on the work for the
benefit of any third party but utilised exclusively for the business of the
establishment, such establishment does not cease to carry on exclusively the
business in which it is engaged. It cannot also be said that the establishment
has commenced to carry on another industry by the setting up of such a place of
work.
In
the instant case there is no dispute that the work that is being carried on at
the appellant's workshop at Bombay is work of maintaining and repairing of the
equipment belonging to the appellant only. The appellant is not earning any
income or profit by carrying on the work of any other establishment at the said
workshop. In the above situation, we find it difficult to agree with the High
Court that the workshop establishment by the appellant at Bombay is an
independent establishment of engineers and engineering contractors which is not
exclusively engaged in building and construction industry. The High Court was
in error in treating the workshop in question as a separate unit of the
business of the appellant forming a separate establishment for purposes of
determining whether the Act is applicable to the appellant or not. It should
have taken all the business operations carried on by the appellant in their
totality into consideration in order to ascertain whether the appellant is
engaged exclusively in building and construction industry or not. If the High
Court had approached the case from the above angle it would not have committed
the error of declaring the workshop at Bombay alone as an establishment
governed by the Act. By splitting up the several operations carried on by the
appellant in connection with the building and construction industry into separate
units and thereby treating the workshop alone as a separate establishment, the
High Court misled itself into thinking that the workshop of the appellant at
Bombay was governed by the Act.
We
agree with the decision of the Calcutta High Court that such a workshop in
which works connected with the business of building and 791 construction
industry were being carried on in connection with such business of the owner
cannot be construed as a separate establishment for purposes of the Act. We,
there- fore, set aside the judgment of the High Court and quash the impugned
notice issued by the Regional Provident Fund Com- missioner, Bombay, calling
upon the appellant to comply with the provisions of the Act and the scheme made
there under in respect of the workmen employed at its workshop at Bombay.
The
appeal is accordingly allowed. There is no order as to costs.
N.P.V.
Appeal allowed.
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