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CASE NO.: Appeal (civil)  7345 of 2000

PETITIONER: Regional Provident Fund Commissioner

RESPONDENT: M/s Raj’s Continental Exports (P) Ltd

DATE OF JUDGMENT: 07/03/2007

BENCH: Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T

Dr. ARIJIT PASAYAT, J.

Challenge in this appeal is to the judgment rendered by a  Division Bench of the Karnataka High Court dismissing the  Writ appeal filed by the appellant.  The learned Single Judge,  whose order was under challenge before Division Bench had   allowed the writ petition filed by the respondent holding that  the order passed under Section 7A of the Employees’ Provident  Funds & Miscellaneous Provisions Act, 1952 (in short the ’Act’)  was not sustainable.

Background facts in a nutshell are as follows:

Respondent claimed in-fancy protection under the  provisions of the Act. It started production in 1984.  The  respondent was of the view that it was an extension on the  branch of M/s Continental Exporters, a proprietorship   concern of one Sampathraj Jain, who was also  the Managing  Director of the respondent-company.  Appellants’ view was  that the respondent was nothing but a department of the  aforesaid "M/s. Continental Exporters".  Assailing the  adjudication, respondent filed a writ petition stating that there  was no financial integrity.  It was separately registered under  the Factories Act, Central Sales Act 1956, Income Tax Act,  1961 and the Employees State Insurance Act. The concerns  are separate and distinct.  They have separate Balance Sheets  and audited statements.  The High Court accepted the  contention and held that there was total independent exercise  of power in the two concerns.  Though the manufacturing of  goods was in respect of the same article, that by itself was not  sufficient to hold that it was a branch or department of M/s  Continental Exporters.  The High Court as a matter of fact  found that there was total independence exercise of the  management and control of the affairs, the employees were  separately appointed and controlled.  Taking into account  these factors it was held that that the respondent company  and M/s Continental Exporters were not one and the same.   

Challenge was made to the order of learned Single Judge  in the Writ Appeal.  The High Court after analyzing the factual  position came to hold that there was nothing in common  between the two establishments.  Merely because the  proprietor of the one concern was the Managing Director of the  other that by itself is not sufficient to establish that one was  branch of the other.  Accordingly the Writ Appeal was

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dismissed.

In support of the appeal, learned counsel for the  appellant submitted that factual scenario clearly establish that  the respondent was a branch of M/s. Continental Exporters.   Learned counsel for the respondent on the other hand  submitted that in view of the findings recorded by both the  learned Single Judge and the Division Bench of the High  Court, there is no scope for any interference.   

At this juncture it would be appropriate to take note of  Section 2A of the Act. The same reads as follows:-

"For the removal of doubts, it is hereby  declared the 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."                                                         

In Pratap Press, etc. v. Their Workmen (1960 (1) LLJ 497)  it was inter-alia held as follows : "The question whether the two activities in  which the single owner is engaged are one  industrial unit or two distinct industrial units  is not always easy of solution.  No hard and  fast rule can be laid down for the decision of  the question and each case has to be decided  on its own peculiar facts.  In some cases the  two activities each of which by itself comes  within the definition of "industry" are so  closely linked together that no reasonable man  would consider them as independent  industries.  There may be other cases where  the connection between the two activities is  not by itself sufficient to justify an answer one  way or the other, but the employer’s own  conduct in mixing up or not mixing up the  capital, staff and management may often  provide a certain answer."                                        

In Regional Provident Fund Commissioner and Anr. v.  Dharamsi Morarji Chemical Co. Ltd. (1998 (2) SCC 446), it was  held that unless there is clear evidence to show that there was  any supervisory financial or managerial control, it cannot be  said that one is the branch of the other.  As noted by learned  Single Judge, the respondent was separately registered under  the Factories Act.  It was separately registered under the  Central Sales Tax Act and the Employees State Insurance Act.  It has also been found by learned Single Judge that there was  total independence of the two units. The learned Single Judge  and the Division Bench were right in their conclusion that the  respondent is not a branch of M/s. Continental Exporters.

The appeal is sans merit, deserves dismissal, which we  direct.  There will  be no order as to costs.