1. Petitioner takes exception to Ex. B which amounts to a determination depriving it of the benefit of the infancy period given by Section 16(1)(b) of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, hereinafter referred to as the Act.
2. Petitioner is a Private Limited Company incorporated under the provisions of the Companies Act, 1956 with its office at Vile Parle (West), Bombay. Since the year 1971, it has a factory at Bhiwandi (Bhiwandi unit) which is engaged in the manufacture of zinc oxide. There was a 100% subsidiary of the petitioner Company at Patalganga manufacturing sulfuric acid and doing business in the name of Shree Siddeshwari Sulphur Products Pvt. Ltd. (Patalganga unit). By virtue of an order passed by this High Court on September 7, 1981 in exercise of its jurisdiction under the Companies Act, the two Companies came to be amalgamated. The Bhiwandi Unit was covered under Section 1(3)(a) of the Act since 1976. A question arose as to how the Patalganga Unit should be treated. On July 4, 1985 petitioner addressed Ex. A to Respondent No. 1 Commissioner-claiming that the two units were distinct and different, that the Patalganga Unit was not a branch or division of the Bhiwandi Unit and that the said unit was entitled to a separate code number denoting converge as an independent identity under the Act. However the petitioner was given to understand that until a decision was taken on the subject by the Commissioner, the Commissioner wanted it to make remittances in respect of the Patalganga unit employees under the very code number which had been allotted for the workers of the Bhiwandi unit. This it was doing, but without prejudice to its contention that the Patalganga and Bhiwandi Units were distinct and different establishments and that the Patalganga unit was not to be taken as already covered under the Bhiwandi unit code number by application of Section 2-A of the Act. This communication merited the reply which is at Ex. B and it avers that the Patalganga unit was a division of the Bhiwandi unit. The reply was taken exception to by a subsequent communication dated September 25, 1985. The Commissioner having been found to be unrelenting the petitioner has come to this Court.
3. The simple case put forward by the petitioner is that the Bhiwandi and Patalganga units are distinct and different. The employees of the two units are separate and there was no connection whatsoever between the two sets of employees except that Works Managers of the said units were directly answerable to the Managing Director of the petitioner Company. There was no common managerial or supervisory cadre with control over the two units. Only for the purposes of the Income-Tax Act were the accounts of the two units consolidated. However separate books of accounts were maintained and the two establishments had a separate profit and loss account as also a separate balance sheet. There was no functional integrality between the two units and the Commissioner's insistence on asserting the contrary was unwarranted. Hence the prayer for quashing of Ex. B and giving a declaration entitling the two units to a separate existence under the Act.
4. The Commissioner in his return contends that the two units are owned by the same set of persons and looked after by a common Managing Director. Next, both were in the manufacture of heavy and fine chemicals-an industry covered by Schedule-I of the Act. Raw material required for the two units was purchased through a common office located at Bombay. The finished products of both the units were sold through the Administrative Office at Bombay. The consolidated balance-sheet was a clincher to show that the two units were divisions and/or branches of the same establishment.
5. Section 2A of the Act marks the expression 'establishment' as embracing all departments or branches of an establishment irrespective of where they are located. Thus a difference in location of different departments and branches, provided they are of one establishment, is not going to make the said departments or branches different establishments. Learned Counsel Mr. Shah representing the petitioner contends that except for the fact of petitioner owing both the Units, there is nothing which can be said to be common between the two. The two units are two separate establishments and it was an error on the part of the Commissioner to treat them as different divisions or branches of one establishment. In support of this submission learned Counsel has relied upon a number of reported decisions. Before I come to those decisions it is necessary to get a clear picture of the factual position. Petitioner owns the two units and it may be taken that there is unity of ownership so far as the petitioner is concerned. Both the units are engaged in an industry which is covered by the entry 'heavy and fine chemicals' occurring in the Schedule-I of the Act. But the two units are manufacturing different products. The Bhiwandi unit manufactures zinc oxide, while the Patalganga unit manufactures sulfuric acid. Petitioner asserts that neither unit is a feeder or dependent upon the other. This assertion has to be accepted as reflecting the true position. Petitioner further asserts that the workers of the two units are different and that the same is the position in regard to maintenance of books of accounts. It is only for the purposes of the Income-Tax Act and certain requirements of the Companies Act, that there is consolidation of the accounts and other information. But this consolidation cannot bring about a functional integrality, which alone has a bearing upon the application of Section 2A of the Act. The factors pointed out by the Commissioner for the application of Section 2A to the two units of the petitioner Company have all been considered in different cases to which I now turn. First, there is the decision of the Supreme Court in Pratap Press v. Delhi Press Workers' Union 1969 I LLJ 497. No question under the Act arose in that decision and what fell for consideration was the availability of a surplus to enable the payment of bonus. It was there held :
'Where an entrepreneur is engaged in several activities each of which comes within the definition of 'industry' no hard and fast rule can be laid down for the decision of the question whether they form part of one single industry for the calculation of the surplus profits for distribution of bonus to workmen in one on the units. Each case has to be decided on its own peculiar facts. In some cases the several activities each of which by itself comes within the definition of industry are so closely linked together that no reasonable man would consider them as independent industries. There may be other cases where the connection between the two activities is not by itself sufficient to justify an answer one way or the other, but the employer's own conduct in mixing up or not mixing up the capital, staff and management may often provide a certain answer ..........
