Full Judgment Text
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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
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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]
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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
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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
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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
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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