Regional Provident Fund Commissioner, Hyderabad v. 2 M/s. Crest Cables Limited, Kattakal Village, Medak District

Order

This writ petition is filed by the Regional Provident Fund Commissioner, Hyderabad, aggrieved by the order, dated 13.04.1999, passed by the Provident Fund Appellate Tribunal in Case No. ATA-1(34)98.

2. Facts of the case, in nutshell, are as under : M/s. Sputnik Cables Pvt. Ltd. was a covered establishment under the provisions of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as ‘the Act’), vide Code No.AP/23978, with effect from 01.06.1992. The 2nd respondent/Company has purchased the said Unit in the month of January 1995. When the 2nd respondent was called upon by the petitioner to comply with the provisions of the Act referred above, it has disputed the coverage on the ground that it is a new establishment and is entitled for infancy protection, as contemplated under Section 16(1)(d) of the Act. In view of the dispute raised by the respondents, claiming infancy protection for a period of three years, an inquiry was conducted by the petitioner, and an order, dated 16.07.1998, was passed, holding that 2nd respondent/Company was not entitled to claim the benefit of exemption as provided under Section 16(1)(d) of the Act. Aggrieved by the said order, the 2nd respondent herein carried the matter by way of an appeal in Appeal No.ATA- 1(34)98, and the appellate Tribunal, by an order, dated

13.04.1999, allowed the appeal by recording a finding that the 2nd respondent has purchased a totally closed factory, and therefore, as a new establishment, it is entitled to claim the benefit under Section 16(1)(d)(4) of the Act. Aggrieved by the order of the appellate authority, the Commissioner of Provident Fund, Hyderabad, has filed the present writ petition.

3. In this writ petition, it is the case of the petitioner that the 2nd respondent/Company is not a new establishment so as to claim exemption for a period of three years as provided under Section 16(1)(d) of the Act. It is

submitted by Sri R.N.Reddy, learned counsel for petitioner, that asmuch as the 2nd respondent has purchased the Unit, which has already availed exemption for a period of three years as provided under Section 16(1)(d), as such, the 2nd respondent, being the purchaser of the same Unit involved in manufacture of Cables, is not entitled for any further exemption. In support of his argument, the learned Counsel has placed reliance on a judgment of the Hon’ble Supreme Court in the case of Sayaji Mills Ltd. V. Regional Provident Fund Commissioner [1] .

4. On the other hand, Sri V.Rajagopal Reddy, learned counsel appearing the 2nd respondent/Company, submits that the 2nd respondent has purchased the factory, which was already closed, and the workers, who were working in the said factory, were retrenched and also left the service of the Company by settling compensation under the provisions of the Industrial Disputes Act, 1947. It is submitted the persons employed the earlier Company were not continued in service and the 2nd respondent/Company has started manufacturing activity from the month of May 1995 by obtaining fresh licenses, and also by obtaining registration under provisions of the Andhra Pradesh General Sales Tax Act,

1957. It is submitted that asmuch as there is no connection between the previous establishment and the newly established 2nd respondent/Company, the appellate Tribunal has rightly given the benefit of exemption as provided under Section 16(1)(d) of the Act, which was subsequently repealed. In support of his argument, the learned counsel has placed reliance on the judgment of a learned Single Judge of Madras High Court, in the case of Yennarkey Printers Pvt. Ltd V. Regional Provident Fund Commissioner, Madurai , and on the judgments of the [2] Hon’ble Supreme Court in the cases of The Provident Fund Inspector V. N.S.S. Co-operative Society [3] , and in Union of India V. A.S.Amarnath [4] and also on the Division Bench judgment of Delhi High Court in the case of Bajaj Food Products V. Central Board Trustee and others [5] .

5. With reference to the above said arguments, the only question, which falls for consideration is, whether the 2nd respondent/Unit, which has purchased the previously closed factory, can be considered as a newly set up establishment or not, for the purpose of grant of exemption, as contemplated under Section 16(1)(d) of the Employees Provident Fund and Miscellaneous Provisions Act, 1952. It is also to be noticed that the said provision is deleted by way of amendment to the provisions of the Act before the expiry of three years from the establishment of 2nd respondent/Company, but it is required to be examined by this Court, asmuch as the 2nd respondent/Company has availed the said exemption for a period of two years before deletion of such provision from the Statute, by way of amendment.

