Full Judgment Text
REPORTABLE
2023 INSC 909
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.4188 OF 2013
M/s MATHOSRI MANIKBAI KOTHARI
COLLEGE OF VISUAL ARTS … Appellant(s)
VERSUS
THE ASSISTANT PROVIDENT FUND
COMMISSIONER … Respondent(s)
J U D G M E N T
RAJESH BINDAL, J.
1. The order dated 30.09.2011, passed by the Division Bench
1
of the Gulbarga Bench of the Karnataka High Court in a Writ Appeal
has been impugned by the appellant before this Court. Vide aforesaid
order, the Division Bench has upheld the order dated 10.06.2011,
2
passed by the learned Single Judge in Writ Petition . The Single Judge
Signature Not Verified
Digitally signed by
Neetu Khajuria
Date: 2023.10.13
16:41:35 IST
Reason:
1
Writ Appeal No. 10133 of 2011.
2
Writ Petition No. 80995 of 2011.
1
3 4
upheld the order passed by the Tribunal dated 24.12.2010 and also
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upheld the application of EPF Act to the appellant’s institution.
2. Briefly the facts, available on record, are that the Ideal Fine
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Arts Society runs two institutions, namely, the ‘Ideal Institute of Fine
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Arts’ and ‘Mathosri Manikbai Kothari College of Visual Arts’ . Both,
the Ideal Institute as well as the Arts College are being run in the same
campus. The Ideal Institute was set up way back in the year 1965,
offering Diploma Course in drawing and painting, whereas the Arts
College was set up in the year 1985-86, offering Degree and Post-
Graduate Degree in drawing and painting. It was claimed that the Ideal
Institute employed 8 persons, whereas the Arts College had 18
employees. The issue arose with reference to their coverage and
application of the EPF Act. Based on the report of the Enforcement
Officer dated 01.07.2003, it was reported that there being total 26
employees working in both the Institutes, which are managed by the
same Society and within the same premises, the establishment would
be covered under the provisions of the EPF Act w.e.f. 01.03.1988.
Thereafter, a notice was issued to the establishment and after affording
3
In ATA No.03/06/2006
4
Employee Provident Fund Appellate Tribunal.
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The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
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For short, ‘Society.
7
For short, ‘Ideal Institute’.
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For short, ‘Arts College’.
2
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an opportunity of hearing, an order was passed by the Commissioner
on 23.09.2005, under Section 7-A of the EPF Act, assessing the amount
of contributions to be made by the appellant under various schemes of
the EPF Act. The aforesaid order was challenged by the appellant
through statutory appeal before the Tribunal, which was dismissed
vide order dated 24.12.2010. Thereafter, the appellant filed a Writ
Petition challenging the order passed by the Tribunal before the High
Court, which was dismissed by the learned Single Judge vide order
dated 10.06.2011. In writ appeal, the order of the learned Single Judge
was upheld by the Division Bench of the High Court.
3. Learned counsel for the appellant, submitted that the
impugned orders passed by the Commissioner, the Tribunal, as well
as the High Court are not legally sustainable. The appellant submitted
that both the Institutes, namely, Ideal Institute and Arts College are
independent from each other and are merely being managed by the
same Society. There is no financial integrity between the two Institutes
and both the Institutes are offering different courses, having
permission/affiliation from different authorities. The Ideal Institute is
getting 100% grant-in-aid, whereas the Arts College is getting 70%
grant-in-aid from the Government of Karnataka. The Ideal Institute was
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The Assistant Provident Fund Commissioner.
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set up in the year 1965, whereas the Arts College was set up in the year
1985-86. Furthermore, the appellant submitted that, since both the
Institutes are independent from each other and are not employing 20
or more persons, their clubbing for coverage under the provisions of
the EPF Act, is totally illegal and deserves to be set aside. In support
of his arguments, reliance was placed by the appellant upon
Management of Pratap Press, New Delhi v. Secretary, Delhi Press
Workers’ Union Delhi etc., AIR 1960 SC 1213.
