India Cements Ltd. v. Union of India & Ors.

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 22.10.2009CORAMTHE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM W.P.No.19026 of 1998India Cements Ltd.,... Petitioner Chennai-2-vs-1.Union of India represented by Secretary, Ministry of Labour, New Delhi.2. The Employees' Provident Fund Appellate Tribunal, 7th floor, 60,Skylark BuildingNehur Place, New Delhi 110 019.3.The Regional Provident Fund CommissionerTamil Nadu, 20, Royapettah High RoadChennai 600 014. ... RespondentsWrit petition filed under Article 226 of the Constitution ofIndia praying for the issuance of a Writ of certiorarified Mandamusto call for the records of the first respondent comprised in AppealNo.35011/13(8)89/516 dt 13.7.98 and quash the same and forbear therespondents from in any manner taking any action pursuant to or underthe said order. For Petitioner : Mr. Rahul Balaji for Mr.Satish ParasaranFor Respondent : Mr.V.Vibhishanan – R2 and R3O R D E RThe petitioner has filed the above Writ Petition challenging theorder passed by the first respondent dated 13.7.1998. The matterarises under the provisions of the Employees Provident Fund andMiscellaneous Provisions Act, 1952, (hereinafter referred as 'the https://hcservices.ecourts.gov.in/hcservices/ Act').2. The facts leading to the filing of the Writ Petition is asfollows:(a) The petitioner is a Company which is registered under theIndian Companies Act and engaged in the manufacture of cement. Thecement manufactured by the petitioner is packed in gunny bags andsuch gunny bags were either new gunny bags or re-conditioned gunnybags. According to the petitioner there are various suppliers of re-conditioned gunny bags who supplied to various Cement Companies likethe petitioner. (b) According to the petitioner one of the suppliers of suchre-conditioned gunny bags established, a factory near thepetitioner's factory compound in Sakaridurg and one K.C.Rangaswamywas the occupier of the factory and the factory licence was alsoobtained by him during 1968 under the provisions of the FactoriesAct, 1948.(c) In order to ensure regular and steady the supply of re-condition gunny bags without fluctuation of price, the petitioneraccepted the willingness of one K.C.Rangasamy during 1972 to enterinto an agreement to supply re-conditioning gunny bags. Accordingly,an agreement was drawn on 9.8.1972 between the petitioner and thesaid K.C.Rangasamy. Under the terms of the agreement, the petitioneragreed to provide old gunny bags, re-conditioning factory space,electricity and water without claiming any charges for the said oldgunny bags. According to the petitioner, the old gunny bags re-conditioning factory shall employ its own workmen and they weresupervising them and paying the wages. On 29.4.1974, the occupierof the said re-conditioning factory applied to the Regional ProvidentFunds Commissioner for coverage of his employees. Majority of theemployees of the said Unit were also willing to get the coverage andalso willing to make their contributions. At that stage of thematter, the third respondent herein by letter dated 24.8.1974,addressed the petitioner stating that the old gunny bags Factoryshould be treated as a Branch or Department of the petitioner andtherefore its employees would also be the employees of the petitionerfor the purposes of the Act. The said communication directed thatcoverage under the Act would be from 1.12.1969 and arrears ofProvident Fund Contributions together with administration chargesshould be remitted by the petitioner. (d)The petitioner by reply dated 26.9.1974 objected to thesaid demand on various grounds. Thereafter no action was taken by thethird respondent till 1978 and in the meantime, the old gunny bagsre-conditioning factory shifted its location about five miles awayfrom the petitioner Factory during the year 1977. It is further https://hcservices.ecourts.gov.in/hcservices/ submitted that a dispute was raised by the workmen of the said oldgunny bags Factory regarding their non-employment and the dispute wasreferred for adjudication by the Government and taken on file by theLabour Court, Coimbatore, as I.D.No.172 of 1978. The Labour Court byan award dated 28.9.1989, held that there is no employer-employeerelationship between the petitioner and that of the employees in theold gunny bags factory. The petitioner received a notice dated4.4.1978, issued under section 7-A of the Act calling upon thepetitioner to appear for an enquiry. A reply dated 17.7.1978 alongwith affidavit sworn to by the Secretary of the petitioner Companywas sent. Thereafter, by a communication dated 7.9.1981, the thirdrespondent stated that the issues have been considered and it wasdecided that the re-conditioning factory is a branch of thepetitioner within the meaning of Section 2A of the act. This ordercame to challenged by the petitioner by filing W.P.No.10485 of 1981before this Court. The Hon'ble Division