IMPORTANT POINT
Tests to determine whether two establishments can be clubbed together for the purposes of the provisions of the Act are test of unity of ownership, management, control and functional integrality or general unity of purpose.

JUDGMENT :

SANJAY KISHAN KAUL, J.

1. Welfare economics, enlightened self-interest and the pressure of trade unions led larger factories and establishments to introduce schemes that would benefit their employees, including schemes like that of the provident fund. L.N. Gadodia & Sons and Another vs. Regional Provident Fund Commissioner, (2011) 13 SCC 517. However, with an increasing number of small factories and establishments coming into the market, the employees of such fledgling units remained deprived of these benefits. In order to diffuse such benefits in establishments across the market, the legislature promulgated the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the ‘said Act’). The said Act was enacted with the avowed object of providing for the security of workers in organised industries, in the absence of any social security scheme prevalent in our country. To avoid any hardship to new establishments, a provision was made for exempting them from the aegis of the said Act, for a period of five years. This period was reduced to three years in 1988 and the exemption provision was completely removed from 22.9.1997.

2. The relevant provision of the said Act is reproduced herein-under:

“16. Act not to apply to certain establishments - (1) This Act shall not apply:-

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(d) to any other establishment newly set up, until the expiry of a period of three years from the date on which such establishment is, or has been, set up.

Explanation: For the removal of doubts, it is hereby declared that an establishment shall not be deemed to be newly set up merely by reason of a change in its location.”

3. The present appeals are concerned with this exemption provision as the three establishments in question claimed exemption in respect of application of this provision of the said Act.

4. The three appeals filed before us are by three limited companies (two separate legal entities and one, an establishment of the parent company), though the question of their exemption has been dealt with by a common order of the Regional Provident Fund Commissioner, Rajasthan (for short ‘RPFC’). This is so, as all the three establishments are sought to be denied exemption on the ground that they are effectively part of the same parent establishment, being M/s. Bennett, Coleman & Company Limited (for short ‘BCCL’), Mumbai. Civil Appeal No. 4475/2010 is by BCCL, Jaipur. We may note that the said Company is not a separate legal entity but was really claimed to be an establishment of the parent company, albeit set up in Jaipur. Civil Appeal No. 4476/2010 is by M/s. Times Publishing House Limited, Jaipur (for short ‘TPHL, Jaipur’) while Civil Appeal No. 4474/2010 is by M/s. Shree Vishal Printers Limited, Jaipur (for short ‘SVPL, Jaipur’).

5. Before we proceed with the factual matrix as to how the controversy arose, it would be appropriate to examine the contours within which this aspect would have to be examined. It would be appropriate to take note of another provision, Section 2A of the said Act, which was inserted by Act 46 of 1960, w.e.f. 31.12.1960. We may note that there is no definition of an “establishment” under the said Act, and thus, the jurisprudence that developed resorted to the provisions of the Industrial Disputes Act, 1947 (for short ‘ID Act’) for the said purpose. Section 2A of the said Act reads as under:

“2A. 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.”

6. The aforesaid provision was introduced so as to obviate the chances of creation of different departments and branches by an establishment and then seek exemptions on the basis of the same being new establishments.

7. There is really no dispute on the