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PETITIONER: THE ASSOCIATED INDUSTRIES (P) LTD.

       Vs.

RESPONDENT: THE REGIONAL PROVIDENT FUNDCOMMISSIONER, KERALA TRIVANDRUM

DATE OF JUDGMENT: 09/04/1963

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. WANCHOO, K.N. GUPTA, K.C. DAS SHAH, J.C. AYYANGAR, N. RAJAGOPALA

CITATION:  1964 AIR  314            1964 SCR  (2) 905

ACT: Provident     Fund-Composite    factory--Two     independent industries-One as falling under the schedule- Whether  Esta- blishment-The  Employees’ Provident Funds Act, 1952  (19  of 1952), ss. 1 (3) (a) 2,(g) & (i), Schedule I.

HEADNOTE: The  appellant runs a tile factory and an engineering  works at  Quilon.   These two industries are  indepedent  of  each other,  but they arc carried on by the same company  and  on the same premises.  The tile factory was started in 1943 and the engineering works in 1950.  The engineering industry was included  in Schedule I of the Act and it employed  only  24 workers,  whereas the tile industry employed more  than  50. The license issued to the appellant under the Factories Act, 1948,  was for the entire premises.  The appellant  moved  a writ petition in the High Court in which he alleged that its factory  did not attract the provisions of s. 1 (3)  (a)  of the Employees’ Provident Funds Act 1952.  The ’writ petition was dismissed with costs.  It is against this order that the appellant has come to this Court. Held  (i)  that a factory is an "establishment"  within  the meaning  of  s.  1 (3) (a) of the Act if  it  satisfies  the requirements of the section, namely, (1) that its one or all industries  fall  under Schedule I of the Act, (2)  that  it satisfies  the  numerical strength as prescribed  under  the section. (ii)that the character of the dominant or primary  industry will  determine the question of the application of s. I  (3) (a) if a factory carries on both the dominant and subsidiary industries. (iii)That if the factory runs more industries than  one an  of  ’which are independent of each other, s. I  (3)  (a) will 906 apply  to the factory even if one or more, but not  all,  of the industries run by it fall under Shedule I. (iv)that  neither  the tile industry was dominant  nor  the engineering   industry  was  subsidiary;  rather  both   the

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industries were independent of each other. (v)that the factory of the appellant will be deemed to  be a composite factory and the provisions of s. 1 (3) (a)  will be  attracted  as one of its industries  i.  e.  engineering industry, falls under Schedule I. The  Regional Provident Fund Commissioner, Bombay  v.  Shree Krishna Metal Manufacturing Co. Bhandara [1962] Supp.3 S. C. R. 815, approved.

JUDGMENT: CIVIL APPELLATE, JURISDICTION: Civil Appeal No. 324 of 1962. Appeal from the judgment and decree dated August 8, 1960  of the Kerala High Court, in O. P. No. 97 of 1953. G.B.  Pai,  J. B. Dadachanji, O. C. mathur  and  Ravinder Narain, for the appellant. S.V.  Gupte,  Additional Solicitor-General of  India,  R. Ganapathy lyer, P. D. Menon and R. H.   Dhebar,   for    the respondent. 1963.  April 9. The judgment of the Court was delivered by GAjENDRAGADKAR  J.-The short question which arises  in  this appeal  is  whether the factory run by  the  appellant,  the Associated  Industries (P) Ltd., Qulion, falls within  s.  1 (3)  of the employees’ Provident Funds Act, 1952 (No. 19  of 1952)  (hereinafter called ’the Act’).  The appellant  is  a Company  which runs a tile factory and an engineering  works at Quilon.  The tile factory began its career in July, 1943, and the engineering works in  907 September,  1950.   It  is  common  ground  that  these  two industries  are  separate  and distinct and  that  they  are carried on by the same Company and on the same premises.  It is  also  common  ground that a  licence  issued  under  the Factories  Act, 1948, has been issued to the  appellant  for the  entire premises and it is under this licence  that  the said  premises arc allowed to be used as one  factory  under the said Act and the rules framed thereunder. It appears that the respondent, the Regional  Provident-Fund Commissioner,  Vanchiyoor,  Trivandrum,  intimated  to   the appellant  on  March 10, 1953, that the Act as well  as  the scheme  framed under it were applicable to  the  appellant’s factory, and so, the appellant was called upon to deposit in the  SubOffice of the Imperial Bank of India  the  contribu- tions and administrative charges as required by s. 6 of  the Act.   The same requisition was repeated on March  25,  1953 and April 24, 1953.  The appellant disputed the  correctness of  the  view taken by the respondent that  the  appellant’s factory  fell  under  the purview of the  Act,  and  so,  it refused   to  comply  with  the  respondent’s   requisition. Thereupon, the respondent wrote to the appellant on June 16, 1953 informing it that appropriate action would be taken  to compel  the  appellant  to make the  necessary  deposit  and submit  returns as required by the Act in case it failed  to comply  with  the notices issued in that  behalf.   At  this stage,  the  appellant moved the High Court of Kerala  by  a writ  petition  (O.  P. No. 97/1953) in which it  claimed  a writ  of  certiorari  quashing the  notices  issued  by  the respondent  against it, and restraining the respondent  from proceeding  further in the matter and for  other  incidental reliefs. The main contention raised by the appellant before the  High Court   was  that  the  appellant’s  factory  was   not   an establishment  to  which s. 1 (3) of the Act  applied.   The High Court

