ORDER [ENTITY], J.
1. The petitioner being dissatisfied by the order dated March 19, 1996, Annexure P/13 has filed the petition challenging the correctness, validity and propriety of the said order.
2. Brief facts leading to the petition are that the petitioner M/s [ENTITY] after entering into an agreement with Messers [ENTITY] Ltd. on April 2, 1993, entered into production and started producing fans under the brand name "[ENTITY]" registered for and owned by the said M/s [ENTITY] Ltd. Under the terms of the said agreement, M/s [ENTITY] was to premit the petitioner to use their brand name on payment of royalty of Rs. 3/- per fan prodcued by the petitioner, the said amount of the royalty could be increased or decreased. The petitioner was to maintain the quality of the product; M/s [ENTITY] was to have a control over the quality checking and was also entitled to examine the accounts in relation to production, etc. The respondent No. 1, [ENTITY] issued a notice to the petitioner that it was required to submit the statements and was also required to deposit the amount as its own contribution. In response to the notice issued, the petitioner raised various objections and claimed protection under [SECTION] of [ACT] (hereinafter referred as the Act for short). The petitioner contended that the Act would not apply to the petitioner because it was newly set up and they were entitled to an exemption commmoly known as 'infancy protection' for a period of three years from date on which such establishment is or has been set up. In the enquiry conducted under [SECTION] of the Act, the petitioner was directed to produce certain material, but the petitioner did not produce the said documents/material, but, however, raised an objection that the present petitioner i.e. [ENTITY] was altogether different identity and entity and had; nothing to do with M/s [ENTITY]. Placing reliance upon [SECTION] of the Act, it was contended that the present petitioner was neither a department nor a branch of M/s [ENTITY] Air-cools, therefore, petitioner was entitled to the infancy protection.
3. The [ENTITY], after hearing the parties, by its order Annexure P/13 held that there was absolute control of the [ENTITY] Ltd. on the establishment i.e., the present petitioner, there was functional integrality and unity of ownership, unity of management and supervision also exist and in view of the utmost interest of the workers working in the establishment, the Act was rightly made applicable. The Commissioner also held that the Act being a beneficent legislation, even if two views were possible, the one which was to advance the object of the Act and was in favour of the employees for whose benefit the Act was passed had to be accepted. The Commissioner ultimately found that the petitioner's challenge to the applicability of the Act was not sustainable and was liable to be rejected. Being dissatisfied by the said order, the establishment- petitioner has preferred this petition under [SECTION] of the [ACT].
4. Shri [ENTITY], learned counsel for the petitioner vehemently contended that the [ENTITY] did not properly appreciate the law laid down by the Supreme Court in relation to the functional integrality and has also not taken into consideration that the present petitioner was altogether new unit and had nothing to do with M/s [ENTITY] Ltd. He also submits that if under the agreement, M/s [ENTITY] was to get some royalty, then this was suggestive of the fact that M/s [ENTITY] was only permitting use of his brand name to the petitioner and for maintaining the prestige of his own brand name, he was entitled to make the inspection and had the quality control. He also submitted that even if the management of M/s Rewa Fan Industry, said to be a closed unit was transferred or some of the employees of M/s Rewa Fan Industry have started working with the present petitioner, it would be of no consequence because change of the name from M/s Rewa Fan Industry to M/s [ENTITY] was not taken to be a ground for the purpose of fixing the liability on the petitioner. It was lastly contended that unless it is proved to the satisfaction of the authority and floats on the surface of the record that in absence of one industry, the second would die its own death or it is a case of absolute dependence, the authority could not hold applying the provisions of [SECTION] that M/s [ENTITY] was a department, extension, expansion or branch of M/s [ENTITY] Ltd.
5. On the other hand, Shri [ENTITY], learned counsel for the Department contended that the petitioner was required to submit the complete records, but as he failed, the Department had no option, but to raise a presumption rather a legal presumption against the petitioner establishment and was justified in observing, looking to the terms of Annexure P/12, that the petitioner- establishment was an extension/department or branch of M/s [ENTITY].
