Sundaram Motors Ltd. v. The Employees Provident Fund, Regional Office, 37, Royapettah High

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 07.06.2011CORAMTHE HONOURABLE MR.JUSTICE K.CHANDRUW.P.NOs.6763 and 16443 of 2008andM.P.Nos.1 and 1 of 2008 Sundaram Motors Ltd. (Establishment of T.V.Sundaram Iyengar & Sons Private Limited)Post Box No.713,180, Anna Salai, Chennai-600 002.rep by its General Manager.. Petitioner in W.P.No.6763 of 2008 Madras Auto Service(Establishment of T.V.Sundaram Iyengar & Sons Private Limited),Post Box No.707,180,Anna Salai, Chennai-600 002... Petitioner in W.P.No.16443 of 2008Vs.The Employees Provident Fund, Regional Office,37,Royapettah High Road, Chennai-600 014.rep by its Regional Provident Fund Commissioner, Chennai – Puducherry Region... Respondent in W.P.No.6763 of 2008 The Employees Provident Fund, Regional Office,37,Royapettah High Road, Chennai-600 014.rep by its Regional Provident Fund Commissioner, Chennai Region... Respondent in W.P.No.16443 of 2008W.P.Nos.6763 and 16443 of 2008 are preferred under Article 226 ofthe Constitution of India praying for the issue of a writ ofcertiorari to call for the records connected with order https://hcservices.ecourts.gov.in/hcservices/ No.C3/CHN/TN/1135/Exem/Regl/2008, dated 3.3.2008 and orderNo.C4/TN/1137/Exem/Regl./2008, dated 02.07.2008 respectively on thefile of the respondent Provident Fund Commissioner and to quash thesame. For Petitioners : Mr.Sanjay Mohan for M/s.S.Ramasubramaniam & Associates in both W.Ps.For Respondents : K.Ramu, Standing Counsel forrespondent in both W.Ps.COMMON ORDERThe petitioner in W.P.No.6763 of 2008 is M/s.Sundaram MotorsLimited represented by its General Manager. In that writ petition, they have challenged an order passed by the respondent EmployeesProvident Fund Department, dated 3.3.2008.

By the impugned order, the petitioner company was informedthat exemption under Section 17(1)(a) of the Employees' ProvidentFunds and Miscellaneous Provisions Act, 1952 was granted toM/s.Sundaram Motors Private Limited with effect from 1.7.1960 byG.O.Ms.No.1725, Labour, dated 20.3.1963. However, subsequently, byan order dated 24.12.1970, this Court had permitted the saidestablishment to be amalgamated with M/s.T.V.Sundaram Iyengar and Sons Limited. By the said order, this court ordered that all theassets of M/s.Sundaram Motors Private Limited including immovableand movable properties, investments in shares, workshop tools, goodsin transit, advances of monies of all kinds, etc., stood transferredand vest with M/s.T.V.Sundram Iyengar and Sons Limited and theexistence of M/s.Sundaram Motors Private Limited, Chennai-6 came toan end. Because of the amalgamation of M/s.Sundaram motors PrivateLtd., the said company had lost its separate legal entity witheffect from 1.4.1970. In terms of condition No.29 stipulated underpara 27AA of the Employees Provident Funds Scheme, for the grant ofexemption under Section 17 of the Employees Provident Funds and Miscellaneous Provisions Act, in case of any change of legal statusas a result of merger, demerger, the exemption will stand revoked. Therefore, no exemption can be granted to the petitioner company, which is the division of M/s.T.V.Sundaram Iyengar and Sons Limited. The petitioner was directed to merge the Sundaram Motors ProvidentFund Trust with the main Provident Fund Trust of M/s.T.V.SundaramIyengar and Sons Limited with effect from 31.3.2008 by transferringall the monies and securities held in the name of M/s.SundaramMotors Provident Fund Trust to the name of Provident Fund trust ofM/s.T.V.Sundaram Iyengar and Sons Limited along with previousaccumulation statement after passing a resolution by its Board of Trustees. It was also informed that the petitioner M/s.SundaramMotors Private Limited will be treated as a branch unit of https://hcservices.ecourts.gov.in/hcservices/ M/s.T.V.Sundaram Iyengar Sons and Limited, which is also a coveredand exempted establishment under the Act, as per Section 2A of thePF Act with effect from 1.3.2008.

The writ petition was admitted on 18.3.2008. Pending the writpetition, this court had granted an interim stay initially for alimited period and it was extended from time to time. On notice fromthis court, the respondent has filed a counter affidavit, dated21.8.2010.

In the meanwhile, the second writ petition came to be filedby M/s.Madras Auto Service challenging the similar order, dated2.7.2008. That writ petition was admitted on 11.7.2008 and wasdirected to be posted along with the earlier writ petition. Pendingthat writ petition, an interim stay was granted against the impugnedorder. In the second writ petition also, the respondent had filed acounter affidavit, dated 21.8.2010.

