iminal Appeals Nos
145 to 156 of 1968
Appeals by special leave from the judgment and order dated September 6 1967 of the Kerala High Court in Criminal Appeals Nos 114 to 124 of 1967
RH Dhebar Lily Thomas for SP Nayar for the appellant in all the appeals
A section Nambiar for the respondent in all the appeals
The Judgment of the Court was delivered by Bhargava J
These twelve connected appeals arose out of twelve prosecutions instituted by the appellant Provident Fund Inspector Trivandrum against the respondent Secretary NSS Co operative Society Changanacherry for offences punishable under the Employees  Provident Funds Act 1952 hereinafter referred to as the Act on the ground of contravention of the provisions of the Employees  Provident Fund Scheme 1952 hereinafter referred to as the Scheme
The specific charges related to the failure of the respondent 1  to pay to the Employees  Provident Fund the employees  and the employer s share of contribution together with administrative charges for the twelve quarters comprised between May 1961 and February 1964 2 to submit the returns in Forms 5 and 10 for the same twelve quarters 3 to send statements of recoveries of contributions in Form
12 for the same 12 quarters and 4 to send the initial return in Form 9 showing the particulars as on 30 4 1961 along with Form 2 in the manner specified in the Scheme
The pay 483 ment of the employer s and employees  contribution to the Provident Fund and the question of sending the various statements arose in respect of a Press which was purchased by the NSS Co operative Society on the 21st March 1961 from the Travancore Cochin Central Printing and Publishing Co operative Society Ltd According to the appellant this establishment of the Printing Press had been set up in the year 1946 and it continued in existence even subsequently when in March 1961 the Press was purchased by the NSS Co operative Society
Until the purchase by the NSS Co operative Society the establishment was employing only 9 workmen but after the NSS Co operative Society started working the Press the number of workmen increased beyond 20 so that the Act became applicable to this establishment
The case was that since the Act became applicable wef April 1961 it was the duty of the respondent to comply with the requirements of the Act and pay the contribution and send the various returns which the respondent failed to do On trial the Magistrate recorded the finding that the establishment as run by the NSS Co operative Society after 1961 could not be held to be an old establishment set up in the year 1946 had emerged as a new establishment in 1961 and consequently for a period of three years from April 1961 the provisions of the Act would not apply to this establishment because of the provision contained in section 161b of the Act
On this view the Magistrate acquitted the respondent in all the cases
The respondent appealed to the High Court of Kerala
The High Court disagreed with the Magistrate and held that even though there was change of management change of workers and change of machinery
when the NSS Co operative Society purchased the Press in 1961 the business that was carried on was the same as it was at the time of purchase so that it could not be held that a new establishment had come into existence different from the one which existed before the purchase
The High Court however took the view in law that under section 161b of the Act an establishment is given exemption for a period of 3 years from the date on which it came within the purview of the Act treating the establishment as an infant establishment standing in need of protection
The High Court therefore held that this establishment was protected from the applicability of the Act for a period of 3 years from 21st March 1961 which would cover the period in respect of which prosecutions were launched by the appellant
On this ground the High Court upheld the orders of acquittal passed by the Magistrate
The appellant has now come up in these appeals against this decision of the High Court by special leave granted by this Court
It is quite clear that on the question of law decided by the High Court in favour of the respondent that decision cannot be 484 upheld in view of the decision of this Court in R Ramakrishna Rao vs State of Kerala1 where it was held that under section 161b in the case of a new establishment the period of five years laid down by subsequent amendment is counted forward from the date the establishment is set up but in the case of an existing establishment from the date the establishment has been set up In the present case since the establishment was first set up in the year 1946 the period of exemption for purposes of applying section 161b of the Act would run from the date on which the establishment had been set up and could not be counted from April 1961 when the Act became applicable to this establishment
In view of that decision of this Court the acquittal of the respondent on the ground given by the High Court cannot be maintained
However on behalf of the respondent it was argued that on the evidence in this case the High Court was not justified in recording the finding that this establishment as set up in the year 1946 continued to exist as it was before even after the purchase by the NSS Co operative Society in 1961
It was urged that on facts the correct finding that should have been recorded was that the old establishment ceased to exist and an entirely new one was set up in the year 1961
In support of this plea we were taken by learned counsel for the parties through the evidence which was tendered during the trial before the Magistrate and after going through it we are
inclined to accept the submission made on behalf of the respondent
The burden of proving that the old establishment had continued and that a new establishment was not set up in the year 1961 was on the appellant as the appellant had filed criminal cases for prosecution of the respondent
The first prosecution witness was the Provident Fund Inspector Raghunathan but most of his evidence relates to facts discovered by him and not in his personal knowledge
It is he who made a report for the prosecution of the respondent and in that report itself he admitted that the strength of the establishment was less than 20 till 16th April 1961 when it was purchased by the NSS Co operative Society
Headded that there were only 9 employees at the date of purchase of these 9 employees 6 were reemployed by the purchasers
Significance attaches to the word reemployed which implies that there was no continuity of employment even of those 6 employees
