http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

PETITIONER: CEMINDIA CO. LTD.

       Vs.

RESPONDENT: BACHUBHAI N. RAVAL

DATE OF JUDGMENT04/08/1987

BENCH: VENKATARAMIAH, E.S. (J) BENCH: VENKATARAMIAH, E.S. (J) SINGH, K.N. (J)

CITATION:  1987 AIR 1956            1987 SCR  (3) 784  1987 SCC  (4)  38        JT 1987 (3)   213  1987 SCALE  (2)187

ACT:     Employees’ Provident Funds and Miscellaneous  Provisions Act,   1952:   Section   1(3)(b)--Notification    No.    GSR 1398---Company engaged in ’building and construction  indus- try’ Whether Act applies to workshop set up by such  company for  maintenance and repairs of its  equipment--Whether  all business operations to be taken in totality to determine  if company is engaged in such activity exclusively.     Words   &  Phrases: ’Building and  construction   indus- try’ Meaning of.

HEADNOTE:     By  a Notification dated 26-9-1964 issued under  Section 1(3)(b)  of  the Employees’  Provident  Funds  Miscellaneous Provisions  Act,  1952, the Act was made applicable  to  the establishments of engineers and engineering contractors  not being  exclusively  engaged  in  building  and  construction industry.  The Regional Provident Fund  Commissioner  called upon  the appellant company carrying on business  as  "engi- neers  and engineering contractors" and engaged in  building and  construction industry, to show cause why it should  not be directed to comply with the Act in respect of the workmen employed at its workshop in Bombay. The appellant  contended that  the  Act was not applicable since it  was  exclusively engaged  in building and construction industry and that  the workshop  had been set up only for the purpose  of  carrying out  its  work, ancillary to the building  and  construction industry, and not any work for others. The respondent  nega- tived  the  contention and directed the  appellant  to  make contributions with effect from 1st December, 1963 in respect of the workmen employed at its workshop.     The  appellant assailed the validity of this  notice  in the Bombay High Court, which declined to follow the decision of the Calcutta High Court quashing a similar notice  issued by the department in respect of the appellant’s workshop  in Calcutta,  dismissed the petition and upheld the  demand  of the  department. It held that the Act applied as the  appel- lant  was  not  only engaged in  building  and  construction industry 785 but  was also engaged in running workshops  for  maintaining

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

and  repairing  equipment such as piling  machines,  drills, etc.,  and  hence it was an establishment of  engineers  and engineering contractors which was not ’ ’exclusively engaged in building and construction industry." Allowing the appeal by special leave, this Court,     HELD: 1.1 Where an establishment is engaged  exclusively in  carrying on a particular type of business by setting  up any  place  of work with a view to carrying on the  work  of repairs etc. to the tools, equipment, vehicles etc. used  in its  business  or to carry on any other  activity  which  is essential for its business effectively and which is not used to carry on the work for the benefit of any third party  but utilised exclusively for the business of the  establishment, such  establishment does not cease to carry  on  exclusively the business in which it is engaged. It cannot also be  said that  the  establishment had commenced to carry  on  another industry by the setting up of such a place of work. [790B-C]     1.2 Any such establishment which carries on an  activity which  forms part of the building and construction  industry should be exempted from the operation of the Act because the expression  "building  and  construction  industry"   refers collectively to all activities which have to be performed in connection  with  the building  and  construction  industry. [789F]     In  order  to  discharge effectively  its  functions  as engineers  and engineering contractors engaged  in  building and construction industry, an establishment has to  maintain a  workshop or workshops where the work of smithy,  welding, cutting, carpentry etc. are carried on. Without these opera- tions  it is not possible for any person to carry on  satis- factorily  the work of building and  construction  industry. [789G]     1.4  Such a workshop in which works connected  with  the business  of building and construction industry  were  being carried  on in connection with such business for  the  owner cannot be construed as a separate establishment for purposes of the Act. [790H]     In  the instant case, the work that is being carried  on at  the  appellant’s  workshop is work  of  maintaining  and repairing of the equipment belonging to the appellant  only. The appellant is not earning any income or profit by  carry- ing  on  the  work of any other  establishment.  It  cannot, therefore,  be  said that the workshop  established  by  the appel- 786 lant is an independent establishment of engineers and  engi- neering  contractors  which is not  exclusively  engaged  in building and construction industry. [790D-E]     1.5 The High Court was in error in treating the workshop in question as a separate unit of the business of the appel- lant forming a separate establishment for purposes of deter- mining whether the Act is applicable or not. It should  have taken  all the business operations carried on by the  appel- lant in their totality into consideration in order to ascer- tain whether the appellant is engaged exclusively in  build- ing  and construction industry or not. By splitting  up  the several operations carried on by the appellant in connection with  the building and construction industry  into  separate units and thereby treating the workshop alone as a  separate establishment,  the High Court misled itself  into  thinking that  the workshop of the appellant was governed by the  Act and thus committed the error of declaring the said  workshop as an establishment governed by the Act. [790F-G]

