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Madras High Court
SRINIVASAN
Devi Press - Appellant
Versus
Regional Provident Fund Commissioner, Madras - Respondent
Decided On : 03/09/1964
EMPLOYEES' PROVIDENT FUNDS ACT - EXEMPTION FROM CONTRIBUTION - NEW ESTABLISHMENT - CONTINUATION OF OLD ESTABLISHMENT - CHANGE OF OWNERSHIP - ADMINISTRATION CHARGES - WORKERS' ENTITLEMENT TO BENEFITS - COMPUTATION OF CONTRIBUTIONS.
Fact of the Case:
Devi Press Ltd., a public limited company, went into voluntary liquidation in January 1957. The two partners of the present petitioner partnership, who were the managing agents of the old company, purchased the machinery and formed a partnership to carry on the business of printing. The workers of the old company were settled amicably and most of them were re-entertained as new employees under the partnership. The Provident Fund Commissioner demanded contributions and administration charges from the petitioner firm from 25-1-1957, the date of formation of the partnership.
Finding of the Court:
The court held that the petitioner firm was not entitled to the infancy protection under Section 16(1)(b) of the Employees' Provident Funds Act, as it was a continuation of the old company. However, the demand for administration charges was not sustainable as no administration was involved during the period in question. The court also held that the workers were not entitled to the benefits of the scheme unless they completed a service of 240 days in one year of service.
Issues: 1. Whether the petitioner firm was entitled to the exemption from contribution under Section 16(1)(b) of the Employees' Provident Funds Act. 2. Whether the demand for administration charges was sustainable. 3. Whether the workers were entitled to the benefits of the scheme.
Ratio Decidendi: 1. The court held that the petitioner firm was not entitled to the exemption under Section 16(1)(b) as it was a continuation of the old company. The court considered the fact that the entirety of the machinery, its accessories, and the furniture were taken over, and the factory and Corporation licenses were transferred in the name of the petitioner partnership. The court also noted that the claims of the workers vis-a-vis the old company were settled up to the date of the winding up and that the workers were re-employed by the petitioner partnership. 2. The court held that the demand for administration charges was not sustainable as no administration was involved during the period in question. The court reasoned that these charges were intended to reimburse the department in respect of expenses of administration, and since no administration was involved, the demand could not be supported in law. 3. The court held that the workers were not entitled to the benefits of the scheme unless they completed a service of 240 days in one year of service. The court considered the provisions of the Act and the scheme framed under the Act, which provide that a worker becomes entitled to the benefits of the Scheme only on his completion of 240 days of work within one year of service.
Final Decision: The writ petitions failed, but the demand for administration charges was revised suitably. The criminal revision cases against the convictions for failure to make the contribution were dismissed, while the convictions for non-payment of administration charges were set aside. The court also directed the Regional Provident Fund Commissioner to take into consideration the fact that the workers were not liable to pay contribution during the period of the one year referred to and to revise his demand accordingly.
ORDER :- In the above two writ petitions, Devi Press is the petitioner. It is a registered partnership consisting of two partners which commenced business from 25-1-1957. Earlier, there was a company known as the Devi Press Ltd., which went into voluntary liquidation. As a result of the winding up and closure of Devi Press Ltd., a dispute arose between the workers and the management. That was settled on 23-1-1957. According to the settlement it was agreed that all the workers except those In the binding department would be re-employed by the new management, Devi Press, as fresh entrants. It was also agreed that such of the workers as were discharged on account of the closure should be paid ten days' basic wages for each year of service plus one month's basic wage as ex gratia payment.
2. Thereafter, the registered firm commenced business. It acquired for the purpose of its business the machinery of Devi Press Ltd., which had been wound up. In 1959, the Provident fund Commissioner called upon the petitioner firm to comply with the requirements of the Provident Fund Scheme. His contention was that the firm had completed three years by the 31st July 1956. The petitioner pointed out that the firm came into existence, only in January 1957, and that the provisions of the Employees' Provident Funds Act would apply only after three years of its life had been completed. This claim of the petitioner was rejected, the respondent holding that the liquidation of the former company would not have the effect of postponing the applicability of the Act and that the Act would apply with effect from 1st August 1956. He also contended that as the petitioner firm had taken over the machinery of the former company and was also housed in the same premises as the old company the exemption contemplated by S. 16(1) of the Act would not apply. The Provident Fund Commissioner also threatened to prosecute the petitioner and to take steps to recover the arrears of provident fund as arrears of land revenue. Subsequently, the Provident Fund Commissioner initiated prosecutions of the partners and the partners were also convicted under para 76(a) of the Employees' Provident Fund Scheme.
3. In the writ petitions, the first of which is for certiorari to quash the demand notices issued in respect of the alleged arrears, and the second for the issue of a writ of prohibition to restrain the respondent from collecting the contributions and other incidental charges for the period of 3 years commencing from the 25th January 1957, the contention advanced by the petitioner is that the petitioner firm is entitled to the exemption from the Act. The contributions on and after 1960 have been paid by the petitioner. It is also alleged that whatever be the position with regard to the contributions, the Provident Fund Commissioner has no authority to demand the payment of incidental administration charges for the period January 1957 to January 1960, for, in the absence of any contribution, no administrative charges could possibly be undertaken by the Regional Provident Fund Commissioner. It is urged that the old company had gone into liquidation and that the firm did not take over the previous company as a running concern. By mutual agreement the service of all the employees ceased and they became new employees in the service of the firm. The mere fact that it purchased the machinery of the old firm could not make the petitioner firm a successor of Devi Press Ltd.
4. In each of the several criminal revision cases, the two partners are the petitioners. Their failure to comply with the demand of the Regional Provident Fund Commissioner resulted in the prosecution and separate cases were launched in respect of different periods, but the point involved is identical. Even before the Criminal Court, the petitioners claimed that they were entitled to the exemption under Section 16(1) of the Act, which contention was, however, rejected, and the convictions followed.
5. In the cou
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