Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1962 Supreme(SC) 102

SUPREME COURT OF INDIA
14th March, 1962
P.B. GAJENDRAGADKAR AND K.N. WANCHOO, JJ.
The Regional Provident Fund Commissioner, Bombay (In both the Appeals) Appellant
Versus
1. Shree Krishna Metal Manufacturing Co., Bhandara (In C. A. No. 361. of 59) and
2. Oudh Sugar, Mill Ltd. (In C. A. No. 387 of 59) Respondents.
Civil Appeals Nos. 361 and 387 of 1959.
Advocates appeared
Mr. B. Sen, Senior Advocate (Mr. P. D. Menon, Advocate, with him), for Appellant (In both the Appeals); Mr. I. N. Shroff, Advocate, for Respondent (In C. A. No. 361 of 59), Mr. A. Viswanatha Sastri, Senior Advocate (Mr. V. J. Merchant, Advocate of M/s. Gagrat and Co., with him), for Respondent (In C. A. No. 387 of 59).

Advocates:
A.V.VISHWANATHA SASTRI, B.SEN, I.M.SHROFF, P.D.MENON, V.J.MERCHANT

Composite factories can be considered factories under Section 1(3)(a) of the Employees Provident Funds Act, 1952, if they are mainly engaged in an industry specified in Schedule I. The numerical test of 50 or more employees applies to the factory as a whole, not to each industry or activity within the factory.

Headnote:
EMPLOYEES PROVIDENT FUNDS ACT, 1952 - S. 1(3)(A) - INTERPRETATION - COMPOSITE FACTORIES - NUMERICAL TEST - MEANING OF "ENGAGED IN ANY INDUSTRY SPECIFIED IN SCHEDULE I" - FACTORIES PRIMARILY OR MAINLY ENGAGED IN SPECIFIED INDUSTRY - FACTORIES ENGAGED IN INCIDENTAL OR SUBSIDIARY ACTIVITIES - FACTORIES ENGAGED IN MULTIPLE INDUSTRIAL ACTIVITIES - FACTUAL DETERMINATION.
Fact of the Case:

The Regional Provident Fund Commissioner, Bombay, filed appeals against two High Court orders that had quashed the Commissioner's attempts to enforce the Employees Provident Funds Act, 1952 (the Act) against two companies: Shree Krishna Metal Manufacturing Co. (the Company) and Oudh Sugar Mills Ltd. (the Mills). The Company was a partnership firm engaged in four different industrial activities, one of which fell within Schedule I of the Act. The Mills manufactured hydrogenated vegetable oil and its by-products, and also fabricated tin containers for packaging the oil. The Commissioner contended that both companies were factories engaged in industries specified in Schedule I and thus subject to the Act's provisions. The companies argued that they were not factories within the meaning of Section 1(3)(a) of the Act.
Finding of the Court:

The Supreme Court held that composite factories, those engaged in multiple industrial activities, could be considered factories under Section 1(3)(a) of the Act. The numerical test of 50 or more employees applied to the factory as a whole, not to each industry or activity within the factory. The expression "engaged in any industry specified in Schedule I" was interpreted to mean "mainly engaged in any industry specified in Schedule I." If a factory's primary or dominant activity was in an industry specified in Schedule I, it would be considered engaged in that industry, even if it also engaged in other industrial activities.
Issues: 1. Whether composite factories are included within the scope of Section 1(3)(a) of the Employees Provident Funds Act, 1952? 2. Whether the numerical test of 50 or more employees applies to the factory as a whole or to each industry or activity within the factory? 3. What is the meaning of the expression "engaged in any industry specified in Schedule I" in Section 1(3)(a) of the Act?
Ratio Decidendi: 1. The Court rejected the argument that composite factories are excluded from the scope of Section 1(3)(a), holding that the definition of "factory" in Section 2(g) of the Act includes premises where any manufacturing process is carried on, regardless of whether the factory is exclusively engaged in a particular industry. 2. The Court held that the numerical test of 50 or more employees applies to the factory as a whole, not to each industry or activity within the factory. This interpretation is supported by the language of Section 1(3)(a) and the subsequent amendment of the Act in 1956, which clarified that the numerical test applies to the establishment, not the industry. 3. The Court interpreted the expression "engaged in any industry specified in Schedule I" to mean "mainly engaged in any industry specified in Schedule I." This interpretation is consistent with the common sense meaning of the words "engaged in" and is supported by the fact that the Act is intended to provide welfare benefits to workmen employed in factories.
Final Decision: The Court allowed the appeal filed by the Regional Provident Fund Commissioner against the Company and dismissed the appeal filed against the Mills. The Company was held to be a factory engaged in an industry specified in Schedule I and thus subject to the provisions of the Act. The Mills, however, was held not to be a factory within the meaning of Section 1(3)(a) because its fabrication of tin containers was a minor and incidental activity.

Judgment

GAJENDRAGADKAR, J. : These two appeals have been heard together because they raise a common question of construction of S. 1(3)(a) of the Employees 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 under the Indian Partnership Act. Its business consists of (I) manufacturing brass, copper and kasa circular sheets and the preparation of utensils therefrom; (2) milling paddy, (3) a flour mill and (4) a saw mill. The aforesaid four works are situated in the same compound. For the manufacture of metal circular sheets, the company has a rolling machine. 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, he threatened to use coercive processes to compel the Co. to comply with its requisitions issued under the relevant provisions of the Act. 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 as 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.

2. 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 October 11, 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 November, 1952.

3. The Central Government framed a scheme under S. 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 per cent. Of the total wage bill every year as his contribution towards the Fund and 3 per cent as the administrative charges on the total contribution of the employer and his employees.

4. On the 8th of August, 1955, the Regional Co

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