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908 has rejected this contention.  Then it was urged before  the High Court on behalf of the appellant that the effect of the notices  served  on  the appellant  by  the  respondent  was retrospective  in character and it was urged that  the  said notices  were illegal.  This argument was also  rejected  by the  High Court.  ’I he appellant further  contended  before the  High  Court  that since for  the  relevant  period  the employees  had  not made their contributions,  it  would  be inequitable  to enforce the notices against  the  appellant. The High Court noticed the fact that it had been conceded by the  respondent  that  he did not  propose  to  collect  the employees’  share  of the contribution to the fund  for  the relevant  period  from the appellant, and it held  that  the concession so made was proper and fair and so, there was  no substance in the grievance made by the appellant that giving effect  to the notices served on it by the respondent  would be  inequitable  and unjust.  On these  findings,  the  writ petition filed by the appellant was dismissed with costs, It is  against this order that the appellant has come  to  this Court with a certificate granted by the High Court. The principal point which is sought to be raised by Mr.  Pai on behalf of the appellant in this appeal is concluded by  a recent decision of this Court in The Regional Provident Fund Commissioner,   Bombay   v.   (1)   Shree   Krishna    Metal Manufacturing  Co., Bhandra, and (2) Oudh Sugar  Mills  Ltd. (1).   It would be noticed that the relevant sections  which fell  to  be  construed  in  dealing  with  the  appellant’s contention  are s. 1 (3), s. 2 (g) and (i) and s. 6  of  the Act.   Section 1 (3) (a) provides, inter alia, that  subject to  the  provisions contained in s. 16, the Act  applies  to every-establishment  which  is  a  factory  engaged  in  any industry  specified in Schedule I and in, which 50  or  more persons  are employed; the numerical requirement of  50  has been reduced to 20 by an Amending Act of 1960.  Section  (2) (g) (1)  A.1,R. (1962) B.C. 1536.  909 defines  a ’factory’ as meaning any premises, including  the precincts  thereof,  in any part of  which  a  manufacturing process is being carried on or is ordinarily so carried  on, whether  with the aid of power or-without the aid of  power; and s. 2 (i) defines an ’industry’ as meaning - any industry specified  in  Schedule I, and includes any  other  industry added  to  the  Schedule by notification  under  section  4. Section 6 prescribes for the levy of contributions and deals with other matters which may be provided for in Schemes; and in  accordance  with  the provisions of  this  section,  the Employees’ Provident Fund Scheme of 1952 has been framed. In  the  case of the Regional Provident  Fund  Commissioner, Bombay,  (1) this Court has held that s. 1 (3) (a) does  not lend  itself  to  the construction that it  is  confined  to factories  exclusively engaged in any industry specified  in Schedule I. It was observed in that connection that when the legislature has described factories as factories engaged  in any  industry,  it did not intend that  the  said  factories should  be exclusively engaged in the industry specified  in Sch.  I.  Consistently with this view,  this  Court  further observed that the word ’factory’ used in S. 1 (3) (a) has  a comprehensive meaning and it includes premises in which  any manufacturing  process is being carried on as  described  in the  definition, and so the factory engaged in any  industry specified  in  Sch.  I does not necessarily mean  a  factory exclusively engaged in the particular industry specified  in the  said Schedule. in construing the scope of s. 1 (3)  (a)

