M/S. SHREE VISHAL PRINTERS LTD., JAIPUR versus REGIONAL PROVIDENT FUND COMMISSIONER, JAIPUR & ANR. on 12 September 2019

SUPREME COURT REPORTS

[2019] 12 S.C.R.

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M/S. SHREE VISHAL PRINTERS LTD., JAIPUR

V.

REGIONAL PROVIDENT FUND COMMISSIONER, JAIPUR& ANR.

(Civil Appeal No.4474 of 2010)

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SEPTEMBER 12, 2019

[SANJAY KISHAN KAUL AND K. M. JOSEPH, JJ]

Employees’ Provident Funds and Miscellaneous ProvisionsAct, 1952:C

ss. 16, 7A – Act not to apply to certain establishments – Onfacts, three establishments sought exemption u/s. 16(1)(d) that theAct will not apply to their establishments – Order by the RegionalProvident Fund Commissioner that establishments not entitled toexemption on the ground that they are effectively part of the sameDparent establishment – Said order upheld by the Appellate tribunalas also Single Judge and the Division Bench of the High Court –On appeal, held: Findings qua all the three establishment satisfythe functional integrality and the general unity of purpose test, andthe same are met in the facts of the instant case – They may beEdifferent legal entities, an arrangement may have been made to havedifferent directors and shareholders, but the nature of control andintegrality of functionality, between the three entities is quiteapparent from the facts set out – Each one of the facts by itself maynot be conclusive, but taken as a whole, the conclusion arrived atby the Regional Provident Fund Commissioner is upheld –FFurthermore, exact amount of liability of each of the establishmentsis to be determined and would be co-extensive with the parentcompany – Costs is imposed on all the three establishments, but ofvarying amounts – Industrial Disputes Act, 1947 – s. 2A.

Nature of – Exemption from the aegis of Act – Object of –GHeld: Act is a beneficial legislation - Object of excluding the infancyperiod of five years which was later reduced to three years from therigours of the Act, was only to provide to new establishments, aperiod to establish their business, and not to permit different kindsof routes to be created to evade the liability under the Act.

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Dismissing the appeals, the Court

HELD: 1.1 Civil Appeal No.4475/2010 is by BCCL, Jaipur,which is not a separate legal entity but was really claimed to bean establishment of the parent company, albeit set up in Jaipur.The counsels appearing for the appellants were of the belief thatit was facts of this case which had caused confusion in the mind ofthe Regional Provident Fund Commissioner as, in theirperspective, exemption could not have been really sought withinthe provisions of the Employees’ Provident Funds andMiscellaneous Provisions Act, 1952. This is so, as BCCL, Jaipurwas not a separate legal entity, but, part of the parent companydirectly. The case would, thus, be fully covered by the provisionsof Section 2A of the said Act and mere location of departmentsand branches in other cities would not have extended the benefitof the exemption to this company. [Para 4, 11][153-B; 157-C-D]

1.2 As regards Civil Appeal No. 4476/2010, the agreementdated 25.7.1986 between the two parties, which gave rise to theProvident Fund Commissioner to initiate proceedings, was insupersession of an earlier agreement dated 13.12.1985. Thebusiness reason stated for entering into this agreement was thecommencement of publication of the Jaipur edition of the dailynewspapers of BCCL, Mumbai, i.e., The Times of India andNavbharat Times. The agreement records that TPHL had openedan office in Jaipur, where it had equipped itself with trained andexperienced staff and all infrastructural, secretarial,administrative and marketing facilities. Since 23.9.1985, it hadbeen providing various services to BCCL, Mumbai, includingoffice space for use and occupation, accounting facilities,stenographers, typing, and so on. The services which were nowfurther sought to be provided to BCCL, Mumbai includedmarketing, development work, realisation of dues, adequate officespace, accounting facilities, infrastructure, packing/bundling ofdaily newspapers (at the cost of BCCL, Mumbai), etc. BCCL,Mumbai was to pay to TPHL an amount calculated @ 5% ascommissions on Net Advertisement Revenue and Net CirculationRevenue. [Para 12, 13, 14][157-E-H; 158-A, D]

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1.3 Once that is conceded that BCCL, Jaipur was reallyonly a part of BCCL, Mumbai. The connection of the other twoestablishments with BCCL, Mumbai or, for that matter, BCCL,Jaipur would, thus, not cause an intrinsic fallacy in the order ofthe RPFC. [Para 18][159-C]

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1.4 In the instant case, a branch or a unit of BCCL, Mumbaiis not dealt with. Thus, a test of unity of ownership, managementand control may not really be applicable, but the test would be offunctional integrality or general unity of purpose, in the givenfactual situation. There is no direct unity of employment. In anyCcase, it is the test of functional integrality or general unity ofpurpose which would have to be applied in the present facts ifthe two establishments have to be clubbed for the purposes ofthe provisions of the said Act. [Para 20][159-G; 160-A]

