Mukul Mudgal, J.
1. This Letters Patent Appeal has been filed by the Shri C.L. Khanna appellant No. 1, the sole proprietor of appellant No. 2 K.F. Engineering Works, against the judgment and order dated 27th February 2003 passed by the learned Single Judge of this Court in the Civil Writ Petition No. 789/1980 by which judgment and order the learned Single Judge had upheld the order of the respondent No. 3 i.e. the Regional Provident Fund Commissioner, holding that the two units i.e. the appellant No. 2, M/s K.F. Engineering Works and M/s A. Pee Industries are one establishment and are covered under the provisions of Employees Provident Fund & Misc. Provisions Act, 1952 (hereinafter referred to as the 'Act'). The respondent No. 1 herein is the Union of India through Secretary Ministry of Labour and respondent No. 2 is the Central Provident Fund Commissioner.
2. The brief facts of the case are that the respondent No. 3 initiated proceedings against the appellant No. 1 under Section 7A of the Act. Section 7A of the Act reads as follows:
7A. Determination of moneys due from employers. - (1) The Central Provident Fund Commissioner, any Additional Provident Fund Commissioner, any Deputy Provident Fund Commissioner, any Regional Provident Fund Commissioner, or any Assistant Provident Fund Commissioner may, by order, ----
(a) in a case where a dispute arises regarding the applicability of this Act to an establishment, decide such dispute; and
(b) determine the amount due from any employer under any provision of this Act, the Scheme or the [Pension] Scheme or the Insurance Scheme, as the case may be,
and for any of the aforesaid purposes may conduct such inquiry as he may deem necessary.
(2) The officer conducting the inquiry under Sub-section (1) shall, for the purposes of such inquiry, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), for trying a suit in respect of the following matters, namely:
(a) enforcing the attendance of any person or examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavit;
(d) issuing commissions for the examination of witnesses;
and any such inquiry shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228, and for the purpose of Section 196 of the Indian Penal Code (45 of 1860).
(3) No order [***] shall be made under Sub-section (1), unless the employer concerned is given a reasonable opportunity of representing his case.
(3A) Where the employer, employee or any other person required to attend the inquiry under Sub-section (1) fails to attend such inquiry without assigning any valid reason or fails to produce any document or to file any report or return when called upon to do so, the officer conducting the inquiry may decide the applicability of the Act or determine the amount due from any employer, as the case may be, on the basis of the evidence adduced during such inquiry and other documents available on record.
(4) Where an order under Sub-section (1) is passed against an employer ex parte, he may, within three months from the date of communication of such order, apply to the officer for setting aside such order and if he satisfies the officer that the show cause notice was not duly served or that he was prevented by any sufficient cause from appearing when the inquiry was held, the officer shall make an order setting aside his earlier order and shall appoint a date for proceeding with the inquiry;
Provided that no such order shall be set aside merely on the ground that there was been an irregularity in the service of the show cause notice if the officer is satisfied that the employer had notice of the date of hearing and had sufficient time to appear before the officer.
Explanation - Where an appeal has been preferred under this Act against an order passed ex parte and such appeal has been disposed of otherwise than on the ground that the appellant has withdrawn the appeal, no application shall lie under this sub-section for setting aside the ex parte order.
(5) No order passed under this section shall be set aside on any application under Sub-section (4) unless notice thereof has been served on the opposite party.
3. In the said proceedings the respondent No. 3 alleged that the appellant No. 2 was set up on 1st March, 1969 and had already completed a period of five years on 1st March, 1974. In addition the appellant No. 1 purchased another unit in 1973 which was owned and being run in the name of M/s A.Pee Industries by the same sole proprietor. Thus, the activities of both the units were being inter-related, they were one establishment within the meaning and the provisions of the Act. The order of the respondent No. 3 dated 17th June, 1978 was challenged by the appellant No. 1 before the learned Single Judge. However, the learned Single Judge upheld the order of the respondent No. 3, holding that the two units i.e. the appellant No. 2, M/s K.F. Engineering Works and M/s A. Pee Industries are one establishment and are covered under the provisions of the Act.