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 3029  of 1986.     From the Judgment and Order dated 8.7.1985 of the Bombay High Court in Misc. Petition No. 488 of 1968.     R.P.  Bhatt,  D.N. Mishra and Mrs. A.K.  Verma  for  the Appellant. C.V. Subba Rao for the Respondent. The Judgment of the Court was delivered by     VENKATARAMIAH, J. This appeal by special leave is  filed against  the Judgment dated 8.7.1985 in Miscellaneous  Peti- tion No. 488 of 1968 on the file of the High Court of Bombay holding  that  the appellant was bound to  comply  with  the provisions of the Employees’ Provident Funds and Miscellane- ous  Provisions Act, 1952 (hereinafter referred to  as  ’the Act’) and the scheme thereunder and to make contributions in respect  of its employees working in its workshop  at  Antop Hill, Wadala in Bombay.     The appellant is a company which is carrying on business as "engineers and engineering contractors" and is engaged in building  and  construction industry.  By  the  Notification bearing No. GSR 1398 787 published in the Gazette of India dated 26.9.1964 (Part  II, Section 3(i), page 1546) issued under section 1(3)(b) of the Act, the Act was extended to establishments of engineers and engineering  contractors  not being exclusively  engaged  in building and construction industry. By the notice dated 11th October,  1967 the Regional Provident Fund  Commissioner  of Bombay  called upon the appellant-company to show cause  why it should not be directed to comply with the Act in  respect of  the  workmen  employed at its workshop  at  Antop  Hill, Wadala in Bombay. The appellant submitted its representation on 13th October, 1967 claiming that the Act was not applica- ble  to  it since the appellant was exclusively  engaged  in building  and  construction  industry and  the  workshop  in question  had been set up only for the purpose  of  carrying out work ancillary to the building and construction industry in  which  it  was engaged and that the  appellant  was  not carrying  on any work for others at the said  workshop.  The Regional  Provident Fund Commissioner negatived the  conten- tion of the appellant and directed that the appellant should make  contributions with effect from 1st December,  1963  in accordance  with the scheme framed under the Act in  respect of the workmen employed at its workshop who were just 70  or 80 in number while the total working force of the  appellant in  its building and construction industry was in the  order of 2,000. The appellant had established another workshop for its own purpose at Calcutta. On being served with a  similar demand it had filed a writ petition in Writ Petition No. 614 of  1967 in the Calcutta High Court contending that the  Act did not apply to such an establishment. In view of the above writ petition which was pending on the file of the  Calcutta High Court, the appellant represented to the Regional Provi- dent Fund Commissioner, Bombay to stay further action  under the Act till the disposal of the writ petition filed in  the Calcutta High Court. The Regional Provident Fund Commission- er  rejected the said request of the appellant and  directed it to comply with the demand already made in respect of  the workshop at Bombay. After some correspondence, the appellant filed Miscellaneous Petition No. 488 of 1968 on the file  of the  High Court of Bombay, out of which this appeal by  spe- cial  leave arises, questioning the validity of  the  notice issued  to it calling upon it to comply with the  provisions

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

of the Act and the scheme made thereunder in respect of  its workshop at Bombay.     It should be stated at this stage that the writ petition filed  before  the Calcutta High Court was allowed  and  the notice  issued to the appellant to comply with the  Act  and the  scheme  made thereunder in respect of the  workshop  at Calcutta was quashed by the judgment of the High Court dated January 6, 1970 and that judgment has become 788 final..When  the  writ petition, out of  which  this  appeal arises was taken up for hearing by the High Court of Bombay, it  was  brought to the notice of the High Court  of  Bombay that  a similar notice issued in respect of the workshop  at Calcutta  had  been quashed and a similar  order  should  be passed  on the petition before the Bombay High  Court  also. The High Court of Bombay declined to follow the decision  of the  Calcutta High Court and proceeded to pass the  judgment upholding  the  demand made by the Regional  Provident  Fund Commissioner. Aggrieved by the decision of the High Court of Bombay,  the  appellant  has filed this  appeal  by  special leave.               The  following basic facts are not in  dispute               in this appeal:                   (i)  that  the  appellant  is  engaged  in               building  and  construction industry  and  the               appellant does not carry on any other business               or profession;                  (ii) that the workshop in Bombay is  estab-               lished only for the purpose of maintaining and               repairing the equipment used by the  appellant               in its building and construction industry; and               (iii)  that the workshop in question does  not               undertake  any job other than maintaining  and               repairing the equipment of the appellant.                   The High Court in the course of its common               judgment delivered in two writ petitions,  one               filed  by  the  appellant out  of  which  this               appeal arises and another Writ petition  filed               by  a  company called  Patel  Engineering  Co.               Ltd., has observed thus:               "In our view, on their own showing, the  peti-               tioner  companies  are  not  only  engaged  in               building  and construction industry,  but  are               also  engaged in running workshops  for  main-               taining and repairing equipment such as piling               machines,  drills, air compressor pumps,  con-               crete  miners  and allied tools.  In  each  of               these  workshops  twenty or more  persons  are               employed. The said workshops by themselves are               not ones engaged in building and  construction               industry.  Though it is true that these  work-               shops  do  not undertake any  job  other  than               maintaining and repairing the equipment of the               petitioner-companies,  still  these  workshops               are  not engaged in building and  construction               industry. They               789               are only aiding and facilitating the petition-               er-companies  which are carrying  on  building               and  construction industry. No doubt  they  do               not  undertake  any  job  of  maintaining  and               repairing  equipment which does not belong  to               the  petitioner-companies.  Nonetheless  these               workshops themselves constitute  establishment               which  employ more than twenty persons  to  do

