IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 22.10.2008 C O R A M : THE HONOURABLE MR. JUSTICE K. CHANDRU W.P.No.3462 of 1999 Regional Provident Fund Commissioner, Tirunelveli. .. Petitioner -vs- 1. M/s.Prabha Beverages Private Ltd. Nathalam Village, Marthandam, Kanyakumari District. 2. The Presiding Officer, Employees Provident Funds Appellate Tribunal, 7th Floor, 60, Skylark Buildings, Nehru Palace, New Delhi-110 019. .. Respondents PRAYER : Petition filed under Article 226 of the Constitution of India praying for the issuance of a writ of certiorari calling for the records of the second respondent relating to the order dated 27.8.1998 passed by the second respondent in Case No.13 (54) 1998 and quash the said order dated 27.8.1998 passed in case No.13(54) 1998. For petitioner :: Mr.V.Vibhishanan For respondents :: Mr.R.Yashod Varadhan, SC for Mr.V.M.Narayanan ***** O R D E R The writ petition is filed by the Regional Provident Fund Commissioner, Tirunelveli, challenging the order of the second respondent - Employees' Provident Funds Appellate Tribunal, dated 27.8.1998, in setting aside the order passed by the petitioner, dated 09.3.1998 made under Section 7-A of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (for short, 'EPF Act'). https://hcservices.ecourts.gov.in/hcservices/ 2. The first respondent was a registered Company under the Companies Act, 1956 and they took up a franchise agreement with M/s.Parle (Exports) Private Limited for the purpose of manufacturing soft drinks, such as, Thumps up, Limca, Gold Spot etc. By the said franchise agreement, the first respondent took Essence from M/s.Parle (Exports) Private Limited and bottled the drinks and distributed the same with its own employees and expertise. All over India, there are 62 such establishments like the first respondent. The first respondent employed initially 37 employees. Subsequently, it was increased to 90 employees. 3. The first respondent approached the petitioner Department for coverage of its employees on completion of three years of their production on 06.4.1992. A code number was also allotted to the first respondent as 11694. But, however, it was stated that the first respondent should be covered with effect from 04.8.1987, the day when they started the Company. But this was disputed by the first respondent. Notwithstanding their objection when a recovery notice was sent, the same was challenged before this Court being W.P.No.1295 of 1997. They were directed to move the Central Government under Section 19A of the Act. It was, thereafter, the Government of India set aside the said order dated 02.6.1997 and remanded the matter to the petitioner to consider whether the first respondent is a Contractor unit of Parle (Exports) Private Limited in terms of Section 2A of the EPF Act. 4. On such remand, the petitioner passed the impugned order holding that the franchise holders are contractors and they come within the meaning of Section 2A of the EPF Act. Therefore, the first respondent unit is not eligible for any infancy protection. In arriving at the conclusion, the petitioner held that the EPF Act is a beneficial Act and it should be construed liberally in favour of persons for whose benefit it was intended to. It was held that the franchise agreement between the petitioner and M/s.Parle Export Private Limited is a contract under the Indian Contract Act. The said Company was a 'Principal' and the first respondent was the 'Agent'. The terms of contract show that ultimate check and control over the manufactured product with reference to quality lay with M/s.Parle (Exports) Private Limited. The products were manufactured with the essence/syrup and formula and specification supplied to the first respondent. Therefore, it was an establishment covered by Section 2A of EPF Act. It was this order which was taken on appeal by the first respondent under Section 7-I of the EPF Act. 5. The appeal was taken on file by the second respondent Tribunal as Case No.13(54) of 1998 and was heard at its camp sitting at Hyderabad. The second respondent Tribunal held that the first respondent is not a contractor of M/s.Parle (Exports) Private Limited and they are independent manufacturers. After relying upon several https://hcservices.ecourts.gov.in/hcservices/ other decisions of various counts even in respect of M/s.Parle (Exports) Company under the Excise Act, it was held that the first respondent cannot be an agent of Parle (Exports) Limited. It is this order which is under challenge by the Provident Fund Commissioner. 6. As to the right of the Provident Fund Commissioner in filing the writ petition and challenging the order of the Tribunal in the light of Section 7L(4) of EPF Act, Mr.Vibhishanan, learned counsel for the petitioner submitted that the bar under Section 7L(4) of the EPF Act may not apply to the writ proceedings. The Provident Fund Commissioner having passed an order under Section 7A can be an aggrieved party and challenged its reversal by the Tribunal before this Court. 