That witness also admitted that after the purchase the Press was removed from its original place and additional machineries were purchased and added to the Press
According to him he also received information that compensation due to the workers till the date of sale was disbursed by the previous owner TC Central Co operative Printers and publishers
He added that the 11968 2 SCR819
485 persons working in the Press at the time of his evidence were all persons who had been appointed by the NSS Co operative Society
Thus his evidence does not prove that the establishment run by the NSS Co operative Society was the same as the establishment which was being run by the previous owner of the Press
The owner changed me machinery changed the location of the Press was altered and even the employees were not the same as before
In fact none of the employees according to his evidence was continued in service
The only witness on whom reliance could be placed on behalf of the appellant to prove continuity of the business was PW 2 Sadasivan Nair who claimed to be one of the employees in this Press of the previous employer and who stated mat he continued to be employed by the NSS Co operative Society
His evidence has rightly been criticised on the ground that he is a disgruntled person who lost his service some years later when the press was being run by the NSS Co operative Society
Further he stated on oath that the Press was taken over with all its workers which is clearly a wrong statement and is contradicted by PW 1 the Provident Fund Inspector himself
It is also significant that according to the Provident Fund Inspector compensation was paid to the previous employees by the previous employer which clearly shows that the previous employees were not continued in service and that they were paid compensation for termination of their services on transfer of the Press presumably in accordance with the provisions of section 25FF of the Industrial Disputes Act
The prosecution could have easily produced the accounts of the previous owner to show that there were at least some employees who were continued in service and who were not paid compensation but no such attempt was made on behalf of the appellant
Even the sale deed in favour of the NSS Co operative Society has not been put in the paper book before us and its absence is significant in view of the statement made by DW 1 one of the Directors of the NSS Co operative Society who stated that the NSS Co operative Society neither purchased the establishment  as a going concern nor did it continue to run the same establishment
According to DW 1
after the purchase of the Press there was a closurefor a periodof about 3 months and a new business was started in June or July 1961 when a new establishment was set up
The workmen employed by the previous owner were not taken over on their old conditions of service
Fresh appointments were made and all workers were newly recruited though at the time of this recruitment some of the old employees were also taken in service
This evidence would clearly show that a new establishment was set up by the NSS Co operative Society after the purchase of the press by it from the previous owner and that there was no continuity of the old establishment
As we have L2SupCI70 19 486 said earlier the appellant could have summoned the accounts of the previous owner to show that these facts alleged by DW 1 are not correct
Even the NSS Co operative Society is maintaining accounts and registers and no attempt was made on behalf of the prosecution to seize or summon those registers
It is true that the respondent himselff on his own initiative did not produce those registers in defence but in a criminal case such a circumstance cannot justify raising a presumption that the registers would have contradicted the evidence of DW 1
DW 1 also stated that there was a specific provision in the sale deed that none of the workers who were working in the press purchased were to be taken in service and nobody was in fact taken
This statement could easily have been challenged before us if the saledeed had been included in the Paperbook
In the absence of the sale deed which has not been brought to our notice we see no reason to disbelieve the statement of DW 1 and we consider that his evidence is decidedly preferable to that of PW 2 whose evidence we have mentioned above
The only other prosecution witness who need be mentioned is PW 3 who also employed by the NSS Co operative Society in this Press after the purchase
He was however not an employee in this press before its purchase by NSS Co operative Society
He was employed in another press which was also purchased by this Co operative Society so that his evidence about continuity of his service cannot indicate that this particular establishment was a continuation of the old establishment set up by the previous owner
On a discussion of the entire evidence and in view of the fact that the burden of proof lay on the appellant we think that the conclusions of fact which must be accepted are that at the time of the purchase a new owner came in place of the previous owner the work of the Press was stopped on sale and was restarted after a break of about three months the machinery in the Press was also altered the persons employed previously were not continued in service while a fresh recruitment of employees took place amongst whom Only six happened to be previous employees and compensation was paid to the workmen at the time of the sale by the previous owner
On these facts no other conclusion can be drawn except that the old establishment was completely closed when the transfer of ownership took place and an entirely new establishment was set up three months later so that in this case the benefit of non applicability of the Act under s161 b of the Act for a period of three years was available to the respondent from June or July 1961 when the new establishment was set up
In this connection learned counsel appearing for the appellant drew our attention to a few decision including one of this Court  to urge that we should not hold that this establishment was newly set up in the year 1961
The first of these decisions is Lakshmi 487 Rattan Engineering Works vs Regional Provident Fund Commissioner Punjab and others1 in which this Court held that a change in location of an establishment or a change in the line of business would not have the effect that a new establishment has been set up provided there was continuity of working
That case cannot apply to the facts as found by us in the present case where there was no continuity of the business and there were the additional factors of termination of services of all the workmen and a new establishment being set up by fresh recruitment of workmen in addition to alteration in machinery in the Press