4. On the other hand, the learned counsel for the respondent
submitted that, if the tests laid down by this Court in L.N. Gadodia &
Sons v. Provident Fund Commissioner, (2011) 13 SCC 517 , are
applied in the present case, it will be evident that there is no error in
the orders passed by the Commissioner, the Tribunal or the High
Court, directing coverage of both the Institutes run by the Society,
under the EPF Act. The respondent submitted that it is a case in which
neither the appellant nor the Ideal Institute or the Society, which is
managing the affairs of the Institutes, had placed any material before
the Commissioner, the Tribunal or even the High Court to dislodge the
facts found by the Enforcement Officer and established that both the
Institutes are independent and have no common management. The
audit report which has been placed on record before this Court is for
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the year ending March 2011, which was finalised on 16.08.2011. The
same was not even placed on record before the High Court, though the
appeal was decided on 30.09.2011. No argument referring to the audit
report was raised before the High Court.
5. The learned counsel for the respondent further submitted
that, once the notice was issued to the establishment regarding
application and coverage under the provisions of the EPF Act by
clubbing the two Institutes being run by the Society, the onus was on
the establishment to controvert the same, by placing relevant material
on record. In fact, even before the Commissioner, the appellant failed
to produce any record and appear regularly. The Tribunal also
adjudicated the appellant’s appeal in its absence. The Single Judge of
the High Court had also noted that the appellant had failed to produce
any material to support the claim that there is no common supervisory
or financial management and that the two Institutes were distinct with
separate management and not interconnected. The fact remained that
both are being run by the same Society. The respondent further
submitted that copy of the statement of bank account, placed on record
by the appellant before this Court, shows that the account was opened
on 07.07.2004. Thus, the same will not establish that both the Institutes
are not being run by the same Society and are independent. The
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respondent also submitted that just because the two Institutes are
offering different courses, having permission from different
authorities, will not exclude the coverage under the EPF Act. Even the
fact that one of the Institutes is getting 100% grant-in-aid whereas the
other is getting 70%, is also not relevant. The respondent submitted
that there is no merit in the present appeal and the same deserves to
be dismissed. Reliance was placed by the respondent upon judgments
of this Court in Noor Niwas Nursery Public School v. Regional
Provident Fund Commissioner and others, (2001) 1 SCC 1 and
Shree Vishal Printers Limited, Jaipur v. Regional Provident Fund
Commissioner, Jaipur and another (2019) 9 SCC 508 .
6. We have heard learned counsel for the parties and perused
the relevant referred record.
7. The undisputed facts on record are that the Society had
initially set up ‘Ideal Institute’ in the year 1965 and later it set up ‘Arts
College’ in the year 1985-86. Both the Institutes are being managed by
the Society. It is also an admitted fact that the Ideal Institute employed
8 persons, whereas the Arts College employed 18 persons. Under the
provisions of the EPF Act, if any establishment employs 20 or more
persons, the same shall be covered under the provisions of the EPF Act
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for grant of various benefits thereunder to the employees working
there, the EPF Act being a welfare legislation.
8. The issue which requires consideration in the present
appeal is regarding the clubbing of two Institutions being run by the
same Society i.e., Ideal Fine Arts Society. In case the two Institutions
are interconnected, these can be clubbed for the purpose of coverage
under the EPF Act.
9. Before we deal with the arguments raised by the learned
counsel for the parties, we deem it appropriate to refer to the settled
legal position with reference to clubbing of different institutes for the
purpose of coverage under the EPF Act.