Bench of this Court disposedof the said Writ Petition by an order dated 22.8.1989. The Hon'bleDivision Bench has taken into consideration the insertion of Section19A of the Act, which provided for power to remove difficulties ingiving effect to the provisions of the Act, the Central Governmentmay by an order make such provisions or gives such direction notinconsistent with the provisions of the Act, for the removal of thedoubt or difficulty. Thus liberty was granted to the petitioner andthe following directions were issued:"1. The petitioner shall prefer the requisiteapplication under section 19A of the Act within a period ofthree months from today; 2.If so done, the Union Government shall dispose ofthe applicant with expedition;3.Until the application is disposed of by the UnionGovernment as per clause(2) supra, the provisions of the actneed not be enforced as against the petitioner. 4.The petitioner shall forward a copy of thepetition to be preferred under section 19-A of the act tothe respondent, so that the respondent may keep track of theposition with regard to the disposal of the said applicationby the Union Government.5.If there is a failure on the part of thepetitioner to resort to the process under Section 19A of theAct as directed above, the respondent is at liberty to takeappropriate process under the provisions of the Act, ifthere is a warrant for it, under law and on facts."Accordingly a petition was presented before the first respondent https://hcservices.ecourts.gov.in/hcservices/ under section 19A of the Act. 3. The first respondent by an order dated 26.6.1997 dismissedthe said Application and the said order was communicated through thesecond respondent, since by then Section 19A was substituted byintroduction of section 7(I) and under section 7 P all Applicationswhich were pending before the Central Government under section 19Abefore its repeal stood transferred to the Tribunal. This orderpassed by the first respondent is impugned in the present WritPetition. 4.Heard Mr.Rahul Balaji, learned counsel for the petitionerand Mr.V.Vebhishanan, learned counsel appearing for the respondents.5.Mr. Rahul Balaji, learned counsel appearing for thepetitioner would assailed the correctness of the impugned order bycontending that under section 7A of the Act, the third respondent mayby order, decide a dispute as to whether the provisions of the Actare applicable to an Establishment, determine the amount due from anyEmployer under the provisions of the Act. 6.By relying upon Sub-section (2) of Section 7 A of the Act,the learned counsel would contend that for the purpose of enquiryunder sub-section (2) of section 7 A of the Act, such an Officershall have the same powers which are vested in a Court under theCode of Civil Procedure for trying a Suit. By that, the thirdrespondent is entitled to summon any person or examine him on oath,call upon the parties to produce the documents, receive evidence onaffidavit and issue commission for the examination of witnesses andsuch proceedings shall be deemed to be a judicial proceedings withinthe meaning of sections 193 and 228 and for the purpose of section196 of IPC. Further, in terms of sub section (3), no order undersub-section 1 of section 7A shall be passed unless the employerconcerned is given reasonable opportunity of representing his case. 7.The learned counsel would submit that the firstcommunication which was received after a lull from 1978 was theproceedings of the third respondent dated 7.9.1981. The learnedcounsel would submit that the third respondent without conducting anyenquiry held that it has been conclusively decided that the old gunnybags re-conditioning factory is a branch of the petitioner companywithin the meaning of section 2A of the Act.8.The learned counsel by laying emphasis on the word'conclusive', used in the order dated 7.9.1981 passed by the thirdrespondent, contended that in the absence of procedure beingfollowed as contemplated under sub-section (2) of 7A, there cannot besuch a 'conclusive' finding. The learned counsel would also contendthat the findings rendered in the order dated 7.9.1981 has been madewithout considering any of the submissions made by the petitioner https://hcservices.ecourts.gov.in/hcservices/ through his counsel on 26.9.1974 and further reply dated 20.2.1978and the letter given by K.C.Rangaswamy on 29.4.1974, requesting thattheir Unit may be covered under the provisions of the Act. Thereforethe learned counsel would submit that no enquiry as required to bedone under section 7A was conducted before such a finding wasrendered. 