1.5 It was submitted that the two companies wereDfunctionally dependent. Practically all three companies wereworking from the same building, albeit on different floors, andthe office of TPHL was open for the use of BCCL, Mumbaiemployees. It was also sought to be contended that the Managerof BCCL, Mumbai was signing papers relating to TPHL andEnotices relating to the closure of offices of the two onMahashivratri and Holi. However, a perusal of the documents inquestion shows that they were really endorsements to TPHL,which would be natural considering that there would be norequirement of work to be sourced in case the office of BCCL,Mumbai itself was closed, and no editing, marketing work wasFrequired to be carried out. On the issue of security staff, sincethe building was one, logically common directions were possible.The executive of TPHL was using the letterpad of BCCL,Mumbai. Furthermore, the nature of the agreement provided forboth the space and the staff to be made available by TPHL for theGbenefit of BCCL, Mumbai. The expenses of the establishment,electricity bill, maintenance costs, etc., were to be borne byTPHL. If the said facts are analysed on the touchstone offunctional integrality or general unity of purpose, it is difficult, ifnot impossible, to disagree with the reasoning of four forums.

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Thus there is no doubt in rejecting the case of TPHL.[Para 22-24, 28][160-D-H; 161-A, F]

1.6 SVPL for the relevant period of time, was carrying outexclusive work only for BCCL, Mumbai, it was pleaded that therewas no commonality of directors and shareholders of the twocompanies, nor was there a cross shareholding, an aspect forwhich charts have been filed. The subsequent fact was also that,at some stage, it got merged with another company. As regardsthe agreement with BCCL, Mumbai, dated 1.10.1985, BCCL,Mumbai, having commenced publication of the Jaipur edition ofthe two newspapers is stated to have approached SVPL forprinting the said newspapers on a contract basis. SVPL was toemploy the necessary personnel for carrying out various tasksand had to print the newspapers. The remuneration was payableby BCCL, Mumbai to SVPL at Rs.24,000/- per day, for the twodaily newspapers. The printing press was elsewhere, but thebusiness office of SVPL was also located in the same building asBCCL, Jaipur, albeit stated to be at a different floor. There was‘Non-Exclusivity Clause’ in the agreement between the twoparties. The emphasis was on the two companies being separatelegal entities, there being no commonality of directors orshareholders, or direct financial control. The balance sheet andprofit and loss accounts were also separate. Another aspectemphasized was that the printing press of SVPL was located at adifferent premises from where the business was really beingcarried on, though naturally, the control of the business would befrom the office located in the same premises as BCCL, Mumbai.It is not, however, disputed that SVPL had, at its own cost, givenadequate covered area adjacent to the printing press to BCCL,Mumbai for storing the newspaper/printing. The consideration,which was being paid to SVPL for printing included the cost ofmaking available the said space for packaging and storageoperations.[Para 32, 33, 35][162-F-H; 163-A-B, D-F]

1.7 Respondent sought to emphasise the functionaldependence between the companies. The aspect of the Managerof BCCL signing papers relating to SVPL was emphasised,including notices of closure. The common factor, again, is of A

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ABCCL, Mumbai issuing orders on the letter pad of SVPL. Infact, the nature of communications and orders issued do suggestthat all three were working towards the common object of bringingout a newspaper. The said would not have been sufficient by itself,but for the application of the functional integrality test, whichBlinked them to be part of the same establishment. [Para 36-37][163-F-H]

1.8 In the impugned orders, it is not very clear as to whetherthe reference is being made to BCCL, Mumbai or to BCCL,Jaipur. However, the same is not of much consequence for theCreason that BCCL, Jaipur is admittedly a branch office of BCCL,Mumbai. In the complete conspectus of facts, after divorcingdifferent aspects of the three establishments, the conclusiondifferent from the one which has come to for TPHL cannot bearrived at. The very nature of the working of SVPL and the othertwo entities show the functional integrality test to be satisfied.DThey may be different legal entities, an arrangement may havebeen made to have different directors and shareholders, but thenature of control and integrality of functionality, between the threeentities is quite apparent from the facts set out. Each one of thefacts by itself may not be conclusive, but taken as a whole, thereEcan be no other conclusion, than the one arrived at by the RPFC.This is done, quite conscious of the fact that there is undoubtedlysome jumbling which has arisen in the order of the RPFC, whichhas been affirmed throughout. But then, the case of the appellantswas built on the principle that all these three entities have really

no functional integrality vis-à-vis BCCL, Mumbai. As it emergedFsubsequently, and was conceded before; there is little doubt thatBCCL, Jaipur is a unit of BCCL, Mumbai, and the other twounits have linkages and are controlled by BCCL, Jaipur in amanner which would satisfy the functional integrality test.[Para 38, 40]G