10. In Pratap Press’s case ( supra ) , this Court referred to the
earlier judgment of this Court in Associated Cement
Co. v. Workmen, AIR 1960 SC 56, wherein it was opined that it is
impossible to lay down any one test as absolute and invariable for all
cases to determine the issue regarding clubbing of two establishments
for the purpose of coverage under the EPF Act. The real purpose is to
find out true relations between the two establishments and finally opine
thereon. In one case, ‘unity of ownership, management and control’
may be an important test whereas in another ‘functional integrity’ or
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‘general unity’ may be important. There can also be a case where the
test can be of the ‘unity of employment’. Relevant para 5 thereof is
extracted below:
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“ . In Associated Cement Co. v. Workmen [AIR
1960 (SC) 56] this Court had to consider the question
whether the employer's defence to a claim for lay-off
compensation by the workers of the Chaibasa Cement
Works that the laying off was due to a strike in another part
of the establishment viz. limestone quarry at Rajanka was
good. In other words the question was whether the
limestone quarry of Rajanka formed part of the
establishment known as the Chaibasa Cement Works within
the meaning of Section 25-E(iii) of the Industrial Disputes
Act. While pointing out that it was impossible to lay down
any one test as an absolute and invariable test for all cases
it observed that the real purpose of these tests would be to
find out the true relation between the parts, branches, units
etc. This Court however mentioned certain tests which
might be useful in deciding whether two units form part of
the same establishment. Unity of ownership, unity of
management and control, unity of finance and unity of
labour, unity of employment and unity of functional
“integrity” were the tests which the Court applied in that
case. It is obvious there is an essential difference between
the question whether the two units form part of one
establishment for the purposes of Section 25-E(iii) and the
question whether they form part of one single industry for
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the purposes of calculation of the surplus profits for
distribution of bonus to workmen in one of the units. Some
assistance can still nevertheless be obtained from the
enumeration of the tests in that case. Of all these tests the
most important appears to us to be that of functional
“integrity” and the question of unity of finance and
employment and of labour. Unity of ownership exists ex
hypothesie. Where two units belong to a proprietor there is
almost always likelihood also of unity of management. In all
such cases therefore the Court has to consider with care
how far there is “functional integrity” meaning thereby such
functional interdependence that one unit cannot exist
conveniently and reasonably without the other and on the
further question whether in matters of finance and
employment the employer has actually kept the two units
distinct or integrated.”
(emphasis supplied)
11. Similar was the position in Regional Provident Fund
Commissioner v. Naraini Udyog, (1996) 5 SCC 522,
wherein this
Court found the functional integrity with common management of two
different establishments controlled by the same Hindu Undivided
Family (HUF) and having a common head office, even though located
at a distance of three kilometres. Merely fact of having separate
registration under the Factories Act 1948, Sales Tax Act 1956 and the
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ESI Act 1948, was held to be non-relevant for the purpose of clubbing
and coverage under the EPF Act.
12. The Pratap Press’s case (supra) was also referred in Noor
Niwas Nursery Public School
(supra) wherein this Court held that no
straight jacket formula or test can be laid down for the purpose of
clubbing of the two establishments and coverage under the EPF Act.
Relevant para 5 therein is extracted below:
“ 5. In the present case, when two units are located
adjacent to one another and there are only two teachers
with an aaya, a clerk and a peon, it is difficult to believe that
the society which runs 30 schools would run a separate
school consisting of such a small number of staff. If the unit
of the appellant School was not part of the unit of Francis
Girls Higher Secondary School, the Head Clerk, Mrs
Wadhavan could not have been in possession of the
particulars of the appellant School and could not have
furnished such particulars to the Inspector when he visited
the school in connection with the grant of a code number.
Undisputedly, the two units are run by the same society and
they are located in one and the same address thereby
establishing geographical proximity and nothing
worthwhile has been elicited in the cross-examination of
the Inspector in regard to inquiries made by him from Mrs
P. Wadhavan. Mrs P. Wadhavan was not examined before
the Provident Fund Commissioner. All these facts clearly
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point out to one factor that the two units constitute one
single establishment. After all the appellant School caters
to nursery classes, while the higher classes are provided in
Francis Girls Higher Secondary School. Thus, the link
between the two cannot be ruled out. In the facts and
circumstances of the case, we hold that the view taken by
the Provident Fund Commissioner as affirmed by the High
Court in this regard is correct.”
(emphasis supplied)
13. The facts of the case in Noor Niwas Nursery Public
School ( supra ) are almost identical to the case in hand. Therein, two
educational institutions were being run by the same society. One
institution was the Higher Secondary School and another one was the
Nursery School (the appellant therein). The appellant contended that
since the two institutions have separate and independent accounts and
are managed by the two different managing committees, thus both the
institutions can’t be treated as one establishment for the purpose of
clubbing and coverage under the EPF Act. The issue before this Court
was to determine how far there is functional integrity between the two
units and whether one unit can exist conveniently and reasonably
without the other. This Court after pursuing the material available on
record, held that two institutions were run by the same society and are
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located in one premises having same address, thereby, establishing
geographical proximity, hence, were rightly clubbed for coverage
under the EPF Act.