9.These issues were pointed out by filing a representationunder section 19-A of the Act, in terms of the liberty granted bythe Hon'ble Division Bench of this Court in the earlier W.P.No.10485of 1981. However, the first respondent by merely perusing theAgreement dated 9.8.1972, came to a conclusion that since space havebeen provided within the Factory premises, it should be taken thatthere is functional integrality and therefore the Unit has to betreated as part of the petitioner under section 2A of the Act. Thelearned counsel would further contend that the award of the LabourCourt was rejected by stating that it has no relevance. Therefore,the learned counsel would contend that there has been absolutely noapplication of mind to the facts and circumstances of thepetitioner's case and curiously no notice has been issued to the saidRangasamy who has independently approached the authorities requestingfor extending the provisions of the Act to the said Unit. Hence, onthese grounds, the learned counsel would submit that the impugnedorder is not sustainable in the eye of law. 10. Mr.Vibhishanan, learned counsel appearing on behalf of therespondents would contend that the petitioner Company had providedspace for receiving, storing and stocking gunny bags, and alsoelectricity and water was provided without claiming any charges.Further, the petitioner also maintained the machines of the saidundertaking and the re-conditioning factory is exclusively for thepurpose of supplying the re-conditioning gunnybags to the petitioner.Hence, the learned counsel contended that the business carried on bythe Contractor is incidental to the main business of the principalemployer, the petitioner herein. 11. It is further contended that the petitioner Company haspower and control over the work of the old gunny bags factory andtherefore, they were treated to be a branch of the petitionerCompany. The learned counsel would contend that the first respondenthad entertained the Application under section 19-A, considered thefacts and circumstance of the case and came to a correct conclusionthat the claim made by the petitioner is not sustainable. It isfurther submitted that while giving effect to the provisions of theAct, the meaning of the words 'Employee' in the Act has beenliberally construed so as to render maximum welfare to the workingclass. 12.In view of the factual situation, it may be easily said that https://hcservices.ecourts.gov.in/hcservices/ there is functional integrality between the petitioner and the saidUnit and since the officials of the petitioner company have gotsupervisory control over the workmen of the said Unit, it has to beheld that they are the branch of the petitioner Unit. Therefore,the learned counsel would contend that the impugned order does notcall for any interference. 13. I have carefully considered the submissions made by thelearned counsel appearing on either side and perused the materialsavailable on record. 14.The Act came to be enacted for making some provisions forfuture of the Industrial Worker after he retires or for hisdependents in the case of his early death, therefore, the Act isessentially a labour welfare legislation.15.As rightly contended by the learned counsel for therespondents that while interpreting the provisions of the act, theword 'employee' in the Act has to be liberally construed so as torender maximum welfare to the working class. Bearing the object ofthe enactment in mind, if the facts of the present case are perused,the following emerges:i)that there were two agreements between K.C.Rangaswamy and thepetitioner dated 9.8.1972 and 10.10.1974, under the said agreement,the said Mr.K.C.Rangaswamy has been termed as Contractor who hasoffered to stitch and re-condition the secondhand gunny bags anddeliver the same to the petitioner company;ii) that the rate per unit has also been stipulated and underthe agreement, the contractor has to secure a licence under theFactories Act as Manager or occupier ;iii) that there are several other conditions including thecondition to give a security deposit in favour of the petitioner.16. According to the petitioner, for the purpose ofuninterrupted supply of gunny bags, agreement was entered into andspace was provided within the factory premises of the petitionerUnit. It is to be seen that the said Mr.K.C.Rangaswamy on 29.4.1974has addressed the third respondent requesting that the provisions ofthe Act may be extended to its employees and he is willing to paythe employer's share as provided under section 6 of the Act andmajority of employees have also agreed for such coverage. Further,57 workers of the said Factory have also given such a similarrepresentation dated 29.4.1974, agreeing to the extension of theprovisions of the Act. However, no record has been placed beforethis Court by the respondents Department as regards the action takenon such representations made by K.C.Rangaswamy and the workers. https://hcservices.ecourts.gov.in/hcservices/

