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1991 Supreme(Ori) 317
IN THE HIGH COURT OF ORISSA
B.L. Hansaria, D.M. Patnaik, JJ.
ALLIED AGENCIES AND OTHERS - APPELLANT
Versus
REGIONAL PROVIDENT FUND COMMISSIONER - RESPONDENT
O.J.C. No. 865 of 1986
Decided On : 23-07-1991
S.D. Nanda, for the Appellant; P.N. Mohapatra, for the Respondent
Functional integrality is the most important factor in determining whether different units/concerns can be said to be part of one establishment.
Headnote:
EMPLOYEES' PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 - SECTION 1(3)(a) - ESTABLISHMENT - INTERPRETATION - FUNCTIONAL INTEGRALITY - UNITY OF OWNERSHIP, MANAGEMENT AND CONTROL NOT SUFFICIENT - DIFFERENT UNITS/CONCERNS CAN BE PART OF ONE ESTABLISHMENT ONLY IF FUNCTIONALLY INTEGRATED.
Fact of the Case:
Three concerns, M/s. Allied Agencies, M/s. Industrial Brush Manufacturing Company, and M/s. Sahoo Chemicals, were owned and managed by the same individual, Somanath Sahoo. The question arose whether these concerns could be considered part of one establishment for the purpose of determining whether they came within the purview of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (the Act).
Finding of the Court:
The court held that the three concerns did not form part of one establishment and, therefore, the provisions of the Act did not apply to them. The court found that there was unity of ownership and some unity of management and control, but functional integrality was missing. The concerns were registered separately, maintained separate accounts, and their workmen were not inter-transferable.
Issues: Whether the three concerns could be regarded as part of one establishment for the purpose of determining whether they came within the purview of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.
Ratio Decidendi: The court held that functional integrality is the most important factor in determining whether different units/concerns can be said to be part of one establishment. Unity of ownership, management, and control are not always the deciding factors. In the present case, the court found that the three concerns were not functionally integrated and, therefore, they could not be regarded as part of one establishment.
Final Decision: The court allowed the petition and quashed the impugned order of the Regional Provident Fund Commissioner.
JUDGMENT :
Hansaria, C.J. - The question for determination in this writ application is whether certain M/s. Allied Agencies, M/s. Industrial Brush Manufacturing Company and M/s. Sahoo Chemicals can be regarded to form part of one establishment for the purpose of determining whether they come within the purview of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for short, 'the Act'). It is an admitted position that if these concerns were not to form part of one establishment, the total number of employees engaged by them would not be 20 because of which the Act would not apply to them. Though there is some dispute that even if these concerns are treated to form part of one establishment, the total number of employees would not come to 20, but then, this being a disputed question of fact and the Regional Provident Fund Commissioner having come to the conclusion on the basis of materials available to him that these concerns at the relevant time had employed 21 persons, we would not re-examine this factual matter. We, therefore, intend to confine our attention to the legal dispute as to whether the aforesaid three concerns form part of one establishment.
2. To examine the aforesaid legal question, we shall have to note in brief the history of these units. M/s. Allied Agencies is a proprietorship concern of opposite party No. 4 Somanath Sahoo and is located at S. 5, Rourkeia. It is a shop wherein opposite party No. 4 carries on sale of electrical goods including refrigerators. It was started in the year 1969 and registered under the Orissa Shops and Commercial Establishments Act, 1956 bearing registration number 565-C1100. M/s. Industrial Brush Manufacturing Company is also a proprietorship concern belonging to opposite party No. 4, It is located in the Industrial Estate, Rourkeia. This unit was started in 1974. It is engaged in manufacture of industrial brushes and was registered as a commercial establishment under the Orissa Shops and Commercial Establishments Act, 1956 bearing registration number: C11-20-297. It was financed by the Orissa State Financial Corporation as well as banks. M/s. Sahoo Chemicals is a registered partnership firm of which opposite party No. 4 and his wife are the partners. It is a small scale industry and is an approved supplier of sodium silicate to the Rourkeia Steel Plant. It commenced its production on August 15, 1980. It was also financed by the Orissa State Financial Corporation.
3. The Regional Provident Fund Commissioner regarded all the aforesaid concerns as part of one establishment and as he was satisfied that the total number of persons employed combinedly in these three concerns exceeded 20, he held that the provisions of the Act were applicable to the aforesaid composite unit with effect from 4/81 and opposite party No. 4 was under statutory obligation to report compliance of the various provisions of the schemes framed under the Act. The legality of this order has been assailed in this application.
4. A perusal of the impugned order shows that the Regional Provident Fund Commissioner took the view that opposite party No. 4 must have also financed M/s. Industrial Brush Manufacturing Company though some institutions also lent some money to it. In this connection it has been observed that in orderto avoid certain statutory obligations, the arrangement for taking finance from the aforesaid institutions might have been made. The Commissioner concluded by saying that from the report of the Provident Fund Inspector and the written statement of opposite party No. 4, he was of the opinion that M/s. Industrial Brush Manufacturing Company was an offshoot of M/s. Allied Agencies. Same conclusion was arrived at relating to M/s. Sahoo Chemicals. Being of this view and keeping in mind what was stated in Associated Cement Co. Ltd. v. Their Workmen (1960 I LL 1) regarding the factors to be taken note of while deciding whether some units could be said to be part of one establishment, the R
