AR. Lakshmanan, J.
1. The writ appeal is directed against the order of Y. Venkatachalam, J. dated 15.11.1995 in W.P. No. 9462 of 1985 dismissing the writ petition filed by the appellant herein, on the ground that the Handicrafts Handloom Export Corporation of India is a subsidiary of the appellant establishment and it is a covered establishment at New Delhi and therefore the respondent had rightly asked the appellant to implement the scheme provisions from 8.1.1979 to the Leather Garment Unit and effect the contribution at the rate of 3% as is being extended by the appellant to its employees.
2. The short facts are as follows:
The subject matter of the writ petition is the proceedings of the Regional Provident Fund Commissioner, Tamil Nadu and Pondicherry in No. D5/TN/12190/Regl./85, dated 28.6.1985 by which the respondent had issued a notice under Section 7-A of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, which has given rise to this present writ petition. According to the appellant, the Leather Garment unit was originally started by the Handloom and Handicrafts Export Corporation during August, 1978 and the same has been acquired by the State Trading Corporation of India Ltd. in January, 1979. In Au-gust, 1981, the appellant has made a reference to the respondent for clarification as to the details of cover-age of employees of the Leather Garment Unit. The appellant provisionally collected some contribution of provident fund of 8% of wages from June, 1981 from the employees of the Leather Garment Unit. As per its earlier letter regarding clarification from the respondent that it is enough if contribution at the rate of 16 1/4%, is paid in respect of those employees vide letter dated 22.1.1982, the appellant had remitted the contributions in full and it had refunded to the employees the excess amount collected from it. Subse-quently, on 19.5.1983 and 14.7.1983, the appellant had received communications from the respondent asking the appellant to pay provident fund dues from January, 1979 to December, 1981 at 8% and the difference in the amount between 8% and 6 1/4% from January, 1982 onwards. The appellant by their letter dated 4.8.1983 had pointed out that the Leather Garment Unit was originally started by the Handloom and Handicrafts Export Corporation during August, 1978 and hence under Section 16 of the Act, they are entitled for the infancy protection available to new establishments. The period of infancy protection has to be computed from. August, 1978, since the Leather Garment Unit was employing less than 50 persons, the infancy protection is available for a period of 3 years from August, 1978. Therefore, the appellant submitted that notwithstanding the acquisition of the Leather Garment Unit by the State Trading Corporation which was already covered under the Act, still the infancy protection would be available to the unit till the expiry of three years from August, 1978. They have also stated in their letter that the authorities are not correct in asking them to pay the contributions from January, 1979. Therefore, it is contended that it is not open to the department to go behind its own direction and call upon them to pay contributions from January, 1979. on 3.9.1983, the appellant had received a notice from the respondent asking them to appear for a personal enquiry under Section 7-A of the Act. The appellant had appeared before the authorities on a number of hearings and finally the authority reserved orders for 13.6.1985 and passed orders on 28.6.1985 holding that the Act is applicable to the Leather Garment Unit and it is not entitled to any infancy protect tion and therefore they have directed the appellant to pay at 8 per cent from 1/79 to 5/81 under various heads amounting to Rs. 55,974.15, within 15 days from the receipt of the abovesaid order, failing which it is stated that the respondent will set in motion the Revenue Recovery Act.
3. In the writ petition, it is contended that when once the Leather Garment. Unit was entitled to the infancy protection, the Authority constituted under Section 19-A of the Act alone is empowered to decide the matter. Hence, the respondent has jurisdiction to decide the issue. It is also contended that as per Section 16 of the Act, the appellant is entitled for infancy protection. for a period of 3 years from August, 1978. However, the authorities have completely failed to take note of this factor.
4. The writ petition was resisted by the respondent, contending that the appellant is covered under the Act with effect from 1.5.1962 as a trading and com-mercial establishment and is engaged in various busi-ness activities and that it had acquired the Leather Garment Unit from its subsidiary units Handicrafts Handloom Export Corporation and it is functioning under its control. Therefore, the Leather Garments Unit is only a constituent part of the appellant and acquisition of the said unit is only I an expansion of its business activity and therefore, it squarely falls under Section 2-A of the Act, It is also contended that Leather Garment Unit is not entitled for the infancy protection in the circumstances.
5. The writ petition was finally disposed of by learned single judge by order dated 15.11.1995, accepting the contentions of the respondent herein. In the result, the appellant was asked to implement the scheme provisions from 8.1.1979 to the Leather Garment Unit and effect the contribution at the rate of 3% as is being extended by the appellant to its employees.
6. Heard. Before us, the points raised in the writ petition were reiterated by the learned Counsel for the appellant herein. The only question which arises for consideration in this case is whether the Leather Garment Unit was entitled for the infancy protection under Section 16pfthe Act.