1.10 The said Act being a beneficial legislation, the objectof excluding the infancy period of five years (later reduced tothree years) from the rigours of the Act, was only to provide tonew establishments, a period to establish their business, and notto permit different kinds of routes to be created to evade theHliability under the said Act. [Para 41][164-G]

M/S. SHREE VISHAL PRINTERS LTD., JAIPUR V. REGIONAL PROVIDENT

1.11 The findings qua all the three appellants satisfy thefunctional integrality and the general unity of purpose test, andthe same are met in the facts of the instant case. [Para 42][164-H; 165-A]

1.12 The appellants are getting away lightly on the issue ofsuch liability, the exact amount of which is to be determined. Theliability of each of these establishments would be co-extensivewith BCCL, Mumbai. The costs is imposed on all the threeappellants, but of varying amounts. As there was no casewhatsoever of BCCL, Jaipur, appellant in CA No. 4475/2010,the appeal is dismissed with costs of Rs.50,000/-, while imposingcosts on the other two appellants of Rs.20,000/- each. [Para 43,44][165-D-E]

L.N. Gadodia& Sons and Anr. v. Regional ProvidentFund Commissioner(2011) 13 SCC 517; Managementof Pratap Press, New Delhi v. Secretary, Delhi PressWorkers’ Union, Delhi & Its Workmen AIR 1960 SC1213; Associated Cement Companies Limited, ChaibassaCement Works, Jhinkpani v. Workmen AIR 1960 SC56– referred to.

Case Law Reference

(2011) 13 SCC 517referred toPara 1AIR 1960 SC 1213referred toPara 8AIR 1960 SC 56referred toPara 8

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4474of 2010

From the Judgment and Order dated 11.04.2008 of the HighCourt of Rajasthan, Jaipur Bench in D.B. Civil Special Appeal (Writ)No. 1229 of 2007

With

Civil Appeal Nos. 4476, 4475 of 2010.

Dhruv Mehta, Jay Deep Gupta, Sr. Advs., Manish KumarSrivastava, Ms. Niharica Khanna, Praveen Agrawal, K. Datta, AshishVerma, Praveen Agarwal, Arnav Sanyal, Ms. Anandita, Keshav Mohan,Rishi K. Awasthi, Prashant Kumar, Piyush Choudhary, Ms. Tarini Sinha,Santosh Kumar - I, Surender Kumar Gupta, Bharat Singh, Raj BahadurYadav, Arun Kumar Yadav, Advs. for the appearing parties.

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152SUPREME COURT REPORTS

[2019] 12 S.C.R.

AThe Judgment of the Court was delivered bySANJAY KISHAN KAUL, J.

1. Welfare economics, enlightened self-interest and the pressureof trade unions led larger factories and establishments to introduceschemes that would benefit their employees, including schemes like thatBof the provident fund.[1] However, with an increasing number of smallfactories and establishments coming into the market, the employees ofsuch fledgling units remained deprived of these benefits. In order todiffuse such benefits in establishments across the market, the legislaturepromulgated the Employees’ Provident Funds and MiscellaneousCProvisions Act, 1952 (hereinafter referred to as the ‘said Act’). Thesaid Act was enacted with the avowed object of providing for the securityof workers in organised industries, in the absence of any social securityscheme prevalent in our country. To avoid any hardship to newestablishments, a provision was made for exempting them from the aegisof the said Act, for a period of five years. This period was reduced toDthree years in 1988 and the exemption provision was completely removedfrom 22.9.1997.

2. The relevant provision of the said Act is reproduced hereinunder:

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

….….….….….….

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

FExplanation: For the removal of doubts, it is hereby declared thatan establishment shall not be deemed to be newly set up merelyby reason of a change in its location.”

3. The present appeals are concerned with this exemption provisionas the three establishments in question claimed exemption in respect ofGapplication 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 1 L.N. Gadodia & Sons and Anr. v. Regional Provident Fund Commissioner, (2011) 13HSCC 517

company), though the question of their exemption has been dealt with bya common order of the Regional Provident Fund Commissioner, Rajasthan(for short ‘RPFC’). This is so, as all the three establishments are soughtto be denied exemption on the ground that they are effectively part ofthe same parent establishment, being M/s. Bennett, Coleman & CompanyLimited (for short ‘BCCL’), Mumbai. Civil Appeal No. 4475/2010 is byBCCL, Jaipur. We may note that the said Company is not a separatelegal entity but was really claimed to be an establishment of the parentcompany, albeit set up in Jaipur. Civil Appeal No. 4476/2010 is by M/s.Times Publishing House Limited, Jaipur (for short ‘TPHL, Jaipur’) whileCivil 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 thecontroversy arose, it would be appropriate to examine the contours withinwhich this aspect would have to be examined. It would be appropriate totake note of another provision, Section 2A of the said Act, which wasinserted by Act 46 of 1960, w.e.f. 31.12.1960. We may note that there isno definition of an “establishment” under the said Act, and thus, thejurisprudence that developed resorted to the provisions of the IndustrialDisputes Act, 1947 (for short ‘ID Act’) for the said purpose. Section 2Aof 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 anestablishment consists of different departments or has branches,whether situate in the same place or in different places, all suchdepartments or branches shall be treated as parts of the sameestablishment.”