The most important test is that of functional integrality meaning thereby such of finance, employment and labour. The Court has to consider how far there is 'functional integrality' 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.'
6. If this ratio is applied to the determination of the question in the instant case it will be noticed that the two units are located at different places, have different sets of workers, manufacture different products and have separate books of account. It is true that there is a common owner of both the units and there is consolidation of accounts of both the units at the year's end. But one owner or association of owners such as a Company, can run more than one establishment. In fact one of the decisions relied upon by Mr. Shah, and, of this Court, goes to the extent of permitting an owner engaged in the same activity at two different places, with the two being treated as distinct. This is a decision of a Division Bench of this Court given on August 3, 1981 in Special Civil Application No. 198 of 1978. In that case the petitioners were having a factory manufacturing rubber goods at Bombay since 1942. To avail of certain concessions given to industrialists establishing industries in backward areas/backward regions of the State, the petitioners established a new factory at Aurangabad. This factory also was engaged in the manufacture of rubber goods. An attempt was made to treat the two factories as a single establishment. This Division Bench sustained the stand taken by the petitioners in that case. In so doing it was observed :
'To attract the provisions of Section 2A of the Act, it is necessary that the Unit must be described or treated as branch or the department of the main establishment. Such a branch or a department cannot have separate existence but is purely dependent on the main establishment. The branch or the department, even if a factory, are merely subsidiary, minor or feeding industries and which are started for the purpose of running the primary industry, then such feeding industries can be well described as branches or departments of the primary industry. In such a case, minor industries or the feeding industries merely serve as departments of the primary industry. But 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 establishment as against the other, would not arise.'
7. Learned counsel for the Commissioner, Mr. Mehta, argues that the two units are administratively served by an office located at Bombay, which amongst other things attends to the purchase of raw material and the sale of finished products for both the units. Would this circumstance make the two units a department or branch of each other In P. S. M. S. Ambalavana Chettiar & Co. (P) Ltd. v. Regional Provident Fund Commissioner, Madras (1970-I-LLJ-296) a negative answer was given to an identical plea. There a Company was carrying on various activities and had a factory. The registered office was five miles away from this factory. The authorities under the Act sought to include employees in the registered office also within the provisions of the Act on the ground that the employees there attended to all the work of purchasing raw material and selling of finished products of the factory and therefore Section 2A of the Act was attracted rendering the factory as well as the office as part of one establishment. This contention was thus approved after considering the definition of 'employee' occurring in Section 2A of the Act. The reasoning was (p. 298) :
'The petitioner on the other hand contends in his affidavit that the work done by the employees in the office at Mint Street, Madras, is not in any way concerned or connected with any of the processes of manufacture in the factory. It appears to me that this restriction of the work of the employees in the company to the process of manufacture in the factory is taking too narrow a view. An establishment which involves the running of a factory may also require a staff for procuring raw materials and disposing of the manufactured products and also for the maintenance of accounts. There can be integral relation between all these items of work and it may not be proper to separate the process of manufacture in the factory from the office establishment which attends to work connected with the factory and its raw materials or products and its accounts. Establishment for this purposes must be viewed in a larger sense than the process of manufacture. But the petitioner contends that the work in the Mint Street office is not exclusively connected with the work of the factory. The factory business is only one of a number of activities which are carried out in that office. The petitioner is aggrieved because all the employees in the Mint Street office have been automatically assumed to have done work connected with the factory, while there is room for a more careful examination of the work which the employees at the office are asked to do and determine whether there is integral connection between their work and the work of the factory. In this connection on the petitioner's counsel offered to produce data which would show that it is possible to segregate the work done by the individual employees in the Mint Street office in the above manner, and according to him, only such of those employees whose work can be shown to be connected with the factory could be brought under the provisions of the Employees' Provident Fund Act ..... Of course, there is a further extension of the definition in this Act which gives it a wider scope ... These observations follow the definition of 'employees' in Section 2(9) of the Employees' State Insurance Act which is clearly an extended one, whereas under the Employees' Provident Funds Act, the definition of 'employee' is more succinct. Section 2(f) of the latter Act defines 'employee' as meaning any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment and who gets his wages directly or indirectly from the employer. Stress is thus laid on the employees being employed in connection with the work of the establishment.'
