Provident Fund Commissioner Vs. M/S Raj's Continental Exports (P) Ltd  Insc
247 (7 March 2007)
Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA
Dr. ARIJIT PASAYAT, J.
Challenge in this appeal is to the judgment rendered by a Division Bench of
the Karnataka High Court dismissing the Writ appeal filed by the appellant. The
learned Single Judge, whose order was under challenge before Division Bench had
allowed the writ petition filed by the respondent holding that the order passed
under Section 7A of the Employees' Provident Funds & Miscellaneous
Provisions Act, 1952 (in short the 'Act') was not sustainable.
Background facts in a nutshell are as follows:
Respondent claimed in-fancy protection under the provisions of the Act. It
started production in 1984. The respondent was of the view that it was an
extension on the branch of M/s Continental Exporters, a proprietorship concern
of one Sampathraj Jain, who was also the Managing Director of the
respondent-company. Appellants' view was that the respondent was nothing but a
department of the aforesaid "M/s. Continental Exporters". Assailing
the adjudication, respondent filed a writ petition stating that there was no
financial integrity. It was separately registered under the Factories Act, Central
Sales Act 1956, Income Tax Act, 1961 and the Employees State Insurance Act. The
concerns are separate and distinct. They have separate Balance Sheets and
audited statements. The High Court accepted the contention and held that there
was total independent exercise of power in the two concerns. Though the
manufacturing of goods was in respect of the same article, that by itself was
not sufficient to hold that it was a branch or department of M/s Continental
Exporters. The High Court as a matter of fact found that there was total
independence exercise of the management and control of the affairs, the
employees were separately appointed and controlled. Taking into account these
factors it was held that that the respondent company and M/s Continental
Exporters were not one and the same.
Challenge was made to the order of learned Single Judge in the Writ Appeal.
The High Court after analyzing the factual position came to hold that there was
nothing in common between the two establishments. Merely because the proprietor
of the one concern was the Managing Director of the other that by itself is not
sufficient to establish that one was branch of the other. Accordingly the Writ
Appeal was dismissed.
In support of the appeal, learned counsel for the appellant submitted that
factual scenario clearly establish that the respondent was a branch of M/s.
Learned counsel for the respondent on the other hand submitted that in view
of the findings recorded by both the learned Single Judge and the Division Bench
of the High Court, there is no scope for any interference.
At this juncture it would be appropriate to take note of Section 2A of the
Act. The same reads as follows:- "For the removal of doubts, it is hereby
declared the 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
In Pratap Press, etc. v. Their Workmen (1960 (1) LLJ 497) it was inter-alia
held as follows :
"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 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."
In Regional Provident Fund Commissioner and Anr. v.
Dharamsi Morarji Chemical Co. Ltd. (1998 (2) SCC 446), it was held that
unless there is clear evidence to show that there was any supervisory financial
or managerial control, it cannot be said that one is the branch of the other.
As noted by learned Single Judge, the respondent was separately registered
under the Factories Act. It was separately registered under the Central Sales
Tax Act and the Employees State Insurance Act.
It has also been found by learned Single Judge that there was total
independence of the two units. The learned Single Judge and the Division Bench
were right in their conclusion that the respondent is not a branch of M/s.
The appeal is sans merit, deserves dismissal, which we direct. There will be
no order as to costs.
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