6. The aforesaid provision was introduced so as to obviate thechances of creation of different departments and branches by anestablishment and then seek exemptions on the basis of the same beingnew establishments.

7. There is really no dispute on the jurisprudential aspect, as allthe learned counsels for the parties, i.e., Mr. Joydeep Gupta, learnedsenior counsel in Civil Appeal Nos. 4475/2010 and 4476/2010 and Mr.Dhruv Mehta, learned senior advocate in Civil Appeal No. 4474/2010,as well as the counsel for the Department, Mr. Keshav Mohan, Advocatehave relied upon the same set of judicial pronouncements. To put thelegal perspective at the threshold would, thus, be appropriate.

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A8. The first judgment is in Management of Pratap Press, NewDelhi v. Secretary, Delhi Press Workers’ Union, Delhi & ItsWorkmen[2]. The dispute was one under the ID Act and also dealt withthe publication of a newspaper as in the present case. Pratap Press wassought to be treated as part of the same industrial unit as Vir Arjun andDaily Pratap. The tests are taken from an earlier judgment, in AssociatedBCement Companies Limited, Chaibassa Cement Works, Jhinkpaniv. Workmen[3], and it was observed in para 5 as under:

“5. In Associated Cement Co., Ltd. v. Workmen, this Court hadto consider the question whether the employer’s defence to aclaim for lay-off compensation by the workers of the ChaibasaCement Works that the laying off was due to a strike in anotherpart of the establishment, viz., limestone quarry at Rajanka wasgood. In other words the question was whether the limestonequarry of Rajanka formed part of the establishment known as theChaibasa Cement Works within the meaning of Section 25E(iii)of the Industrial Disputes Act. While pointing out that it wasimpossible to lay down any one test as an absolute and invariabletest for all cases it observed that the real purpose of these testswould be to find out the true relation between the parts, branches,units etc. This court however mentioned certain tests which mightbe useful in deciding whether two units form part of the sameestablishment. Unity of ownership, unity of management andcontrol, unity of finance and unity of labour, unity of employmentand unity of functional “integrality” were the tests which the Courtapplied in that case. It is obvious there is an essential differencebetween the question whether the two units form part of oneestablishment for the purposes of Section 25E(iii) and the questionwhether they form part of one single industry for the purposes ofcalculation of the surplus profits for distribution of bonus toworkmen in one of the units. Some assistance can still neverthelessbe obtained from the enumeration of the tests in that case. Of allthese tests the most important appears to us to be that of functional“integrality” and the question of unity of finance and employmentand of labour. Unity of ownership exists ex hypothesi. Where twounits belong to a proprietor there is almost always likelihood also C

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of unity of management. In all such cases therefore the Court has2 AIR 1960 SC 1213H3 AIR 1960 SC 56

to consider with care how far there is “functional integrality”meaning thereby such functional interdependence that one unitcannot exist conveniently and reasonably without the other andon the further question whether in matters of finance andemployment the employer has actually kept the two units distinctor integrated.”

9. The second judgment relied upon for this purpose is in L.N.Gadodia & Sons and Anr. v. Regional Provident FundCommissioner[4]. This case dealt with the said Act and the question whicharose was whether two sister concerns, having different dates ofincorporation, could be treated as two separate establishments. Thejudgments in Associated Cement Companies Limited[5] andManagement of Pratap Press, New Delhi[6] were referred to for thesaid purpose. In para 16 of this case, the observations qua the AssociatedCement Companies[7] in para 11, insofar as relevant is extracted as under:

“…11. … What then is ‘one establishment’ in the ordinaryindustrial or business sense? … It is, perhaps, impossible to laydown any one test as an absolute and invariable test for all cases.The real purpose of these tests is to find out the true relationbetween the parts, branches, units, etc. If in their true relationthey constitute one integrated whole, we say that the establishmentis one; if on the contrary they do not constitute one integratedwhole, each unit is then a separate unit. How the relation betweenthe units will be judged must depend on the facts proved, havingregard to the scheme and object of the statute which gives theright of unemployment compensation and also prescribes adisqualification therefor. Thus, in one case the unity of ownership,management and control may be the important test; in anothercase functional integrality or general unity may be the importanttest; and in still another case, the important test may be the unityof employment. Indeed, in a large number of cases several testsmay fall for consideration at the same time. The difficulty ofapplying these tests arises because of the complexities of modernindustrial organization; many enterprises may have functional 4 (2011) 13 SCC 517

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integrality between factories which are separately owned; somemay be integrated in part with units or factories having the sameownership and in part with factories or plants which areindependently owned.”