17.Next communication which has been received by thepetitioner is dated 24.8.1974, wherein the re-conditioning factorywas treated as a Unit of the petitioner. On receipt of the saidcommunication, the petitioner has sent a reply through their counselon 26.9.1974. In the said reply, it has been contended that theemployees employed by the occupier can by no stretch of imaginationbe brought within the fold of the definition of the terms 'employee'as defined under section 2F of the act in so far as the petitioner isconcerned. Further, since there is a subsisting agreement betweenthe petitioner and the occupier and he is the person who has employedsuch workmen, there is no employer – employee relationship. 18.Further, it has been contended that Section 2A of the Acthas no application and a reference has also been made about thevoluntary application made by K.C.Rangaswamy on 29.4.1974. It is tobe noted that a reply was sent through the counsel for the petitioneron 26.9.1974 and thereafter no action seems to have been taken forover four years and on 2.2.1978, the third respondent has threatenedto take action against the petitioner under section 14 and section 8of the Act to realise the dues. Thereafter, the petitioner hassubmitted that an application would be presented under section 19-Aof the Act. On 4.4.1978 a summon was issued to the petitioner totheir registered office at Chennai under section 7A of the Act,calling upon them to produce the records relating to the said re-conditioning Unit such as Attendance Register, Membership Register,Cash Book and Vouchers, Payment Registers and other documentsnecessary. In response to the said notice of enquiry, the petitionersubmitted a reply on 17.7.1978, reiterating the earlier stand takenand as to how such records cannot be produced by them since they werenot the occupier of the said Unit. An affidavit sworn to by theSecretary of the Company was also enclosed for the reference of thethird respondent. Thereafter, the third respondent by an order dated7.9.1981, determined that the re-conditioning Unit is the branch ofthe petitioner within the meaning of section 2A of the Act. 19.As rightly contended by the learned counsel for thepetitioner, the scope of enquiry under section 7A of the Act is not asummary procedure, but, is in the nature of a quasi judicialenquiry, since the authority has been given the same powers as vestedin the Court under the provisions of the Code of Civil Procedure. 20.The Hon'ble Supreme Court in FOOD CORPORATION OF INDIA Vs.PROVIDENT FUND COMMISSIONER AND OTHERS reported in (1990) 1 SCC 68,while considering the scope of enquiry under section 7-A of the Act,has held as follows:"7.The question, in our opinion, is notwhether one has failed to produce evidence. Thequestion is whether the Commissioner who is thestatutory authority has exercised powers vested in him https://hcservices.ecourts.gov.in/hcservices/ o collect the relevant evidence before determining theamount payable under the said Act.8.It is of importance to remember that theCommissioner while conducting an inquiry under Section7-A has the same powers as are vested in a Court underthe Code of Civil Procedure for trying a suit. Thesection reads as follows:"7-A Determination of moneys due from employer--(1) The Central Provident Fund Commissioner, anyDeputy Provident Fund Commissioner or any RegionalProvident Fund Commissioner may, by order determine theamount due from any employer under any provision ofthis Act (the scheme or the Family Pension Scheme orthe Insurance Scheme as the case may be) and for thispurpose may conduct such inquiry as he may deednecessary.(2)The Officer conducting the inquiry under sub-section (1) shall, for the purposes of such inquiry, havethe same powers as are vested in a court under the Code ofCivil Procedure, 1908, for trying a suit in respect of thefollowing matters, namaly:(a)enforcing the attendance of any person or examininghim on oath;(b)requiring the discovery and production of documents;(c)receiving evidence on affidavit;(d)issuing commissions for the examination of witnessand any such inquiry shall be deemed to be a judicialproceeding within the meaning of Sections 193 and 228, andfor the purpose of Section 196 of the Indian Penal Code."21.Thus before rendering a finding as to whether anEstablishment would fall within the scope of the Act, in my view, anenquiry has to be conducted, especially a full-fledged enquiry wherethe attendance of witnesses are enforced, documents are summoned,evidence on affidavit is received and evidence could also becollected by issue of Commission. However, without following suchprocedure, the third respondent decided that it has been"conclusively" proved that the said re-conditioning Unit is a branchof the petitioner, within the meaning of section 2A of the Act. Theorder passed under section 7A of the Act has to be a speaking orderand it should reflect as to the basis on which the authority comes toa conclusion that the provisions of the Act are applicable. There isno record to show as to whether any summons were issued to the saidre-conditioning Unit or any records were summoned from the said Unit https://hcservices.ecourts.gov.in/hcservices/ especially after the petitioner has taken a stand