7. In more or less similar circumstances, under the Cinematograph Act, the Supreme Court vide its decision in Union of India -vs- K.M.Sankarappa reported in (2001) 1 SCC 582 held in para 7, which is as follows:- ''7. ........... The executive cannot sit in an appeal or review or revise a judicial order. The Appellate Tribunal consisting of experts decides matters quasi-judicially. A Secretary and/or Minister cannot sit in appeal or revision over those decisions. At the highest, the Government may apply to the Tribunal itself for a review, if circumstances so warrant. But the Government would be bound by the ultimate decision of the Tribunal". (Emphasis added) 8. When the Central Board of Film Certification came up before this Court challenging the order of the Tribunal, a Division Bench of this Court, to which I am (K.Chandru, J.) a party, had an occasion to consider the locus standi of the Central Board of Film Certification in Central Board of Film Certification -vs- Yadavalaya Films ((2007) 2 MLJ 604). In para 22, it was observed as follows:- ''22. In our opinion, it is doubtful whether these appeals are maintainable, in view of the decision of the Supreme Court in Union of India -vs- K.M.Shankarappa, AIR 2000 SC 3678: (2001) 1 SCC 582: (2001) 1 MLJ 146 (SC)." 9. In the present case, except that the petitioner was very sensitive about his own order being reversed by the Tribunal, there is no case for them to come to this court challenging the order of the Tribunal, which had given sound reasoning for reversing the order passed by the first respondent. 10. Even otherwise, this Court is of the opinion that the petitioner has not made out any case in challenging the order passed by the Tribunal. In order to give a quietus to the issue, this Court permitted the petitioner to advance his arguments. Before adverting to those arguments, it is necessary to refer to the provisions of the https://hcservices.ecourts.gov.in/hcservices/ EPF Act, which has a bearing on this issue. Section 2A of the EPF Act reads as follows:- ''2A. 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." 11. Though initially Section 16(1)(d) exempted the grant of infancy protection, the same has been removed by the Amending Act 10 of 1998 with effect from 22.9.1997. Therefore, the present issue is only confined to a provision which is no longer available to any employers in future. 12. Mr.Vibhishanan, learned counsel for the petitioner submitted that the Commissioner can decide whether a particular establishment is a department or a branch and can pierce the veil and find out as to who is the real owner. For this purpose reliance was placed on Rajasthan Prem Krishnan Goods Transport Co. -vs- Regional Provident Fund Commissioner, New Delhi and others ((1996) 9 SCC 454). Paragraphs 4 and 6 may be usefully extracted below:- ''4. It is beyond dispute that if the two supposed entities were to be treated as separate, the provisions of the Act would not apply. But, if they be treated as one, the provisions of the Act would apply. It can otherwise be not disputed that on proper facts being established, two apparently separate entities can be clubbed into one to carry out the purposes of the Act and a fraudulent device adopted by a designing management can be exploded and matters put to their proper perspective. 6. The finding recorded by the Regional Provident Fund Commissioner is that there is unity of purpose on each count inasmuch as the place of business is common, the management is common, the letterheads bear the same telephone numbers and 10 partners of the appellant are common out of the 13 partners of the third respondent. The trucks plied by the two entities are owned by the partners and are being hired through both the units. The respective employees engaged by the two entities when added together, bring the integrated entities within the grip of the Act; so is the finding. Now, this finding is essentially one of fact or on legitimate inferences drawn from facts. Nothing could be suggested on behalf of the appellant as to why could the Regional Provident Fund Commissioner not pierce the veil and read between the lines within the outwardliness of the two apparents. No legal bar could be pointed out by the learned counsel as to why the views of https://hcservices.ecourts.gov.in/hcservices/ the Regional Provident Fund Commissioner, as affirmed by the Central Government, be overturned". 