10. Thereafter, while discussing some subsequent judgments, theBfollowing observations were made:

“18. Accordingly, depending upon the facts of the particular case,in some cases the units concerned were held to be the part ofone establishment whereas, in some other cases they were heldnot to be so. Regl. Provident Fund Commr. v.. Dharamsi MorarjiChemical Co. Ltd. reported in [(1998) 2 SCC 446] and Regl.Provident Fund Commr. v. Raj’s Continental Exports (P) Ltd.reported in [(2007) 4 SCC 239] are cases where the two unitswere held to be independent. In Dharamsi Morarji (supra), theappellant company was running a factory manufacturing fertilizersat Ambarnath in District Thane, Maharashtra since 1921. Theappellant established another factory at Roha in the adjoiningdistrict in the year 1977 to manufacture organic chemicals withseparate set of workers, separate profit and loss account, separateworks manager, plant superintendents and separate registrationunder the Factories Act. The two were held to be separate forthe purposes of coverage under the Provident Funds Act. In Raj’sContinental Export (supra), Dharamsi Morarji was followedsince the two entities had separate registration under the FactoriesAct, 1948, Central Sales Tax Act, 1956, Income Tax Act, 1961,Employees’ State Insurance Act, 1948 separate balance sheetsand audited statements and separate employees working underthem.

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19. As against that in Rajasthan Prem Krishan Goods TransportCo.v. Regl. Provident Fund Commr. reported in [(1996) 9 SCC454] and Regl. Provident Fund Commr., v. Naraini Udyogreported in [(1996) 5 SCC 522] the concerned units were held tobe the units of the same establishment. In Rajasthan PremKrishan Goods Transport Co. (supra) the trucks plied by thetwo entities were owned by their partners, ten out of thirteenpartners were common, the place of business was common, themanagement was common, the letter-heads bore the sametelephone numbers. In Naraini Udyog (supra) the two entities G

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were located within a distance of three kilometers as separatesmall-scale industries but were represented by the members ofthe same Hindu Undivided Family. They had a common head officeat New Delhi, common branch at Bombay and common telephoneat Kota. The accounts of the two entities were maintained by thesame set of clerks. Separate registration under the Factories Act,the Sales Tax Act and the ESI Act were held to be of no relevanceand the two units were held to be one establishment for the purposeof the Provident Funds Act.”

11. Now turning to the facts of the cases before us, we may noteat the inception itself, Civil Appeal No.4475/2010 was not really arguedbefore us. In fact, the impression we got was that the counsels appearingfor the appellants were of the belief that it was facts of this case whichhad caused confusion in the mind of the RPFC as, in their perspective,exemption could not have been really sought within the provisions of thesaid Act in this case. This is so, as BCCL, Jaipur was not a separatelegal entity, but, part of the parent company directly. The case would,thus, be fully covered by the provisions of Section 2A of the said Act andmere location of departments and branches in other cities would nothave extended the benefit of the exemption to this company. Thus, thisappeal, in any case, has to fail.

12. Insofar as Civil Appeal No. 4476/2010 is concerned, learnedsenior counsel sought to refer to the provisions of the agreement inquestion, between the two parties, which gave rise to the Provident FundCommissioner to initiate proceedings. This agreement is dated 25.7.1986.It appears that this agreement was in supersession of an earlier agreementdated 13.12.1985. The business reason stated for entering into thisagreement was the commencement of publication of the Jaipur editionof the daily newspapers of BCCL, Mumbai, i.e., The Times of India andNavbharat Times.

13. The agreement records that TPHL had opened an office at 8-9, Anupam Chambers, Tonk Road, Jaipur, where it had equipped itselfwith trained and experienced staff and all infrastructural, secretarial,administrative and marketing facilities. Since 23.9.1985, it had beenproviding various services to BCCL, Mumbai, including office space foruse and occupation, accounting facilities, stenographers, typing, and soon. The services which were now further sought to be provided to BCCL,Mumbai included marketing, development work, realisation of dues, A

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Aadequate office space, accounting facilities, infrastructure, packing/bundling of daily newspapers (at the cost of BCCL, Mumbai), etc. Clause1(g) of the agreement states as under:

“1. “TPH” shall render the following services effective from 1[st]August, 1986 to “Bennett”:- B

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(g) All staff employed by “TPH” will carry out the instructionsgiven by “Bennett” and in case of working problems; “TPH” shallat the request of “Bennett” remove the problems. The staffemployed by TPH shall not be considered as employees ofC“Bennett” but they will remain the staff of “TPH” and “TPH”shall be responsible to the employees.”