L.N. Gadodia & Sons’s
14. In case (supra) , the issue under
consideration before this Court was regarding the clubbing of two
companies namely, Delhi Cattle Farming Pvt. Ltd and Delhi Farming
and Construction Pvt. Ltd. It was argued by the appellant therein, that
both these companies were independently incorporated at different
times and there was no connection between their activities or the
business. However, the Enforcement authority argued that both the
companies had their registered office at the same place wherein some
of the directors were also common. There were financial transactions
between the two companies. Both the companies had the same
telephone number and were using the same gram number. The issue
before this Court was as to whether these two companies, despite
having separate legal entities, common management, financial
integration and workforce proximity, should be considered a single
establishment under the EPF Act. This Court held that despite being
separate entities, both the institutions were effective branches of the
same establishment because they were run by the same management,
workforce and have common financial integrity. Hence, the Court held
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that the EPF Act will be applicable and both the companies will be
regarded as one establishment for the purpose of coverage under the
EPF Act.
15. Now coming to the facts of the case in hand, as had already
been noticed above, both the Institutes are being run by the same
Society. The Ideal Institute was set up in the year 1965, whereas the
Arts College (the appellant) was set up in the year 1985-86. If the
employees employed in both the institutes are added, the total number
of employees would be 26, which will be sufficient for coverage in
terms of Section 1(3)(b) of the EPF Act, which stipulates that an institute
employing 20 or more persons is liable to be covered under the
provisions of the EPF Act. It is also a fact not in dispute that both the
institutes are being run in the same campus.
16. From a perusal of various orders and documents produced
on record, it is evident that the appellant had taken the case very
casually. After the inspection of the institute, report was submitted by
the Enforcement Officer on 01.07.2003, wherein it was stated that there
being total 26 employees working in both Institutes, being managed
by the same Society and within the same premises, the establishment
would be covered under the provisions of the EPF Act w.e.f.
01.03.1988. It is the date from which the EPF Act was made applicable
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to the educational institutions. The coverage was confirmed vide order
dated 12.08.2003. There is nothing pointed out by learned counsel for
the appellant, that the aforesaid two orders clubbing both the
establishments provisionally and thereafter finally was challenged by
the appellant. If yes, the same was not presented before this Court.
The proceedings in the present case started after an order was passed
by the Commissioner on 23.09.2005 under Section 7-A of the EPF Act,
which provides for determination of the dues payable under the EPF
Act, for the benefits of the employees. The Commissioner’s order
begins with the line that the establishment has been covered under the
provisions of the EPF Act and Schemes framed there under. Further, it
recorded that the management had responded to the notice issued by
the Commissioner on 30.06.2004 vide its letter dated 14.12.2004,
disputing the applicability of the provisions of the EPF Act. The order
passed by the Commissioner also recorded that on various dates when
the matter was listed, either no one appeared on behalf of the
management or only adjournment was sought. It was also recorded
that the management had failed to produce the relevant records. The
Enforcement Officer had to visit the establishment for the inspection.
The report mentions that there were total 26 employees. Thereafter,
the establishment had pointed out that, 8 out of the 26 employees were
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working in the aided Institute i.e., Ideal Institute, thus, these ought to
be excluded for the purpose of calculation of dues under the EPF Act.
The issue raised in the present appeal is not regarding the calculation
of dues under the EPF Act, rather it is regarding the coverage of the
EPF Act by clubbing of two Institutes. In fact, no arguments were raised
regarding calculation.
17. After verification of all the documents, the Commissioner
passed an order wherein it determined the amount due under various
schemes of the EPF Act. The appellant filed a Review Petition under
Section 7-B of the EPF Act, which was rejected by the Commissioner
vide order dated 14.11.2005. Aggrieved by the orders, the appellant
filed an appeal before the Tribunal. However, no one appeared when
the appeal was taken up for hearing. The Tribunal while considering
the merits of the case, recorded that the onus to prove that the
employees were less than 20 for exclusion of the applicability of EPF
Act before the Commissioner, was on the appellant and the appellant
had failed to discharge the same. Thus, there was no error in the order
passed by the Commissioner under Section 7-A of the EPF Act.