4. The findings of the learned Single Judge are as follows:
a) There was inter-dependence and geographical proximity between the appellant No. 2, M/s. K.F. Engineering Works and M/s. A. Pee Industries.
b) The appellant No. 1 C. L. Khanna owned the appellant No. 2, M/s. K.F. Engineering Works and M/s. A. Pee Industries and there was also a functional integrity between the two units.
c) The appellant No. 2, M/s. K.F. Engineering Works and M/s. A. Pee Industries have unity of finance and there is a common registration of both the units under the local Sales Tax and Central Sales Tax.
d) As per the records of the respondent No. 3, the financial and management of the appellant No. 2, M/s. K.F. Engineering Works and M/s. A. Pee Industries were both in the hands of the appellant No. 1.
e) There was no cash transactions between the appellant No. 2, M/s. K.F. Engineering Works and M/s. A. Pee Industries.
f) The documents placed on record prove that the appellant No. 2, M/s. K.F. Engineering Works and M/s. A. Pee Industries are located at the same premises.
It is against this judgment and order dated 27th February, 2003 of the learned Single Judge that the present LPA has been filed.
5. The learned Counsel for the appellant No. 1 submitted as follows:
(a) The learned Single Judge has erred in holding that the the two units i.e. the appellant No. 2 M/s K.F. Engineering Works and M/s A.Pee Industries are one establishment and are covered under the provisions of the Act.
(b) The learned Single Judge has not taken into account the fact that the appellant No. 2, M/s. K.F. Engineering Works was registered under the Factories Act and the A. Pee Industries was registered under the Delhi Shops & Establishments Act, 1954 and as such could not be treated as one unit under Section 2-A of the Act. Section 2-A of the Act reads as follows:
2A. Establishment to include all departments and branches. - For the removal of doubts, it is hereby declared that where an establishment consists of different departments or has branches, whether situate in the same place or in different places, all such departments or branches shall be treated as parts of the same establishment.(c) The A. Pee Industries was not required to be covered under the Act and this fact was within the knowledge of the respondent No. 3.
(d) It was the responsibility of the Respondent No. 3 to first give a show cause notice under Section 2-A of the Act to show cause as to why appellant No. 2, M/s. K.F. Engineering Works and A. Pee Industries be not treated as one single unit. The absence of the notice renders the proceedings taken by the respondent No. 3 as invalid.
(f) The learned Single Judge has erred in interpreting the judgment of the Hon'ble Supreme Court in Management of Pratap Press v. Secy. Delhi Press Worker's Union : (1960)ILLJ497SC in favor of the respondent as the said judgment is in favor of the appellant No. 1.
(g) The learned Single Judge has failed to refer the case of Workman of Straw Board : (1974)ILLJ499SC and Regional Directors ESIC Corporation v. Metropolitan Engineering Company Ltd. : (2001)ILLJ567SC .
(h) No further action should be taken against the appellant No. 1 specially keeping in view the fact that the payment of the provident fund has been made to the concerned workman, closure of both the units and the handicapped condition of the appellant No. 1.
6. The learned Counsel for the respondent submitted as follows:
(a) The appellant has raised many question of facts as well as of law which were never raised earlier before the Respondent No. 3, respondent No. 1 and in the writ petition. The appellant never raised a question in any proceedings that it was incumbent upon the respondent No. 3 to issue a notice to the appellant under Section 2-A of the Act. As both the units were owned by the appellant himself he had complete notice of the proceedings being undertaken under Section 7A of the Act for treating both units as one establishment.
(b) The point that strength of employees working in both the units if clubbed, would be below 20, was never taken earlier.