14. BCCL, Mumbai was to pay to TPHL an amount calculated@ 5% as commissions on Net Advertisement Revenue and NetCirculation Revenue.D

15. On all the three establishments being called upon to complywith the provisions of the said Act, all three of them sought exemptionunder Section 16(1)(d) of the said Act. In view thereof, the RPFC initiatedproceedings under the said Act, and issued a notice under Section 7A ofthe said Act, dated 28.10.1987. The proceedings were held thereafter,Eand the RPFC passed a common order in respect of all the threeestablishments on 4.10.1990 opining that they were not entitled to theexemption. The appeal filed before the Employees’ Provident FundAppellate Tribunal by all the three establishments also failed, as it wasdismissed on 10.10.1997. The same fate befell all three in the proceedingsFbefore the learned Single Judge, vide order dated 20.12.2006 and theDivision Bench of the High Court, on 11.4.2008. Thus, practically fourforums have scrutinised the cases qua all these three establishments.

16. The learned senior counsel, Mr. Joydeep Gupta, appearing forTPHL, however, contended that the fallacy which came in the order ofGthe RPFC was of jumbling of the facts in issue, relating to the threeestablishments, and thereafter, there has really been no scrutiny beforeany of the forums, other than giving their imprimatur to the said order.In fact, the High Court effectively refused to look into the matter as twoforums had already gone into that aspect.

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17. Learned senior counsel for the appellant, TPHL, sought totake us through the order of the RPFC, Rajasthan, as according to him,that was the material order to show that from the inception, there was aproblem arising from the manner in which the facts relating to the threeestablishments were mixed up. He contended that each of theseestablishments were required to be connected to BCCL, Mumbai, and,it was not a case which could have been built on with connectivity withBCCL, Jaipur, as was sought to be done.

18. We may note at this stage itself that though, in principle, therecan be no dispute on this proposition, it does not really appeal to us forthe reason that it was intrinsically predicated on the ground that BCCL,Jaipur was a different establishment. Once that is conceded as not so,BCCL, Jaipur was really only a part of BCCL, Mumbai. The connectionof the other two establishments with BCCL, Mumbai or, for that matter,BCCL, Jaipur would, thus, not cause an intrinsic fallacy in the order ofthe RPFC.

19. Learned senior counsel sought to emphasise the distinctivefeatures why it could not be said that there was any direct connectbetween the two establishments, i.e. BCCL, Jaipur and TPHL. A greatemphasis was laid on the facts that these are two separate registeredcompanies, under the then Companies Act, 1956, that there is nocommonality of directors or shareholders and no direct financial unity.The balance sheet as well as profit and loss accounts are separate, andthere were varying figures of independent and separate employees ofthe two entities, with there being no transfer of employees inter se BCCL,Mumbai and TPHL or, for that matter, between BCCL, Jaipur and TPHL.

20. If the aforesaid factual matrix is analysed within the principlesof what would constitute one establishment, as set out in the AssociatedCement Company case,[8] it is obvious that there are various parametersdependent on the factual matrix of each case, which have to be examined.Undoubtedly we are not dealing, in this case, with a branch or a unit ofBCCL, Mumbai. Thus, a test of unity of ownership, management andcontrol may not really be applicable, but the test would be of functionalintegrality or general unity of purpose, in the given factual situation. Thereis no direct unity of employment. In any case, it is the test of functional AB

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Aintegrality or general unity of purpose which would have to be applied inthe present facts if the two establishments have to be clubbed for thepurposes of the provisions of the said Act.

21. We may note that one of the arguments of learned seniorcounsel for the appellant was based on the business model of outsourcingBand it was sought to be suggested that if one aspect of work is outsourcedto another company, the same would not satisfy the aforesaid tests.However, we did point out to the learned senior counsel that the businessmodel of outsourcing really does not have history that old or was notmuch prevalent in respect of the time period which we are discussing;but it is a relatively later phenomenon and, thus, that principle would notCreally be applicable for testing the nature of linkage, if any, for the timewith which we are concerned.

22. Learned counsel for the respondent sought to emphasise thatthe two companies were functionally dependent. In fact, what waspointed out was that practically all three companies were working fromDthe same building, albeit on different floors, and the office of TPHL wasopen for the use of BCCL, Mumbai employees. It was also sought to becontended that Mr. Sunil Gupta, Manager of BCCL, Mumbai was signingpapers relating to TPHL and the examples given of the same are noticesrelating to the closure of offices of the two on Mahashivratri and Holi.EHowever, a perusal of the documents in question shows that they werereally endorsements to TPHL, which would be natural considering thatthere would be no requirement of work to be sourced in case the officeof BCCL, Mumbai itself was closed, and no editing, marketing workwas required to be carried out. Similarly, on the issue of security staff,since the building was one, once again, logically common directions wereFpossible. However, what is also emphasised is that the executive ofTPHL was using the letterpad of BCCL, Mumbai.

23. The important aspect, in our view, which was emphasised bylearned counsel for the respondent was the nature of the agreementwhich provided for both the space and the staff to be made available byGTPHL for the benefit of BCCL, Mumbai. The expenses of theestablishment, for example, electricity bill, maintenance costs, etc., wereto be borne by TPHL.