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this  Court  held that composite factories came  within  its purview  and  that  the fact that a factory  is  engaged  in industrial activities some of which fall under the  Schedule and some do not, will take the factory out of the purview of s.  1 (3) (a) having dealt with this aspect of  the  matter, this Court proceeded to consider the question as to (1)  A I. R. 1962 S. C. 1536. 910 whether  numerical  requirement  of  the  employment  of  50 persons,  as the section then stood, applied to the  factory or  to the industry, and it held that the said test  applied not  to  the  industry  but  to  the  factory.   Thus,   the conclusion  was  that in order that a  factory  should  fall under  s. 1 (3) (a), it must be shown that it is engaged  in any such industry as is specified in Sch.  I and the  number of its employees should not be less than 50. This  decision  makes  it clear that s. 1  (3)  (a)  is  not confined only to factories which are exclusively engaged  in industrial  work to which Sch.  I applies,but it also  takes in  composite factories which run industries some  of  which fall  under Sch.  I and some do not.  In order to  make  the position  clear  let  us state the true  legal  position  in respect  of the scope of the application of s. 1 (3) (a)  in categorical  terms.  If the factory carries on one  industry which  falls under Sch.  I and satisfies the requirement  as to  the number of employees prescribed -by the  section,  it clearly falls under s. 1 (3) (a).  If the factory carries on more  than one industry all of which fell under Sch.  1  and its numerical strengh satisfies the test prescribed in  that behalf,  it  is an establishment under s. 1 (3) (a).   If  a factory  runs more industries than one, one of which is  the primary  and  the dominant industry and the others  are  its feeders  and  can  be  regarded  as  subsidiary,  minor,  or incidental  industries in that sense, then the character  of the  dominant  and  primary  industry  will  determine   the question as to whether the factory is an establishment under s.  1 (3) (a) or not.  If the dominant and primary  industry falls under Sch.  I, the fact that the subsidiary industries do  not  fall  under Sch.  I will not help  to  exclude  the application  of s. 1 (3) (a).  If the dominant  and  primary industry  does  not  fall  under Sch. 1,  but  one  or  more subsidiary,  incidental, minor and feeding  industries  fall under Sch.  I, then S.   1  (3) (a) will not apply.  If  the factory runs more  911 industries  than  one all of which are independent  of  each other and constitute separate and distinct industries, s.  1 (3) (a) will apply to the factory even if one or more.,  but -not  all, of the industries run by the factory  fall  under Sch. I. The question about the subsidiary, minor, or feeding industries  can  legitimately arise only where it  is  shown that  the  factory  is really started  for  the  purpose  of running  one  primary  industry  and  has  undertaken  other subsidiary industries only for the purpose of subserving and feeding  the purposes and objects of the primary industry  ; in  such  a  case, these minor industries  merely  serve  as departments  of  the  primary  industry;  otherwise  if  the industries  run by a factory are independent, or are not  so integrated  as to be treated as part of the  same  industry, the question about the principal and the dominant  character of one industry as against the minor or subsidiary character of another industry does not fall to be considered. It  is in the light of this position that we may  revert  to the   actual  decision  in  The  Regional   Provident   Fund Commissioner,  Bombay  (1).  In that case,  this  Court  was