8. Tested thus it is difficult to hold that the employees of the two units part of one establishment. The Administrative Office at Vile Parle may be an establishment by itself, and, as to that, we are not concerned in this case.
9. The third factor relied upon by the Commissioner is the admitted maintenance of a consolidated balance-sheet. But this is on account of the requirements of the Income-Tax Act and possibly Companies Act. Mr. Mehta relied upon the Associated Industries (P) Ltd. v. The Regional Provident Fund Commissioner, Kerala, Trivendrum 1966 (13) FLR 80 (SC). That was a case of composite factories which came within the purview of Section 1(3)(a) of the Act. It was held that composite factories come within this provision and the fact that factories were engaged in industrial activities independent of each other, some of which fell under First Scheduled and some did not, would not be enough to take the factory out of the purview of Section 1(3)(a) of the Act. That is not the question in the instant case. Here, there are two different units. Both had a separate existence until a unity of sorts was established by the order of amalgamation. The manufacture of zinc oxide cannot be said to be incidental to the manufacturer of sulphuric acid. Neither unit has the character of being a dominant or primary industry. Neither can be said to be sub-servicing of feeding the other. In the case relied upon by Mr. Mehta it was held that unless there be a relationship as sketched out above, the two units could not be said to be so connected as to form part of the same industry. That the Courts have taken a consistent view of Section 2A is further established by a decision of the Mysore High Court relied upon by Mr. Shah reported in 41 F.J.R. 329 Mahipalsingh Shankarsingh and Another v. Regional Provident Fund Commissioner, Mysore. In that case an employer was having independent establishments, one dealing in cigarettes, petrol and kerosene, the second, in food-grains and the third, an oilmill. All these were situated at different places and in none of the establishments was the number of employees in excess of twenty. The RPFC tried to treat the three establishments as functionally integrated. This contention was negatived - it being held that they could not be treated as one establishment, merely because they were all owned by the same employer. The test in all the decisions relied upon is, whether the new factory constitutes a distinct and different entity from the one already existing That they are owned by the same Company is not enough and a learned Single Judge of this Court has gone to the extend of holding that some employees of the old factory being sent to the new factory in the initial stages, is not reason for treating the two factories as being part of the same establishment (see 1984 Mh. L.J. 780).
10. In Gujchem Distillers India Ltd. v. Regional Provident Fund Commissioner reported in (1986-I-LLJ-19) the petitioner was initially doing business in the name of 'Sardesai Brothers Limited'. Its original factory was at Billimora in Valsad District started somewhere in the year 1939. In the year 1975, the Company decided to establish a new factory for the purpose of manufacturing acetic acid at Ankleshwar. The RPFC made the usual attempt to deprive the employer of the benefit of Section 16(1)(b) of the Act. The Gujarat High Court observed (p 21) :
'The term 'establishment' is not defined in the Act and therefore, every case has to be decided on the conspectus of all relevant factors of the particular case. There cannot be a rigid formula, nor can there be any watertight guidelines because what is good in respect of one case may not be good in respect of another case. One or two factors by themselves may not be sufficient to lead to any definite conclusion, but on the overall considerations, if the Court finds that the unit for all purposes is a distinct one, the only factor that it is run by a common employer, may be a company or a partnership, would hardly be of any consequence.'
11. Considered in the light of all these cases, except for the fact of petitioner Company owning the two units and the consolidation of their accounts, there is nothing which can be said to be indicative of the two units being a department or branch, of each other. Consequently the view taken by the Commissioner in Ex. B is erroneous and has to be quashed. Petitioner is entitled to the benefit claimed in Ex. A. and the Commissioner shall give that benefit with effect from the date claimed. Rule in these terms made absolute with parties being left to bear their own costs.