that they are notthe employer, the occupier of the said Unit is a different person andthe said Unit hold a valid licence under the provisions of theFactories Act. Thus, the authority summarily came to a conclusionthat the said Unit is a Branch of the petitioner under section 2A. 22.It is to be noted that the petitioner was directed toapproach the first respondent by way of a petition under section 19-Aof the Act. Section 19-A of the Act envisages that a direction couldbe issued by the Central Government when any difficulty arises ingiving effect to the provisions of the Act and if any doubt arises asto matters referred to under clauses (i) to(v) of section 19A.Further, it is to be noted that section 19-A of the Act does notindicate the procedure that should be adopted before a conclusion isreached. However, such a conclusion cannot be reached without anenquiry or an investigation, especially when the decision has to berendered on a question of fact. Therefore, the enquiry ought to bein the nature of a quasi judicial enquiry, since it affects therights of the parties to the proceedings. 23.A perusal of the impugned order would show that the firstrespondent came to a conclusion that the said re-conditioning Unithas functional integrality with the petitioner factory based on theagreement dated 9.8.1972. It is to be noted at this juncture thatthe said re-conditioning Unit was not a party to the proceedingsbefore the first respondent and no records were also placed beforethe authority, except the agreement between the petitioner and thesaid occupier of the re-conditioning Unit. Therefore, I am of theview that the findings of fact rendered by the first respondent iswithout conducting any investigation or enquiry and without takinginto consideration the facts and circumstances. Equally thefindings as regards the applicability of the award passed by theLabour Court in I.D.No.172 of 1978 dated 28.09.1989, is alsoerroneous. according to the learned counsel for the petitioner, thesaid award had become final,therefore the applicability of the saidAward ought to have been considered on merits. 24.Though the subject matter in I.D.No.172 of 1978 relates tonon-employment of the workmen in the old gunny re-conditioning Unit,the Labour Court had rendered a finding that the said Unit, which wasthe second respondent in I.D.No. 172 of 1978, cannot be said to bemaintained by the petitioner because of the reason for providingspace, water supply, electricity etc. Further, a finding has alsobeen rendered that the workmen had worked only under the Contractor.Thus, the findings of the Labour Court had not been taken note of bythe first respondent, but has been rejected on the ground that theyhave no relevance so far as the provisions of the present Act. Sucha finding would be incorrect in law especially when the subjectmatter in issue is between the same parties. Therefore, the firstrespondent ought to have endeavored to go into the said findings and https://hcservices.ecourts.gov.in/hcservices/ decide on its applicability, which unfortunately has not been done inthe present case. 25.Further, it is brought to the notice of this Court by thelearned counsel on either side that during 1977, the said Unit hadshifted its place of activity about five miles away from thepetitioner Factory. The summons issued under section 7-A of the Actwas issued on 4.4.1978, after the unit had shifted. This factor alsoought to have been taken note of while deciding the issue, since theearlier finding was rendered primarily on the ground that the re-conditioning Unit was situated in the premises of the petitionerFactory, enjoying free supply of water, electricity and otherfacilities.26.For all the above reasons, I find that the order passed bythe first respondent is not sustainable and requires interference.Accordingly, the impugned order is set aside and the matter isremanded back to the third respondent to conduct a detailed enquiryunder section 7-A of the act, afford an opportunity to the petitionerto produce all oral and documentary evidence, issue notice to the re-conditioning Factory and call for records and documents lying in thecase of the said Unit and after affording an opportunity to theparties, shall pass an order on merits and in accordance with law,within a period of four months from the date of receipt of a copy ofthis order. The Writ Petition is allowed with the above direction. No costs.rpa Sd/- Asst.Registrar/True Copy/ Sub.Asst.RegistrarTo1.The Secretary, Union of India Ministry of Labour, New Delhi.2. The Employees' Provident Fund Appellate Tribunal, 7th floor, 60,Skylark BuildingNehur Place, New Delhi 110 019. https://hcservices.ecourts.gov.in/hcservices/

3.The Regional Provident Fund CommissionerTamil Nadu, 20, Royapettah High RoadChennai 600 014.+ 1 cc to Mr. Sathish Parasaran, Advocate CC SR.53814+ 1 cc to Mr. V. Vibhishanan, Advocate CC SR.55675W.P.No.19026 of 1998 RSY(CO0EU 10.11.2009.