(c) As per the law laid down by the Hon'ble Supreme Court in State of Punjab v. Satpal and Anr. 1970 Lab. IC 772, the question whether the business is being carried on at one place or difference places is in the same line or in the different line, is neither material nor relevant for deciding the scope of an `Establishment'. The relevant paragraph of the said judgment reads as follows:
7. ...The law takes into account only the existence of establishments and the employment of a certain number of persons in factories over a given period. It is for this purpose that change of location or change of composition of partners of even a change in the manufacturing process is not considered vital in the application of this law. This was laid down by this Court in very explicit terms terms in Civil Appeals Nos. 572 and 573 of 1964, D/- 6-10-1965 (SC) (Lakshmi Rattan Engineering Works v. Regional Provident Fund Commissioner Punjab).(d) Notice issued under Section 7A of the Act was a comprehensive notice to the appellant and due appearance was made. The appellant apprised and knew the purpose of the enquiry being set up under Section 7A of the Act. At no stage, any kind of objection was taken that the subject notice should be issued to all the units owned by the appellant.
(e) The appellant itself has treated the second unit as its branch. This is evident from the conduct of the appellant on getting his certificate issued by the Sales Tax Department allotted by incorporating therein the name of M/s A. Pee Industries. This fact was never denied by the appellant and thereforee, attracts Section 2A of the Act.
7. After hearing the learned Counsel for both the parties, we are inclined to agree with and affirm the judgment and the order of the learned Single Judge dated 27th February 2003 holding that the appellant No. 2, M/s. K.F. Engineering Works and M/s. A.Pee Industries are under one `establishment'.
8. The learned Counsel for the appellant has relied upon a judgment of the Hon'ble Supreme Court in Regional Director, ESI Corporation, Kerala v. Metropolitan Engineering Co. Ltd., Kerala : (2001)ILLJ567SC . In the said judgment, the Hon'ble Supreme Court found that damages were not warranted as deduction has not actually been made towards employees' contribution. In our view the aforesaid position of law does not have any bearing on the issues arising in the present case where on facts functional integrity between the two units has been clearly found to exist.
9. Reliance has also been placed by the learned Counsel for the appellant on a judgment of the Hon'ble Supreme Court in Regional Provident Fund Commissioner and Anr. v. Dharamsi Morarji Chemical Co. Ltd. : (1998)2SCC446 . In the said case, the Hon'ble Supreme Court found that Section 2A of the Act was not attracted because one unit was making fertilizers and another unit with a separate registration number was manufacturing inorganic Chemicals in a separate factory. Separate set of workers were working for either of the factories and separate profit and loss account was maintained in the said case and there was no supervisory control. In our view, the aforesaid judgment is not applicable to the facts of the present case.
10. The learned Counsel for the appellant has also relied on paragraph 11 of the judgment of the Hon'ble Supreme Court in Ghatge and Patil Concerns Employees Union v. Ghatge and Patil (Transports) Private Ltd. and Anr. : (1968)ILLJ566SC . Paragraph 11 of the said judgment reads as follows:
(11) The matter of dispute no doubt referred in the second part to ex-drivers but it referred generally to the new system in the first. The Tribunal was wrong in thinking that the first part also referred to the ex-drivers (now operators). On the whole, however, it is clear that the Company has not done anything illegal. A person must be considered free to so arrange his business that he avoids a regulatory law and its penal consequences which he has, without the arrangement, no proper means of obeying. This, of course, he can do only so long as he does not break that or any other law. The Company declared before us that it is quite prepared, if it was not already doing so to apply and observe the provisions of the Motor Transport Workers Act in respect of its employees proper where such provisions can be made applicable. In view of this declaration we see no reason to interfere, because Parliament has not chosen to say that transport trucks will be run only through paid employees and not independent operators. The appeal fails but in the circumstances of the case we make no order as to costs.
11. We are of the view that the aforesaid judgment is not applicable to the present case. This is not a case where the person has arranged his business to avoid a regulatory law. Section 2A clearly contemplated the two units in the present case to have functional integrity and thereforee the aforesaid judgment does not support the contention of the learned Counsel for the appellant.