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

             jobs  which  do not  constitute  building  and               construction  industry. The  petitioner-compa-               nies are thus engaged not only in building and               construction industry but also running  either               respective   workshops.  The  said   workshops               themselves  thus constitute establishments  of               engineers  and  engineering  contractors.  The               workshops  are  not engaged  in  building  and               construction  industry at all. That is  suffi-               cient  to hold that  the  petitioner-companies               are  engineers  and  engineering   contractors               which are not ’exclusively engaged in building               and  construction industry’. Once it is  shown               that  they are engineers and engineering  con-               tractors  not  being  exclusively  engaged  in               building and construction industry, by  virtue               of the notification of the Central  Government               under clause (b) of sub-section (3) of section               of the Act, the Act applies to them."     The notification issued under section 1(3)(b) of the Act makes the Act applicable to establishments of "engineers and engineering  contractors, not being exclusively  engaged  in building  and  construction industry". It follows  that  any establishment  carrying  on the business  of  engineers  and engineering  contractors  which is  exclusively  engaged  in building and construction industry does not fall within  the scope  of  the notification and hence the Act would  not  be applicable to such an establishment. Any such  establishment which carried on an activity which forms part of the  build- ing  and construction industry should naturally be  exempted from the operation of the Act because the expression ’build- ing  and construction industry’ refers collectively  to  all activities which have to be performed in connection with the building  and construction industry. In order  to  discharge effectively  its  functions  as  engineers  and  engineering contractors  engaged in building and construction  industry, an  establishment  has to maintain a workshop  or  workshops where  the work of smithy, welding, cutting, carpentry  etc. are carried on. Without these operations it is not  possible for any person to carry on satisfactorily the work  building and  construction industry. The reason for taking this  view is obvious. An establishment exclusively engaged in  running a hospital does not cease to be an establishment exclusively carrying on the said business merely 790 because  it  sets up a Pharmacy Section  for  preparing  and compounding medicines to be used exclusively by the patients at its hospital. Similarly an estalblishment which is exclu- sively  engaged in providing shipping  transport  facilities does not cease to be an establishment exclusively  carrying- on  the said business merely because it sets up an  on-shore workshop for effecting repairs exclusively to its own ships. Such  illustrations  may be multiplied. The point  which  is made out by these illustrations is that where an  establish- ment is engaged exclusively in carrying on a particular type of  business by setting up any place of work with a view  to carrying  on the work of repairs etc. to the  tools,  equip- ment, vehicles etc. used in its business or to carry on  any other  activity which is essential for its  business  effec- tively  and which is not used to carry on the work  for  the benefit of any third party but utilised exclusively for  the business  of the establishment, such establishment does  not cease  to carry on exclusively the business in which  it  is engaged.  It cannot also be said that the establishment  has commenced to carry on another industry by the setting up  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6  

such a place of work.     In  the instant case there is no dispute that  the  work that  is  being carried on at the  appellant’s  workshop  at Bombay is work of maintaining and repairing of the equipment belonging to the appellant only. The appellant is not  earn- ing  any  income or profit by carrying on the  work  of  any other  establishment  at  the said workshop.  In  the  above situation, we find it difficult to agree with the High Court that  the workshop establishment by the appellant at  Bombay is an independent establishment of engineers and engineering contractors which is not exclusively engaged in building and construction industry. The High Court was in error in treat- ing  the  workshop  in question as a separate  unit  of  the business  of the appellant forming a separate  establishment for purposes of determining whether the Act is applicable to the appellant or not. It should have taken all the  business operations  carried  on by the appellant in  their  totality into consideration in order to ascertain whether the  appel- lant  is  engaged exclusively in building  and  construction industry  or not. If the High Court had approached the  case from  the above angle it would not have committed the  error of  declaring the workshop at Bombay alone as an  establish- ment governed by the Act. By splitting up the several opera- tions  carried  on by the appellant in connection  with  the building  and construction industry into separate units  and thereby treating the workshop alone as a separate establish- ment,  the High Court misled itself into thinking  that  the workshop of the appellant at Bombay was governed by the Act. We  agree with the decision of the Calcutta High Court  that such  a workshop in which works connected with the  business of building and 791 construction  industry were being carried on  in  connection with  such  business of the owner cannot be construed  as  a separate  establishment for purposes of the Act. We,  there- fore, set aside the judgment of the High Court and quash the impugned  notice issued by the Regional Provident Fund  Com- missioner, Bombay, calling upon the appellant to comply with the provisions of the Act and the scheme made thereunder  in respect of the workmen employed at its workshop at Bombay. The  appeal is accordingly allowed. There is no order as  to costs. N.P.V.                                                Appeal allowed. 792