24. If we analyse the aforesaid facts on the touchstone of functionalintegrality or general unity of purpose, it is difficult, if not impossible, toH

disagree with the reasoning of four forums, which are sought to be assailedbefore us.

25. Learned counsel for the appellant sought to rely upon thejudgment in the Management of Pratap Press case[9] to contend that inthe case of similar facts, it was held to the contrary, and the units wereheld to be distinct establishments. An examination of the said judgmentwould show that though they were all in the same nature of business, thefunctions of the press and the newspaper were held not so interdependentthat one could not exist without the other. The activities of the press unitwere found to be independent of the activities of the paper unit, and theview of the Tribunal, that they are two distinct and separate industrialunits was not found worthy of interference.

26. The aforesaid judgment had emphasized the most importanttest to be that of functional integrality and opined that unity of ownershipexists ex hypothesi.

27. We are, however, not able to persuade ourselves to agreewith the submission of the learned senior counsel for the appellant forthe reason that what has effectively been done in the present case,under the agreement in question, is that TPHL has handed over its officespace, employees and control to BCCL, Mumbai, for all practical purposes,to the extent that the letter pads are also being used without any dueregard as to which entity the instructions are being issued from. This isnot a case of a singular document being issued, but a number of documentswhere this practice has been followed. Just to make an endeavour onpaper to somehow keep these two segregated for various labour lawramifications would not be an appropriate principle to accept, more sotaking into consideration the very purpose for which the said Act wasenacted.

28. We have, thus, no doubt in rejecting even the case of TPHL.

29. Now turning to Civil Appeal No. 4474/2010 of SVPL, Mr.Dhruv Mehta, learned senior counsel, while adopting the arguments ofMr. Joydeep Gupta, learned senior counsel, sought to emphasise thesame, possibly in a different perspective.

30. Learned senior counsel contended that since an “establishment”was not defined under the provisions of the said Act, as noticed above, 9 (supra)

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Athe provisions of the ID Act were resorted to for the said purpose. In thecontext of the approach adopted both, by the learned single Judge, andthe Division Bench of the High Court, it was contended that they oughtnot to have merely rejected the petitions on a broad principle of non-requirement of the relevant facts being looked into, the same havingbeen dealt with by the RPFC and the appellate authority. It is in thisBcontext that he invited our attention to the judgment in the case ofAssociated Cement Company[10], more specifically to paras 9 and 11.The issue of the Industrial Tribunal under the ID Act, being a final courtof facts, was debated in the context of Section 25-E(iii) of the ID Actwhile referring to the expression “in another part of the establishment.”CIn that context it was opined that this question could not be treated as apure question of fact as it involved consideration of the tests which shouldbe applied in determining whether a particular unit is part of a biggerestablishment. It was, thus, said that “indeed, it is true that for theapplication of the tests certain preliminary facts must be found; but thefinal conclusion to be drawn therefrom is not a mere question of fact.”D

31. Elucidating the matter further, qua the problem of not havingreally specific tests, it was observed in para 11 that there were severaltests which were required to be resorted to especially where theestablishments were in different locations. This paragraph has alreadybeen extracted by us before.E

32. On the facts of the case, it was stated that SVPL wasincorporated on 20.6.1984 and entered into the agreement in question on1.10.1985. It claimed exemption on 31.12.1986 and has been makingprovident fund contributions from 24.2.1988. Though it was not disputedthat the said Company, for the relevant period of time, was carrying outFexclusive work only for BCCL, Mumbai, it was pleaded that there wasno commonality of directors and shareholders of the two companies, norwas there a cross shareholding, an aspect for which charts have beenfiled. The subsequent fact was also that, at some stage, it got mergedwith another company, i.e., M/s. Raghuvar India Limited.

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33. Now examining the agreement with BCCL, Mumbai, dated1.10.1985, BCCL, Mumbai, having commenced publication of the Jaipuredition of the two newspapers is stated to have approached SVPL forprinting the said newspapers on a contract basis. SVPL was to employthe necessary personnel for carrying out various tasks and had to printH10 (supra)

the newspapers. The remuneration was payable by BCCL, Mumbai toSVPL at Rs.24,000/- per day, for the two daily newspapers. The printingpress was elsewhere, but the business office of SVPL was also locatedin the same building as BCCL, Jaipur, albeit stated to be at a differentfloor. One of the clauses, which has been referred to, which shows thatthere was no exclusivity of dealing, is clause 28, which reads as under:

“28. “SHREE VISHAL” will be at full liberty to undertake anyother contract for printing newspaper/journals from any other party/s provided it ensures timely printing of the daily newspapers of“Bennett” and complies with Clause 32 of this agreement.”

