Full Judgment Text
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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
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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
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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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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
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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
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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
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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.
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