13. Per contra, Mr.R.Yashod Vardhan, learned Senior Counsel placed reliance upon the Regional Provident Fund Commissioner and another -vs- Dharamsi Morarji Chemical Co. Ltd. ((1998) 2 SCC 446). Para 4 of the said order may be usefully extracted below:- ''4. It is true that if an establishment is found, as a fact, to consist of different departments or branches and if the departments and branches are located at different places, the establishment would still be covered by the net of Section 2-A and the branches and departments cannot be said to be only on that ground not a part and parcel of the parent establishment. However, on the facts of the present case, the only connecting link which could be pressed in service by the learned counsel for the appellant was the fact that the respondent-Company was the owner not only of the Ambarnath factory but also of Roha factory. On the basis of common ownership it was submitted that necessarily the Board of Directors could control and supervise the working of Roha factory also and therefore, according to the learned counsel, it could be said that there was interconnection between Ambarnath factory and Roha factory and it could be said that there was supervisory, financial or managerial control of the same Board of Directors. So far as this contention is concerned the finding reached by the High Court, as extracted earlier, clearly shows that there was no evidence to indicate any such interconnection between the two factories in the matter of supervisory, financial or managerial control. Nothing could be pointed out to us to contra indicate this finding. Therefore, the net result is that the only connecting link which could be effectively pressed in service by the learned counsel for the appellant for culling out interconnection between Ambarnath factory and Roha factory was that both of them were owned by a common owner, namely, the respondent-Company and the Board of Directors were common. That by itself cannot be sufficient unless there is clear evidence to show that there was interconnection between these two units and there was common supervisory, financial or managerial control. As there is no such evidence in the present case, on the peculiar facts of this case, it is not possible to agree with the learned counsel for the appellant that Roha factory was a part and parcel of Ambarnath factory or it was an adjunct of the main parent establishment functioning at Ambarnath since 1921". After recording the same, the Supreme Court rejected the stand of the PF Department. 14. This question came up once again for consideration by the https://hcservices.ecourts.gov.in/hcservices/ Supreme Court in Regional Provident Fund Commissioner -vs- Raj's Continental Exports (P) Ltd. ((2007) 4 SCC 239). The Supreme Court approved the judgment in Dharamsi Morarji Chemical Co.'s case (cited supra). The factual background of the case as found in para 2, reads as follows:- "2. Background facts in a nutshell are as follows: The respondent claimed infancy protection under the provisions of the Act. It started production in 1984. The respondent was of the view that it was an extension of the branch of M/s Continental Exporters, a proprietorship concern of one Sampathraj Jain, who was also the Managing Director of the respondent Company. The appellant’s view was that the respondent was nothing but a department of the aforesaid “M/s Continental Exporters”. Assailing the adjudication, the respondent filed a writ petition stating that there was no financial integrity. It was separately registered under the Factories Act, the Central Sales Tax Act, 1956, the Income Tax Act, 1961 and the Employees’ State Insurance Act. The concerns are separate and distinct. They have separate balance sheets and audited statements. The High Court accepted the contention and held that there was total independent exercise of power in the two concerns. Though the manufacturing of goods was in respect of the same article, that by itself was not sufficient to hold that it was a branch or department of M/s Continental Exporters. The High Court as a matter of fact found that there was total independence in exercise of the management and control of the affairs, the employees were separately appointed and controlled. Taking into account these factors it was held that the respondent Company and M/s Continental Exporters were not one and the same. 15. After setting out the factual background of the case, the Supreme Court in para 3, observed as follows:- "3. Challenge was made to the order of learned Single Judge in the writ appeal. The High Court after analysing the factual position came to hold that there was nothing in common between the two establishments. Merely because the proprietor of one concern was the Managing Director of the other that by itself is not sufficient to establish that one was branch of the other. Accordingly, the writ appeal was dismissed". 16. Whether a franchise agreement holder can be considered as a contractor of the principal came to be considered under the Excise Act in respect of the very same M/s.Parle (Exports) Company by the Bombay High Court in Parle Beverages (P) Ltd -vs- Union of India and https://hcservices.ecourts.gov.in/hcservices/ others (1982 ELT 142 (Bombay)). After referring to the terms of franchise agreement, the Bombay High Court held as follows:- '' 6. ..... As mentioned hereinabove, an identical question came up for consideration before the Division Bench of Delhi High Court and the judgment is reported in 1981 ELT 389 (supra). The Division Bench held on consideration of the terms of Franchise agreement that the imposition of various restrictions on the petitioner company under the Franchise agreement on buying the essence for the beverages, like maintenance of records, chemical tests, sale and distribution of beverages, types of bottles or crowns to be used, control over retail franchise, company's right of inspection, were merely to safeguard the trade interests and cannot lead to the conclusion that the bottling companies are manufacturing for or on behalf of the Parle (Exports) Pvt.Ltd. I am in agreement with the view taken by the Division Bench of Delhi High Court." 