Heard the arguments Mr.Sanjay Mohan, learned counselappearing for M/s.S.Ramasubramaniam Associates for the petitioner inboth writ petitions and Mr.K.Ramu, learned Standing Counsel for theEPF Department.

The contentions raised by the petitioner was thatM/s.T.V.Sundaram Iyengar and Sons Private Limited had its ownProvident Fund applicable to its employees. Even after amalgamation,M/s.Sundram Motors Private Limited sought for continuing theexisting Sundaram Motors Staff Provident Fund as per the exemptiongranted earlier. The respondent by a communication, dated 24.2.1971had indicated that their office has no objection to maintain theregister of M/s.Sundaram Motors Private Limited as a separatedivision of T.V.Sundaram Iyengar and Sons Private Ltd. Periodicalinspections were done. By an amendment made to EPF Scheme, 1952,paragraph 27AA was introduced, by which it is stated that allexemptions already granted or to be granted hereafter under Section17 of the Act or under paragraph 27A of the scheme shall be subjectto terms and conditions as given in the Appendix A.

Entry 29 in Appendix A reads as follows: "29. In case of any change of legal status of theestablishment which has been granted exemption, as aresult of merger, demerger, acquisition, sale, amalgamation, formation of a subsidiary, whetherwholly owned or not, etc., the exemption grantedshall be revoked and the establishment shouldpromptly report the matter to the RPFC concerned forgrant of fresh exemption. "

Even after the introduction of paragraph 27AA of the Schemeand Appendix-A with effect from 6.1.2001, continued inspection wasdone by the respondent. Therefore, they cannot suddenly ask formerger of the PF Trust. The reasoning given by the respondent in the https://hcservices.ecourts.gov.in/hcservices/ impugned order was not germane. There was no retrospective effectgiven to paragraph 27AA read with Appendix A of the Scheme and itcannot have any application to the merger done earlier. Therespondent had continued to treat the scheme as a separate entityand there is no reason to merge the funds with the company's fund. Section 17 contemplates an exemption to an establishment and it isshown that it is a separate establishment notwithstanding its run bythe same company.

In the counter affidavit, it was stated that by virtue of anorder of this court, the entire asset of M/s.Sundaram Motors PrivateLimited were transferred to M/s.T.V.Sundram Iyengar and Sons PrivateLimited. Due to amagamation, the original company had lost itsseparate legal entity. Therefore, they cannot enjoy any furtherexemption. Since M/s.T.V.Sundram Iyengar and Sons Private Limited isalso an exempted establishment under Section 17(1)(a), all its unitsand branches will also be governed by the exemption status. Thepetitioner cannot run two different trusts, one in the name ofexisting company and the other in the name of the company which isno longer in existence.

It was stated that paragraph 27AA of the EPF Scheme, 1952clearly stipulates that in case of change of legal status, theexemption will stand revoked. Therefore, in the absence of any lawfor continuing the exemption in the name of the non existingcompany, the petitioner cannot have any right to seek for continuedexemption. As the statutory scheme itself indicated that on such achange of status, the exemption cannot continue and there is noestoppal or the petitioner cannot rely upon any correspondencebetween the parties. Further by the merger of two trusts, theemployees who are the beneficiaries were not put to any prejudice.

The stand of the respondent is in consonance with thestatutory scheme framed by the Central Government. The petitionerscompany cannot be said to be an aggrieved party. In fact, in boththe writ petitions, they have not even made the employees as partiesto ascertain their views. Even otherwise, when the company does notexist, it is unthinkable that exemption can continue in the name ofthe trust alone. It is fair and proper that the petitioner mustmerge the existing trust with the trust run by their parent company. The merger can never cause any prejudice to the workmen who aresubscribers to the earlier trust.

The argument that the scheme cannot have retrospectiveeffect does not stand to reason. First of all, it is a matter ofexemption. Secondly, any amendment will definitely have impact onthe existing exempted establishment. In the present case, theoriginal exempted unit does not exist. Therefore, this axiomaticexemption also must come to an end. By cancelling the exemption, theworkers are not going to lose, because even after the merger, theparent company continues to be an exempted establishment and it will https://hcservices.ecourts.gov.in/hcservices/ only be a matter of maintaining accounts by a single trust.

In view of the above, both the writ petitions will standdismissed. However, there will be no order as to costs. Consequently, connected miscellaneous petitions stand closed. Sd/- Asst. Registrar. /true copy/ Sub Asst. Registrar.vvkTo1. The Regional Provident Fund Commissioner, Chennai Region - Puducherry Region The Employees Provident Fund, Regional Office,37,Royapettah High Road, Chennai-600 014.2. The Regional Provident Fund CommissionerChennai Region, The Employees provident FundRegional Office No.37 Royapettah High Road, Chennai-141 cc to Mr.M. Jayaraman, Advocate, Sr. 326292 ccs to Mr.K. Ramu, Advocate, Sr. 32134, 32135W.P.NOs.6763 and 16443 of 2008MS (CO)kk 16/6