7. We have gone through the entire pleadings and also considered the rival submisaions made by the parties. It is an admitted fact that Handloom and Handicraft Export Corporation started a Leather Garment Unit in the year 1978. It is also an admitted fact that the E.P.F. Act is not applicable to Handloom and Handicraft Export Corporation which is exempted establishment in the Delhi region. Once it is an admitted fact that the parent department is exempted from the Act, ultimately, the Leather Garment Unit is also to be exempted. As rightly pointed out by the learned Counsel for the appellant that this aspect of the matter was not at all considered by the authorities concerned and also by the learned single Judge. this Court has not noticed that the Leather Garment Unit, which was started in August, 1978 as per Section 16 of the Act, is entitled for Infancy Protection for the period of 13 years from August, 1978. There is no dis-pute that the Leather Garment Unit is totally a differ-ent business venture and it is entitled for Infancy Protection under Section 16 of the Act. This legal position has not been taken note of. The respondent has expressed an erroneous view that since S.T.C. India Ltd. is already covered under E.P.F. Act, the Leather Garment Unit also has to be covered as that of the S.T.C. under the Act and the question of apply ing the provisions of Section 16 of the Act will not arise. When once the section comes into operation the Leather Garment Unit would continue to have the Infancy Protection,, even if there is a transfer of ownership. The learned single Judge has not looked into the above legal position whether Section 16 of the Act is applicable to the facts of this case and whether the appellant herein is untitled for infancy protection and if it is so the impugned order of the authority is to be set aside. In our opinion, when once Section 16 comes into operation the Leather Garment Unit would continue to have the Infancy Protection even if there is a transfer of ownership. This apart, the authorities have not noticed that not with standing the acquisition of the Leather Garment Unit by S.T.C. which was already covered under the Act, still infancy protection would be available to the Leather Garment Unit till it completes three years from August, 1978. If that be so,l the question of paying P.F. contribution from January, 1979 to May, 1981 will not arise. Section 16(1)(d) of the Act reads thus:
16. Act not to apply to certain establishment: (1) This Act shall not apply-
(a)...
(b)...
(c)...
(d) to any other establishment newly set up, until the expiry of a period, of three years from the date on which such establishment is, or has been, set up.
Explanation: For the removal of doubts, it is hereby declared that an establishment shall not be deemed to be newly set up merely by reason of a change in its location..
The above section clearly applies to the facts of this case. Likewise, Section 2-A of Act which reads thus:
2-A. Establishments 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..
Has no application to the Leather Garment Unit, since it is not a branch or department of Handloom and Handicraft Export Corporation. Both the authorities and the learned single Judge have not noticed that in, two or more units of the same employer as one estab-lishment, there must be unity of employment, inter-dependency, inter-transfer of employees, unity of fi-nance and functional integrality. None of these conditions exists in this case to hold that the appellant herein has a branch unit of Handloom and Handicraft Export Corporation.
8. As laid down by the Supreme Court in Gopika Ranjan Choudhary v. Union of India : AIR1990SC1212 , that the most important test appears to be that of functional integrality and the question of unity of finance of employment and of labour. Unity of Ownership exists exhypothesi, where two units belong to a proprietor there is almost always likelihood also of unity of management. In all such cases, therefore, the court has to consider with care how far there is functional integrality meaning there by such functional inter-dependance that one unit cannot exist conveniently and reasonably with the other and on the further question whether in any matters of finance and employment the employer has actually kept two units distinct or integrated. The decisions cited by the learned Counsel for the appellant can also be noticed in this context. In Bells Controls Ltd. v. R.P.F. Commisioner, Bangalore 1988 L. I.C. 1102, while construing the scope of Sections 16 and 2-A of the Act, learned single Judge of the Karnataka High Court held as follows:. There may be different units or operations for the purpose of carrying on the main industry or business of one establishment. In such an event, all units or places where different activities are carried on, will constitute one establishment. However, if the activities carried on at different places, are not connected or dependent on each other, all of them cannot constitute one integrated establishment. Different operations or activities, unconnected with each other will make each of them an independent establishment. It is the dependence of lone on the other,1 that constitutes both to be one establishment. Whether by integrality exists between one set up and Anr. i.e., between two different units or departments, will have to be seen and if such integrality exists, only then both of them would constitute one establishment. The word 'department' in Section 2-A has to be understood as a major division of a business..
In Wipro Ltd. v. R.P.F. Commisioner (1994) 1 L.L.N. 571, it has been held as follows: (at p. 579) It is thus clear that there is no material to hold that the petitionerestablishment and Amelnar unit in Maharashtra constitute one integrated whole. On the other hand there is material to show that one can exist conveniently and reasonably without the other. In the absence of functional integrality between the petitionerestablishment and Amelnar unit at Maharashtra, it is not possible to hold that the establishment is a branch of Wipro, Ltd. Bombay, and hence is not entitled for fresh infancy protection is terms of Section 16(1)(d) of the Act. The order of the respondent being contrary to its own finding is unsustainable in law..
In M/s. Metazing Pvt. Ltd. v. A.M. Gandhi, R.P.F. Commissioner 1991 L.I.C. 2060 it has been held as follows: Section 2-A of the Act makes 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 owning 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 lone 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 a industry which is covered by the entry 'heavy and fine chemicals' occurring in Schedule 1 of the Act. But the two units are manu-facturing different products. The Bhiwandi unit manufactures zinc oxide. While the Patalganga unit manufactures sulphuric acid. Petitioner asserts that neither unit is 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 differ-ent 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 a 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 2-A of the Act..
9. In the instance case, the Leather Garment Unit was originally started by the Handloom and Handicrafts Export Corporation during August, 1978 and hence under Section 16 of the Act, the appellant is entitled for the infancy protection available to the new establishments. That period of infancy protection has to be computed from August, 1978 since the Leather Garment Unit was employing less than 50 persons, the infancy protection is available for a period of 3 years from August, 1978. But when once the section comes into operation, the Leather Garment Unit continues to have that protection, even if there is a transfer of ownership. Therefore, we are of the view that not-withstanding the acquisition of the Leather Garment Unit by the State Trading Corporation which was al-ready covered under the Act, still the infancy protection would be available to the unit till the expiry of three years from August, 1978. In our opinion, the authorities have overlooked the infancy protection available to the Leather Garment Unit and demanded contribution from January, 1979 on the basis of the acquisition of the unit by the State Trading Corporation.
10. For the foregoing reasons, we are of the view that it is not open to the department to raise demand for the coverage of the employees of the Leather Garment Unit. The order impugned in this writ petition is therefore illegal and is liable to be quashed. Accordingly, the writ appeal succeeds and the order of the learned single Judge in W.P. No. 9462 of 1985, dated 15.11.1995 is set aside. However, there will be no order as to costs.