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M/S Nav Financiers (Registered) v. Union Of India And Others - WRIT - C No. 48013 of 2006  RD-AH 5118 (22 March 2007)
Writ Petition No. 48013 of 2006
M/s Nav Financiers ( Registered). ... .......................................Petitioner
Union of India and others .....................................................Respondents.
Writ Petition No.4407 of 2007
M/s Nav Financiers ( Registered) ...............................................Petitioner
Union of India and others. ...................................................Respondents.
Hon'ble Tarun Agarwala, J.
The petitioner is a partnership firm, duly registered under the provision of the Indian Partnership Act and is engaged in the Hire Purchase business. The petitioner is aggrieved by the application of the Employees Provident Fund and Misc. Provision Act and the action of the respondents in clubbing three other Companies incorporated under the Companies Act with the petitioner's firm treating all the four entities as one unit.
It transpires that notices were issued by the respondents under Section 7-A for the determination of the money due from the petitioner under the Act. It transpires that the petitioner contended that the Act was not applicable, and therefore, an enquiry was constituted under sub clause 2 of Section (7-A) to enquire, as to whether the Act was applicable on the petitioner's firm or not. The Assistant Provident Fund Commissioner by an order dated 21.8.2006, held that the Act was applicable to the petitioner's firm and that the coverage was also extended to the three other units.
Heard Sri A.K. Srivastava, the learned counsel for the petitioner Sri D.M. Chaudhry, the learned counsel appearing for the Regional Provident Fund Commissioner.
The bone of contention before this Court is, that the petitioner is a partnership firm and that the other three units are separate legal entities under the Companies Act 1956 and that the said companies cannot be clubbed together for the purposes of coverage under the Employees Provident Fund Act. The learned counsel for the petitioner further submitted that the other units have different shareholders and that there is no unity or interdependance between the petitioner's firm with the other companies. The companies have separate independent accounts and are independent legal entities. The learned counsel for the petitioner further submitted that there is no financial integrality with regard to finance, employment and labour between the petitioner's partnership firm and the other companies and that the petitioner's firm cannot be clubbed together with the other companies for the purposes of coverage under the Act.
Before dealing with the questions involved in the present case, it is necessary to observe here that one should not loose sight of the fact that the provisions of the Act is a beneficial piece of legislation to provide healthy security to the workmen. The Supreme Court in Regional Provident Fund Commissioner, Jaipur vs. Naraini Udyog and others, 1996 (5) SCC 522 held that in the ultimate analysis, the employer gets maximum out-turn of his production by ensuring health insurance to its employees which is the fundamental right to the latter.
Section 2-A of the Employees' Provident Funds Act Miscellaneous Provisions Act, 1952 provides as under:
" 2-A. Establishment to include all departments and branches.- For the removal of doubts, it is hereby declared 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 parts of the same establishment."
The aforesaid provision clearly indicates that where an establishment consists of different departments or branches located at the same place or at different places, such departments or branches would be treated as a part of the same establishment.
In Management of Pratap Press, New Delhi vs. Secretary, Delhi Press Workers Union, Delhi, AIR 1960 SC1213, the Supreme Court held that in order to decide as to whether two units form part of the same establishment, unity of ownership, unity of management and control, unity of finance and unity of labour, unity of employment and unity of functional "integrality" were the tests which were required to be applied and the Court had to consider as to how far there was a functional "integrality" meaning thereby such functional interdependence that one unit could not exist conveniently and reasonably without the other and that in matters of finance and employment, the employer had actually kept the two units distinct or integrated.
In the case of Naraini Udyog and others ( supra) while considering the functional " integrality", the Supreme Court held that merely became the two units were registered under the Companies Act did not mean that the two units could not be clubbed together for the purpose of levying contribution under Section 7-A of the Act when a finding of fact of functional unity and integrality between the two concerns are recorded. The Supreme Court further held that the definition of an establishment was large enough to encompass within its ambit the two units as an establishment for the purpose of the Act.
In M/s Rajasthan P.K. Goods Transport Company vs. Regional Provident Fund Commissioner, New Delhi and others, AIR 1997 SC 48, the Supreme Court held that where the management was common, the letter heads had the same telephone numbers and most of the partners were common and the place of business was also common, the mere fact that the two units were registered separately would still bring the units within the grip of the Act. The Supreme Court further found that if the veil was pierced, it would be found that the two units are one of the same, and therefore, the two units would be covered under the provisions of Act as an establishment for the purpose of coverage under the said Act.
In Noor Niwas Nursery Public School vs. Regional Provident Fund Commissioner and others, AIR 2001 SC 277, the Supreme Court held-
" Whether two units are one or distinct will have to be considered in the light of the provisions of Section 2-A of the Act which declares 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 parts of the same establishment. In such cases, the Court has to consider how far there is functional integrity between the two units, whether one unit cannot exists conveniently and reasonably without the other, and on the further question, in matters of finance and employment, the employer has actually kept the two units distinct or integrated."
In the present case, the Commissioner has found that the four units belong to the same family and there was interconnectivity amongst them in the sense of money transaction, and that there was a common management and that all the four units were carrying on the business of Hire Purchase and that all the four firms were situated in the same premises under one roof, and therefore, there was not only a unity of ownership but also unity of management and functional " integrality". The Commissioner consequently found that all the four units should be clubbed together for the purpose of coverage under the provisions of the Act.
In view of the aforesaid findings of fact given by the Provident Fund Commissioner which has not been disputed, the mere fact that the petitioner is a partnership firm and other three units are limited Companies is by itself insufficient to take the units outside the coverage under Section 2-A of the Act.
Consequently, the impugned order does not suffer from any error of law. The writ petition fails and is dismissed.
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