34. In the aforesaid context, it may be noted that clause 32 referredto in this clause is only a ‘Confidentiality Clause’.

35. A great emphasis was laid by learned senior counsel appearingfor the said entity on the ‘Non-Exclusivity Clause’ in the agreementbetween the two parties, i.e., clause 28. Once again, the emphasis wason the two companies being separate legal entities, there being nocommonality of directors or shareholders, or direct financial control. Thebalance sheet and profit and loss accounts were also separate. Anotheraspect emphasised was that the printing press of SVPL was located ata different premises from where the business was really being carriedon, though naturally, the control of the business would be from the officelocated in the same premises as BCCL, Mumbai. It is not, however,disputed that SVPL had, at its own cost, given adequate covered areaadjacent to the printing press to BCCL, Mumbai for storing the newspaper/printing. The consideration, which was being paid to SVPL for printingincluded the cost of making available the aforesaid space for packagingand storage operations.

36. Learned counsel for the respondent, once again, sought toemphasise the functional dependence between the companies. The aspectof Mr. Sunil Gupta, Manager of BCCL signing papers relating to SVPLwas emphasised, including notices of closure, as discussed in the caseof TPHL. The common factor, again, is of BCCL, Mumbai issuing orderson the letter pad of SVPL. In fact, the nature of communications andorders issued do suggest that all three were working towards the commonobject of bringing out a newspaper.

37. The aforesaid would not have been sufficient by itself, but forthe application of the functional integrality test, which linked them to bepart of the same establishment.

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A38. We may add here that in the impugned orders it is not veryclear as to whether the reference is being made to BCCL, Mumbai or toBCCL, Jaipur. However, as noticed before, the same is not of muchconsequence for the reason that BCCL, Jaipur is admittedly a branchoffice of BCCL, Mumbai.

39. We have examined this case more closely because of thefactual pleas raised by learned senior counsel for SVPL. We have alsotaken note of the fact that as per the submissions of the learned seniorcounsel, the said unit was subsequently merged into another company,an aspect already noticed aforesaid.

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C40. Despite the aforesaid, in the complete conspectus of facts,after divorcing different aspects of the three establishments, we areunable to come to a conclusion different from the one which we havecome to for TPHL. We believe that the very nature of the working ofSVPL and the other two entities show the functional integrality test tobe satisfied. They may be different legal entities, an arrangement mayDhave been made to have different directors and shareholders, but thenature of control and integrality of functionality, between the three entitiesis quite apparent from the facts set out hereinabove. Each one of thefacts by itself may not be conclusive, but taken as a whole, there can beno other conclusion, than the one arrived at by the RPFC. We are doingEso, quite conscious of the fact that there is undoubtedly some jumblingwhich has arisen in the order of the RPFC, which has been affirmedthroughout. But then, the case of the appellants was built on the principlethat all these three entities have really no functional integrality vis-à-visBCCL, Mumbai. As it emerged subsequently, and was conceded beforeus; there is little doubt that BCCL, Jaipur is a unit of BCCL, Mumbai,Fand the other two units have linkages and are controlled by BCCL, Jaipurin a manner which would satisfy the functional integrality test.

41. The said Act being a beneficial legislation, the object ofexcluding the infancy period of five years (later reduced to three years)from the rigours of the Act, was only to provide to new establishments,Ga period to establish their business, and not to permit different kinds ofroutes to be created to evade the liability under the said Act.

Conclusion:

42. We have, thus, no hesitation in coming to the conclusion thatthe findings qua all the three appellants satisfy the functional integralityH

and the general unity of purpose test, and the same are met in the factsof the present case.

43. We may also notice another aspect before parting with thecase. On a Court query as to what would be the liability arising from theimpugned orders, it was stated to be in the range of only about Rs.15lakh for which five judicial forums have now been troubled. The otheraspect is that this matter has been prolonged over so many years andthe only avenue open for the RPFC is to impose damages under Section14B of the said Act, which, at the relevant time, limited the damagesamount to twice the original amount. The net result is that the liabilitywould only double during this long period, over the last more than thirtyyears. It is only by a subsequent legislative amendment, now repealed,by introduction of Section 7Q, inserted w.e.f. 1.7.1997, that the provisionwas made for interest to be payable at 12 per cent per annum, whichwould naturally apply prospectively. Thus, the appellants are getting awaylightly on the issue of such liability, the exact amount of which is to bedetermined. The liability of each of these establishments would be co-extensive with BCCL, Mumbai.

44. In view of the aforesaid facts, we are inclined to impose costson all the three appellants, but of varying amounts. As there was no casewhatsoever of BCCL, Jaipur, appellant in Civil Appeal No. 4475/2010,we, thus, dismiss that appeal with costs of Rs.50,000/-, while imposingcosts on the other two appellants of Rs.20,000/- each.

45. The appeals are accordingly dismissed.

Nidhi Jain

Appeals dismissed.

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