The decisions in Jamnaclas Agarwalla and Another vs The Regional Provident Fund Commissioner West Bengal  Others2 and Messrs Bharat Board Mills Ltd vs The Regional Provident Fund Commissioner and Others3 are also inapplicable to the facts before us in the present case
A good deal of reliance was placed on a decision of a learned single Judge of the Madras High Court in Devi Press vs Regional Provident Fund Commissioner Madras and Another4 but even in that case the facts were different
One of the prominent facts before the Judge was that the particular business transferred was being run under licences and those licences were also transferred by the seller to the purchaser
In view of this transfer the learned Judge held that it was a case of sale of a going concern and there was continuity of business
Without expressing any opinion as to whether the learned Judge was correct in holding that there was continuity of business in that case the very fact that he held the establishment not to have been newly set up on the ground that it was a case of a transfer of a going concern distinguishes that case from the case before us
In the present case the facts established show that the old business was close and was restarted as a new business after recruiting new workmen
The principle to be applied in arriving at a decision in such a case appears to us to have been rightly explained in a decision of a learned single Judge of the Madras High Court in Vithaldas Jogannathadas andAnother vs Regional Provident Fund Commissioner and Another5
The learned Judge held  If in a particular case it appears that the new establishment is not genuinely such but is only an old one formally resuscitated in order to avoid the legal obligation it is always open to the Court to hold that it is the old establishment which is substantially continuing and that the liability to contribute must be affixed to the apparently new form also
But where in reality the old establishment has come to an end and there is a new establishment this establishment is entitled to infancy 1 2 3 4 AIR 1965 Mad
5 L2SupCI70 20 488 protection in its own right even if it happens by coincidence to have employed a large part of the personnel of the previous establishment
 This principle applied to the facts of the present case can only lead  to the conclusion that the NSS Co operative Society had set up a new establishment and the provisions of section 161b of the Act have to be applied on the basis that the new establishment was set up in June or July 1961 so that there was no liability tO pay
Provident Fund contributions or to file the various returns during the period to which the prosecutions related
The acquittal of the respondent was therefore fully justified
The appeals are dismissed
GC Appeals dismissed


Summary:
The respondent cooperative society purchased a Press
from another cooperative society on 21st March 1961
The establishment had been set up by the vendor originally in 1946 and at the time of purchase by the respondent only 9 workmen were employed therein
As the number of workers employed by the respondent went beyond 20 the Employees  Provident Fund Act 1952 and the Employees  Provident Fund Scheme 1952 became applicable to the respondent s establishment with effect from April 1961
For not complying with the provisions of the aforesaid Act and Scheme the Provident Fund Inspector Trivandrum appellant herein launched prosecutions against the respondent
The specific charges related to the failure of the respondent i to pay to the Employees  Provident  Fund the employees  and the employer s share of contributions together with administrative charges for the twelve quarters comprised between May 1961 and February 1964 ii to submit the returns in Forms 5 and 10 for the same twelve quarters iii to send statements of recoveries of contributions in Form 12 for the same quarters and iv to send the initial return in Form 9 showing the particulars as on 30 4 1961 along with Form 2 in the manner specified in the SCheme
On trial the Magistrate recorded the finding that the establishment as run by the respondent after 1961 could not be held to be an old establishment set up in the 1946 it had emerged as a new establishment in 1961 and consequently for a period of three years from April 1961 the provisions of the Act would not apply to
this establishment because of the provisions
contained in section 161b of the Act
On this view the respondent was acquitted
The High Court in appeal did not agree with the Magistrate that a new establishment came into being in 1961 but nevertheless upheld the acquittal on the ground that under section 161b of the Act an establishment is given exemption for a period of 3 years from the date on which it came within the purview of the Act
On appeal to this Court by special leave HELD
 i In view of the decision of this Court in R Ramakrishna Rao s case the finding of the High Court that the exemption under section 161b of the Act was available for the first three years from the date when the Act became applicable to an establishment was wrong 486 A C R Ramakrishna Rao vs State of Kerala   applied
ii However the acquittal of the respondent must be upheld
The burden of proving that the old establishment had continued was on the appellant
The evidence showed that at the time of the purchase a new owner came in place of the previous owner the work of the Press was stopped on sale and was restarted after a break of about three 482 months the machinery in the Press was also altered the persons employed previously were not continued in service while a fresh recruitment of employees took place amongst whom only six happened to be previous employees and compensation was paid to the workmen at the time of the sale
by the previous owner
On these facts no other conclusion could be drawn except that the old establishment was completely closed when the transfer of ownership took place and an entirely new establishment was set up three months  later so that in this case the benefit of the Act under section 161b of the Act for a period of three years was available to the respondent from June or July 1961 when the new establishment was set up
488 E G Lakshmi Rattan Engineering Works vs Regional Provident Fund Commissioner Punjab  Ors
Jamanadas Agarwalla  Anr
vs The Regional Provident Fund Commissioner West Bengal  Ors  Ms Bharat Board Mills Ltd vs The Regional Provident Fund Commissioner  Ors and Devi Press vs Regional Provident Fund Commissioner Madras  Anr
AIR  distinguished
Vittaldas Jagannathadas  Anr
vs Regional Provident Fund Conmissioner  Anr  applied