6. Though the preliminary authority has recorded a finding that the 2nd respondent/Company is not entitled for exemption in the infancy period of three years from the date of its establishment, but the appellate Tribunal, taking into account the previous Company was completely closed and the workers working therein were retrenched by settling compensation under the provisions of the Industrial Disputes Act, 1947, and the 2nd respondent has started the Unit by employing new employees, and by obtaining fresh statutory clearance, has held that it can be termed as a new establishment for the purpose of claiming exemption for infancy period. In the case of Sayaji Mills Ltd. (1 supra), relied upon by the learned counsel for petitioner, the Hon’ble Supreme Court was considering the case where there was stoppage of production in the factory due to an order of High Court in winding up proceedings for a temporary period, and held that such Factory shall not be given the benefit contained in Section 16(1)(d) of the Act. In the said judgment, the Hon’ble Supreme Court was pleased to observe that the Act, being a beneficial Statute, should receive a strict construction.

7. In the judgment relied upon by the learned counsel appearing for the 2nd respondent/Company in the case of Yennarkey Printers (2 supra), a learned Single Judge of Madras High Court was dealing with the case, where, an old Firm was reconstituted by including three of the earlier partners, and it was held that the new establishment is a fresh legal entity, and is entitled for infancy protection. Further, in the Division Bench judgment of the Delhi High Court in the case of Bajaj Food Products (5 supra), wherein the assets of the old Firm were disposed of and employees were retrenched as per Law and Sales Tax Registration Number was surrendered, it was held that the new Firm was not part of old establishment, and therefore, was entitled for infancy protection. Similarly, in the case of Provident Fund Inspector (3 supra), the Hon’ble Supreme Court, while dealing with the case of prosecution under Section 14 of the Act, has held that when the old establishment was completely closed and transfer of ownership took place, and an entirely new establishment is set up three months later, such new establishment is entitled for the benefit of infancy period. Similarly, in the case of Union of India (4 supra), the Hon’ble Supreme Court has confirmed the view taken by the Madras High Court that when the business of the earlier establishment was closed, the new business run by the new concern, is entitled to the infancy benefit. In the aforesaid case, though Sayaji Mills case (1 supra) was referred to, but at the same time, the Hon’ble Supreme Court has confirmed the view taken by the Madras High Court, that when the new establishment has started the business by employing new workmen by settling compensation of the earlier workers working in the old establishment under the provisions of the Industrial Disputes Act, 1947, then, the new establishment is entitled for the benefit under Section 16(1)(d) of the Act.

8. Keeping in mind the various decisions referred to above, in this case also, it is not in dispute that the previous Company, namely, M/s. Sputnik Cables Pvt. Ltd., has closed its business with effect from 01.10.1994, and all its workers were discharged from service, and compensation was also settled as per the provisions of the Industrial Disputes Act,

1947. The 2nd respondent/Company has purchased the Unit on 19th January 1995, and by installing additional machinery to manufacture PVC Cables, started its business by obtaining fresh electricity connection and getting itself registered under the provisions of the Andhra Pradesh General Sales Tax Act, 1957, and commenced its production from

02.05.1995, after recruiting new workers, other than those employed by the erstwhile Sputnik Cables Pvt. Ltd. So, from the facts of the case, it is clear that the 2nd respondent/Company has purchased the industry, which was closed, and has set up its new establishment and started its production. Merely because the newly set up industry of the 2nd respondent is also involved in the activity of manufacturing Cables, it cannot be denied the benefit of infancy period. In view of the complete stoppage of business by the previous industry and the 2nd respondent/industry starting its business afresh by recruiting fresh employees by obtaining new licenses, it cannot be construed as continuation of business of the previous industry, so as to deny the benefit of exemption available under Section 16(1)(d) of the Act. Though it was held by the Hon’ble Supreme Court in the case of Sayaji Mills Ltd (1 supra), that under such circumstances, infancy benefit need not be extended, but in view of the later judgment in the case of Union of India (4 supra), wherein the view taken by the Madras High Court that such newly established Units are entitled for infancy benefit, was approved by the Hon’ble Supreme Court, there is no option left to this Court, but to confirm the view taken by the appellate Tribunal. Accordingly, in view of the reasons stated by the appellate Tribunal on factual aspects, namely, closure of business activity of the previous Company, settling the dues of the erstwhile workers as per the provisions of the Industrial Disputes Act, 1947, recruitment of new workers by the 2nd respondent/Company and obtaining all required clearances/licenses afresh from the various authorities, I do not find any illegality in the order passed by the appellate Tribunal, warranting interference of this Court, in exercise of powers under Article 226 of the Constitution of India.

9. For the aforesaid reasons, the writ petition is devoid of merit and it is accordingly dismissed. No order as to _____________________ R.SUBHASH REDDY, J costs. 30th June 2009 [1] [2] [3] [4] [5] AIR 1985 SC 323 2001 (1) LLJ 508 AIR 1971 SC 82 1999 (1) LLJ 1365 (SC) 1991 (1) LLJ 52