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2011 (6) Supreme 495
SUPREME COURT OF INDIA
J.M. Panchal and H.L. Gokhale, JJ.
M/s L.N. Gadodia & Sons & Anr. — Petitioner(s)
versus
Regional Provident Fund Commissioner — Respondents(s)
Special Leave Petition (Civil) No. 11230 of 2008
Decided on : 26-9-2011
AIR 1985 SC 323 – Relied upon
(b) Directors of the two petitioner companies belong to the same family – The Managing Director as also the Commercial Manager and Technical Manager are common – Employees of the two companies were being swapped – Both companies have same registered address and common telephone numbers and a common gram number – The two companies are family concerns of the same family – Thus there is an integrity of management, finance and the workforce in the two private limited companies – Despite their attempt to show that they are two different companies having less than 20 workmen to avoid application of the Act, the material on record shows that the two entities are parts of the same establishment – Provident Funds Act applies to them. (Para 14)
AIR 1960 SC 56; AIR 1960 SC 1213; (1998) 2 SCC 446; (1996) 5 SCC 522 – Relied upon
(2007) 4 SCC 239; (1996) 9 SCC 454 – Referred
(c) Employees Provident Funds and Miscellaneous Provisions Act, 1952 – Section 2A r/w Section 2(5) and (9), Delhi Shops and Establishment Act, 1954 – Establishment –The two petitioners carry on trade or business for private gain – They are, as such, commercial establishments. (Para 15)
(d) Indian Evidence Act, 1872 – Section 106 – When any fact is especially within the knowledge of any person, the burden of proving that fact lies on him – Such a party is required to produce the best evidence before the authority concerned, failing which the authority cannot be faulted for drawing the necessary inference – Presently, the inference of integrity of finance, management and workforce in the two petitioners on the basis of the material on record rightly drawn. (Para 17)
JUDGEMENT
H.L. Gokhale J. —
This Special Leave Petition raises the question as to whether the respondent herein had erred in clubbing the two appellant concerns for the purposes of applying the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Provident Funds Act).
Facts leading to this Special Leave Petition -
2. The facts leading to this petition are this wise. The petitioner no.1 herein and petitioner no.2 (M/s Delhi Farming and Construction Pvt. Ltd.) are sister concerns. The office of the respondent wrote to them vide their letter dated 11.6.1990 calling upon them to comply with the provisions of the Provident Funds Act, failing which legal action would be initiated against them. The petitioner filed an application, and disputed clubbing of the two concerns for the purposes of their coverage under the provisions of the said Act. The application was accordingly heard by the Regional Provident Fund Commissioner (Enforcement and Recovery) Delhi, under the provisions of section 7A of the Provident Funds Act. He heard the legal advisor of the petitioners as well as the enforcement officer representing the provident fund department. It was submitted on behalf of the petitioners that the second petitioner was incorporated in 1930 as the Delhi Cattle Farming Private Limited, and in the year 1983 it’s name was changed to the present name i.e. Delhi Farming and Construction Private Limited (‘Delhi Company’ for short). The first petitioner was incorporated as another Private Limited Company in the year 1941, and there was no connection between the activities or business of the two companies. They were different and separate legal entities, and should not be clubbed into one establishment. It was pointed out that the main business of the second petitioner i.e. the Delhi Company was to acquire lands and farms for the purpose of cultivation and to engage in other agricultural activities. After its land was acquired by Delhi Administration in 1959 and after receiving compensation, the second petitioner shifted its business to purchase of gas cylinders and giving them on hire, supplying security equipments to the Government of India, and supply of gray/processed fabrics to readymade garments exports though this was only a side business. It was pointed out that as far as the first petitioner is concerned, their business was only as a selling agent of Calico Mills and Tata Mills, Ahmedabad. It was also trading in whole-sale cloth business. It was not disputed that both the companies have their registered office at 1112, Kucha Natwan, Chandni Chowk, Delhi-6 but it was stated that the Delhi Company carries its business and commercial activities at 116, Hans Bhawan, Bahadur Shah Zafar Marg, New Delhi-110002. Shri R.G. Gadodia and Shri T.P. Gadodia were no longer the Directors in either of the two companies, and only Smt. Sudha Gadodia was Director in both the companies.
3. On the other hand, the enforcement officer pointed out that apart from the fact that the two companies had common registered office, Shri R.G. Gadodia and Shri T.P. Gadodia were the common Directors in both the units at the time of inspection and clubbing. Apart from Smt. Sudha Gadodia being admittedly a Director in both the units, Shri T.P. Gadodia was the Managing Director in both the units. It was further pointed out that as per the Audited Report of the Delhi Company dated 24.4.1988, it had given a loan of Rs.5 lakh to the first petitioner. Two officers viz. Shri G. Ventakeshwaran and Shri S.K. Shome were employed by both the units as Technical Manager and Commercial Manager respectively. The two companies had the same telephone nos. i.e. 2512890 and 2513009. Both the units were using the same gram number which was ‘GadodiaSon’.
4. In rebuttal, the petitioners pointed out that the Delhi Company had its own separate staff. The above referred two telephone nos. were in the name of the first petitioner and th
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