18. Still aggrieved, the appellant filed a Writ Petition before the
High Court. The learned Single Judge of the High Court held that since
both the Institutes were run by the same management and there was
15
common supervisory and financial control within the Institutions, thus
both are inter-connected. It was also noted that the appellant had failed
to produce any material to dislodge the aforesaid facts. The learned
Single dismissed the Writ Petition. The Division Bench also upheld the
order passed by the Single Bench and dismissed the Writ Appeal.
19. Though the aforesaid material is sufficient to non-suit it, to
be fair to the appellant, we will deal with the documents which have
been placed on record by the appellant before this Court but not
before any of the authorities under the EPF Act or the High Court. The
first one is the letter dated 09.12.1987 from the University Grants
Commission conveying the Registrar, Gulbarga University, Gulbarga,
about the inclusion of the appellant college in the list of the approved
colleges under the non-Government colleges, teaching upto
Bachelor’s degree. The name of the college is mentioned as ‘The Ideal
Fine Arts Society’s College of Visual Art’, a copy of which is also
endorsed to the Principal of the aforesaid College. It shows that the
College is nothing but an extended arm of the Society. The next
document is the certificate of accreditation issued by the National
Assessment and Accreditation Council on 04.11.2004. This
accreditation has been issued in the name of ‘The Ideal Fine Art
Society’s Mathosri Manikbai Kothari College of Visual Arts’. This
16
document again belies the stand of the appellant that both the institutes
are independent. The documents produced by the appellant
themselves show that it is not an independent establishment but an arm
of the Society.
20. The next document is the audit report of the Ideal Fine Arts
Society’s Mathosri Manikbai Kothari College of Visual Arts for the year
ending March 2011. The accounts were finalized on 16.08.2011.
Though, it may not be relevant considering that the two establishments
managed and run by the same Society were clubbed way back in 2003
and the assessment order under Section 7-A of the EPF Act was passed
by the Commissioner on 23.09.2005, still a perusal of the balance sheet
of the appellant clearly shows deposits from both the Society and the
Ideal Fine Arts Trust. It shows financial integrity of the appellant with
the Society which is running both the Institutes. Schedule No.4
attached to the Income and Expenditure Account shows details of the
capital receipts. It mentioned Hand Loan from Ideal Fine Arts Trust and
the Ideal Fine Arts Society. Similar accounts of the Ideal Institute have
been withheld from the Court, as the same would have certainly
undermined the appellant's case of financial integrity with the Society,
which manages both the Institutes, and therefore, the management
thereof. What has been placed on record with reference to the Ideal
17
Institute is the Receipt & Payment Accounts for the years ending
31.03.2009 and 31.03.2010. Even these statements show loan from
Ideal Fine Arts Trust. A certificate from the Corporation Bank dated
03.06.2009, has also been produced, before this Court, showing that
the account was opened on 07.07.2004, in the name of the Ideal
Institute. The name of the introducer for opening the account is shown
as the ‘Ideal Fine Arts Trust’. No other documents for the period from
1988 till the Commissioner's order, were submitted. Even the
documents pertaining to the subsequent period weaken the appellant's
case.
21. Even the judgment of this Court in Pratap Press ’s case
(supra) relied upon by the learned counsel for the appellant does not
come to the rescue of the appellant. In that case, this Court upheld the
order passed by the Tribunal on appreciation of the material produced
before it, wherein it was opined that both the units are distinct and
separate industrial units. The matter was examined in the light of the
principles laid down in the Associated Cement’s case (supra) .
22. The mere fact that two Institutes, managed and controlled
by the same management, offer different courses or were established
at different times is not relevant for their clubbing under the EPF Act.
The fact that one of the institutes receives 100% grant-in-aid from the
18
government while the other is receiving to the extent of 70%, is also
not relevant. After coverage of the establishments, the benefits, as
determined for the purpose of assessing dues under the EPF Act, have
already been assessed by the Commissioner.
23. From a perusal of the material available on record and the
settled position of law, it can be safely opined that there is financial
integrity between the Society of the appellant as well as the Ideal
Institute as substantial funds have been advanced to the Institutes by
the Society. Further, both the Institutes are functioning from the same
premises.
24. For the reasons mentioned above, the appeal is dismissed.
There shall be no order as to costs.
…..……………..J
(HIMA KOHLI)
…………………..J
(RAJESH BINDAL)
New Delhi
October 12, 2023.
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