6. [SECTION] provides 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 part of the same establishment. [SECTION] if read in its true perspective, would only mean that a person who has obtained benefit under [SECTION] of the Act, would not be entitled to the infancy protection, if he goes on opening different departments or branches. [SECTION] in fact is a corollary and in contra-indication to [SECTION]. [SECTION] provides that the Act shall not apply 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. The establishment, for taking the benefit of [SECTION], has to prove clearly that it was a newly set up establishment, had nothing to do with existing establishment and it was also not a branch or department of the existing unit/establishment. To refuse the benefit under [SECTION], the Department is required to prove that the petitioner or the alleged newly established,unit in fact was a department, extension, expansion or a branch of the existing unit. In the instant case, the respondent-Commissioner has basically decided the matter on three grounds. It has firstly held that the son of the Managing Director of M/s Rewa Fan Industry is in the management of M/s [ENTITY]; the employees of the earlier industry i.e. M/s Rewa Fan Industry have been employed in the present establishment and the present establishment despite demand did not produce the material records. It appears that the [ENTITY] without even appreciating the legal position, was (sic.) swayed away with the pressure of the judgements delivered by the different Courts. A judgement is to be appreciated on the facts, on strength or foundation of which it has been declared/delivered. The judgements on which reliance was placed by the [ENTITY] were not interpretation of the legal provisions, but in fact were depending on their own facts. In the opinion of this Court, if the Commissioner was of the opinion that the establishment was required to produce complete accounts, then exercising powers of a Civil Court under [SECTION] of the Act, it could have required the petitioner to discover and produce the document; it could also direct them to file affidavits; it could also direct issuance of the commission and it could also enforce the attendance of any person for examining him on oath. Simply because the documents were not filed by the present petitioner, it could not be held that the petitioner is an extension/department or branch of M/s [ENTITY]. In various judgements cited before this Court, it has been observed that the test laid down to the appreciation of appliability of [SECTION] is the functional integrality of the two establisments. The judgements say that if one unit is absolutely dependent upon the other, then there is a functional integrality or absolute interdependence, because in absence of one, the latter cannot survive. In the present case, the learned [ENTITY] has not appreciated the legal position correctly. He decided the matter only on the strength of Annexure P/12, the agreement relating to use of the brand name and payment of the royality so also the condition that M/s [ENTITY] would have a right of quality control.
7. In the commercial world, it is not unheard that an established concern would loan out its name to a newly established company for the purposes of obtaining royalty or to provide a foundation to the newly established unit to set up in the market. If the brand name is given as a loan or for royalty to the newly established unit, then that in itself would not be sufficient to hold that the old unit/establishment was in fact extending its branches. It is proper to hold that when a brand name is given on loan or for royalty then the person who extends the facility would always try to maintain the reputation and prestige of its own brand name. In the present case, the [ENTITY] did not appreciate these facts in their true perspective. From Annexure P/12, it clearly appears that the petitioners were required to pay royaltly at Rs. 3/- per fan produced by them and, the rate of royaltly could be increased or decreased from time to time by mutual consent. The petitioner-establishment was required to produce Fans of such quality and description as prescribed by M/s [ENTITY]. They were also required to maintain proper accounts regarding the fans produced by them and M/s [ENTITY] did reserve the right to inspect the factory at any time during the currency of the agreement. The agreement also provided that M/s. [ENTITY] would be free to adopt any method/methods of quality checking in respect of the fans produced by the petitioner estab-
lishment under the brand name '[ENTITY]'. The petitioners were required to pay all costs relating to repairs, quality consultation, etc. to M/s [ENTITY], so that the quality of the production could be maintained. The agreement entered into between the petitioner establishment and M/s [ENTITY] does not lead to the only inference that the present establishment was a department/branch/expansion/extension of M/s [ENTITY]. The [ENTITY] was required to appreciate the legal provisions as interpreted by the Supreme Court in the matters of [PRECEDENT], and [PRECEDENT]. In the opinion of this Court, the [ENTITY], without appreciating the correct legal position has held that the petitioner is not entitled to the infancy protection. The observations made by the Supreme Court in the matter of [ENTITY]) are apt to be quoted:-
"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.
8. The order passed by the learned [ENTITY] deserves to and is accordingly quashed. The matter is remanded back to him with a direction to give the petitioner proper opportunity to submit his case and if the [ENTITY] is of the opinion that the petitioner is required to produce the documents, then he can exercise his powers under [SECTION] of the Act. The [ENTITY] shall be free to pass order in accordance with law, but after giving proper opportunity of hearing to the petitioner. As the parties are present before this Court, it is directed that the petitioner shall appear before the [ENTITY] on March 23, 1998. On his appearance before the [ENTITY], the said Commissioner shall give proper opportunity to the petitioner to submit his case and if the Commissioner is of the opinion that the documents are required, then he may give notice to the petitioner to produce the documents. It is made clear that a fresh enquiry is required to be made in the matter and any finding recorded earlier would not be used by the [ENTITY] against the present petitioner. Till March 23, 1998, the respondents are restrained from recovering the amount from the petitioner establishment. The petitioner shall be free to move an application before the [ENTITY], who shall be free to pass orders regarding the recoveries.
9. The petition is allowed. No costs.