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dealing with the cases of Shree Krishna Metal  Manufacturing Co., and Oudh Sugar Mills Ltd.  The Metal Company carried on four different kinds of activities and it was held that  its industrial  activity  which fell under Sch.  I  was  neither minor,   nor  subsidiary,  nor  incidental  to   the   other activities.  In other words, the industry which the  company ran  and  which fell under Sch.  I was  independent  of  the other  industries conducted by the Company, and so,  it  was held that the question about one industry being  subsidiary, minor,  or  incidental did not arise.  In  the  result,  the Company’s factory was found to fall under s. 1 (3) (a). On the other hand, the case of the Oudh Sugar Mills stood on a different basis.  The primary activity (1)  A. I. R. 1962 S C. 1536. 912 of  the mills was the manufacture of hydrogenated  vegetable oil named ’Vanasada’ and its by-products, such as soap, oil- cakes,  etc.   It appeared that a department  of  the  Mills manufactured  containers  and -this part of  the  industrial activity of the Mills fell under Sch. I. Evidence,  however, showed  that  the  fabrication of the  containers  had  been undertaken by the Mills only as a feeder activity which  was integrally connected with its primary business of  producing and marketing vegetable oil, and since the primary  business was.  outside Sch. 1, the factory as a whole was held to  be outside s. 1 (3) (a). It  is  true  that  since this  Court  dealt  with  the  two respective  cases  of  the Company and  the,  Mills  in  one judgment,  the  test as to the principal  character  of  the industrial  activity  of  one industry in  relation  to  the character of the minor industry came to be considered ;  but the   application   of  the  said  test   became   necessary essentially because of the case of the Oudh Sugar Mills.  In the  case  of the Company, however, the  several  activities were not minor or subsidiary, but were independent , and  it was held that the factory of the company fell under s. 1 (3) (a).   Therefore, in our opinion, there is no scope for  the argument  in the present case that the engineering  industry which  the  appellant runs is not the  primary  or  dominant industry but the manufacture of tiles is.  Mr. Pai attempted to  argue  that  though  engineering  industry  run  by  the appellant’s  factory falls under Sch.  I,it employs only  24 workers whereas the tiles industry employs more than 50.  He also relied on that fact that the tiles factory was  started in 1943 and the engineering works in 1950, and his  argument was  that  judged in the light of the fact  that  the  tiles industry  was  started first, as well as considered  by  the application  of  the test of the strength of  the  employees working  in  the  two industries,tiles  industry  should  be treated to be the main, dominant and primary industry of the factory, and so, the factory, as a 913 whole,  should be held to be outside s. 1 (3) (a).   In  our opinion,  this argument is plainly untenable.  If the  tiles industry  and  the engineering industry are  independent  of each other, then no question arises as to which is principal and  which is subsidiary.  As soon as it is shown  that  the factory  is carrying on two industries independent  of  each other  one  of  which  falls under Sch.   I,  it  becomes  a composite factory to which s. 1 (3) (a) applies.  When s.  1 (3)  (a) requires that the factory should be engaged in  any industry specified in Sch.  I, considerations as to  whether the  industrial  activity is major or minor can  arise  only where  some  activities are dominant and others are  of  the nature of feeding activities, but not otherwise.  Where  the

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industrial  activities  are independent and the  factory  is running separate industries within the same premises and  as part of the same establishment and under same licence, it is difficult to accept the argument that in dealing with such a factory,  enquiry  would  be relevant as  to  which  of  the industries  is  dominant  and primary,  and  which  is  not. Therefore, in our opinion, the High Court was plainly  right in  rejecting the appellant’s case that its factory did  not attract the provisions of s. 1 (3) (a) of the Act. Mr. Pai wanted to contend that if the appellant’s factory is treated  as  falling under s. 1 (3) (a),  complications  may arise  by reason of the fact that the rate  of  contribution initially prescribed by s. 6 has been amended in 1962 by the Amending Act No. 48 of 1962.  Section 6 of the unamended Act provides,  inter alia, that the contribution to be  paid  by the employer to the fund shall be 6-1/4% of the basic wages, dearness allowance and retaining allowance, if any, for  the time  being  payable  to  each of  the  employees,  and  the employees’  contribution shall be equal to the  contribution payable  by  the employer in respect of him.   This  section further provided that the employee was competent to 914 make a higher contribution not exceeding 8 and one-third per cent  of his emoluments specified in the said  section.   By the  amendment made in 1962, this rate has been enhanced  to 8%   in   respect   of  any  establishment   or   class   of establishments  which the Central Government,  after  making such  enquiry  as it deems fit, may by notification  in  the official  Gazette specify.  We were told that in  regard  to the engineering industry., this amended sub-section has been extended  by a notification, and Mr. Pai’s  apprehension  is that  if  the  factory of the appellant is  held  to  be  an establishment  to which s. 1 (3) (a) applies on  the  ground that it is a composite factory Which runs several industries one  of  which falls under Sch.  I, it is  likely  that  the increased  rate may be made applicable to the factory  as  a whole.   We  ought  to  add  that  Mr.  Pai  conceded   that subsequent to the decision of the appellant’s writ  petition in the High Court, the tiles industry has also been included in  Sch.  I.. but the revised rate has been made  applicable to  it.  Mr. Pai contends that if the factory is treated  as falling under s. 1 (3) (1), a distinction should be made  in the different industries run by the factory for the  purpose of  calculating  the  contribution of the  employer  to  the Provident  Fund.   We  do  not propose  to  deal  with  this contention  in the present appeal.  That is a  matter  which may well have to be decided by the respondent, and it is not open  to  Mr.  Pai to request this Court to  decide  such  a hypothetical question in the present proceedings. The  result  is,,  the appeal fails and  is  dismissed  with costs. Appeal dismissed. 915