12. The learned Counsel for the respondent has relied upon the position of law laid down by the Hon'ble Supreme Court in State of Punjab v. Satpal (supra), where it was held that the question whether the business is being carried on at one place or difference places or in the same line or in the different line, is neither material nor relevant for deciding the scope of an `Establishment'. The law takes into account only the existence of establishments and the employment of a certain number of persons in factories over a given period. It is for this purpose that change of location or even a change in the manufacturing process is not considered vital in the application of this law. We are bound by the position of law laid down by the Hon'ble Supreme Court in said judgment and thus uphold the judgment and the order of the learned Single Judge that the appellant No. 2 K.F. Engineering Works and A. Pee Industries are one establishment within the meaning of the Section 2A of the Act.
13. In this view of the matter, we find no reason to interfere with the judgment of the learned Single Judge essentially recording the findings of fact holding both these establishments to be one. The learned Single Judge dealt with the main question and appreciating the contentions, arrived at a conclusion that there was a functional integrity between the appellant No. 2, M/s. K.F. Engineering Works and A.Pee Industries. This was examined in the light of the mandate of Section 2A of the Act. The sweep of Section 2A of the Act as extracted above, is wide and covers cases such as the present case. The Court is also required to examine the issue of functional integrity as per the decision of the Hon'ble Supreme Court in Management of Pratap Press v. Secretary, Delhi Press Workers' Union, Delhi : (1960)ILLJ497SC . In Noor Niwas Nursery Public School v. Regional Provident Fund Commissioner and Ors. : (2001)ILLJ446SC , the Hon'ble Supreme Court took into account the test of geographical proximity and other factors. In Regional Provident Fund Commissioner, Jaipur v. Naraini Udyog and Ors. : (1996)IILLJ163SC , the Hon'ble Supreme Court held that the fact that the two units belonged to the members of the same family and that some of the employees were working for both the units situated at the same premises and accounts being maintained by same set of clerks, were the facts which are also required to be noticed. In the instant case, the learned Single Judge has rightly found that C. L. Khanna is the sole proprietor of both the units and the said two units are located at plot No. 52-A, Okhla industrial Estate. The fact that the two units in the said plot were separated by a small distance, a factor highlighted by Mr. Thadani in appeal, is of no consequence because the learned Single Judge clearly found that the activities of both units were inter-dependent and not only there is not only unit of ownership but also functional integrity.
14. The learned Single Judge has also found that there was unity of finance and a common registration of both the units under the Local Sales Tax and Central Sales Tax and that the financial and management control of both the units are in the hands of Mr. C.L. Khanna and there was no cash transaction between the two units. If this is so, then the plea of the learned Counsel for the appellant No. 1 that A. Pee Industries carried out transactions at arms length, cannot be given any credence. Consequently, we are of the view that no grounds have made out by the appellant to warrant interference with the order of the learned Single Judge which essentially recorded findings of fact.
15. Mr. Thadani, the learned Counsel for the appellant, finally contended that the appellant had filed an affidavit on 25th August, 2006 where he had brought on record the fact that a letter had been addressed to the respondent No. 3 along with the affidavits of the concerned workers stating that they have received their PF dues and in view of this the present proceedings should be dropped. He has further submitted that since the appellant No. 1 is a handicapped and senior person and his movements are restricted, this fact should be sympathetically taken into account. We are of the view that notwithstanding the dismissal of the appeal, it will be open to the appellant No. 1 to satisfy the respondent No. 3 that the payment of Provident Fund dues has been made and the concerned employees have received their dues. Thus notwithstanding the dismissal of the appeal, if such a plea is raised before the respondent No. 3, the respondent No. 3 will ascertain the veracity of such plea and given credence and adjustment to the claim raised in this application filed in this Court in case the averments in this application are established.
16. The appeal is accordingly dismissed.