17. The Supreme Court while dealing with the clubbing of various manufacturers under the Excise Act dealt with the said issue in Rollatainers Limited -vs- Commissioner of Central Excise, Delhi-III (2004 (11) SCC 203). In paras 7 and 8, it was observed as follows:- 7. There are no two opinions that both the factories are near to each other and they are owned by the same owner and the common balance sheet is maintained. But, by this can it be said that both the factories are one and the same? The definition of “factory” as defined in Section 2 (e) of the Central Excise Act, 1944, reads as under: “2. (e) ‘factory’ means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on;” 8. Simply because both the factories are in the same premises, that does not lead to the inference that both the factories are one and the same. In the present case, from the facts it is apparent that there is no commonality of purpose, both the factories have a separate entrance, there is a passage in between and they are not complementary to each other nor are they subsidiary to each other. The end product is also different, one manufactures duplex board and the other manufactures paper. They are separately registered with the Central Excise Department. The staff is separate, their management is separate. It is also not the case of the Revenue that the end product of one factory is raw material for the other factory. From the above facts it is apparent that https://hcservices.ecourts.gov.in/hcservices/ there is no commonality between the two factories, both are separate establishments run by separate managers though at the apex level they are maintained by the appellant Company. There are separate staff, separate finished goods. Simply because both the factories may have common boundaries, that will not make them one factory. Accordingly, we are of the opinion that the view taken by the Tribunal does not appear to be well founded and likewise, the view taken by the Commissioner, Central Excise. Accordingly, we allow both these appeals, set aside the order of the Tribunal passed on 7-6-2002 as well as the order passed by the Commissioner, Central Excise, New Delhi III on 28-9-2001 in both the appeals". 18. If all these tests are applied, it will be difficult to hold the first respondent as an agent of M/s.Parle (Exports) Limited and since the principal is covered by the Act, Section 2A is attracted to cover the first respondent. On the other hand, the first respondent is a distinct and separate establishment and entitled to have infancy protection under section 16(1)(d) of the Act. Hence, the writ petition is misconceived and will have to be necessarily dismissed. 19. It was further contended by R.Yashod Vardhan, learned Senior Counsel for the first respondent that the petitioners have collected the entire amount of Rs.3,40,242.85 and hence they are entitled to get the refund of the said amount together with interest. Initially, an interim stay was granted. But, subsequently, by an order dated 04.9.2003, the stay was vacated. However, the petitioner was made to part with the amount. But it was stated in the order dated 04.9.2003 that in case the first respondent succeeds, they can always get back the amount. It was also stated that since illegally the amounts have been withheld, they are eligible for refund with interest. 20. In this context, learned counsel placed reliance upon the judgment of the Supreme Court in Kerala State Electricity Board -vs- M.R.F.Limited ((1996) 1 SCC 597) and referred to the following passage in para 24, which reads as follows:- ''24. There is no manner of doubt it is an imperative duty of the court to ensure that the party to the lis does not suffer any unmerited hardship on account of an order passed by the court. The principle of restitution as enunciated by the Privy Council in Rodger case1 has been followed by the Privy Council in later decisions and such principle being in conformity to justice and fair play be followed. It should, however, be noted that in an action by way of restitution, no inflexible rule can be laid down. It will be the endeavour of the court to ensure that a party who had suffered on account of decision of the court, since finally reversed, should be put back to the position, as https://hcservices.ecourts.gov.in/hcservices/ far as practicable, in which he would have been if the decision of the court adversely affecting him had not been passed. In giving full and complete relief in an action for restitution, the court has not only power but also a duty to order for mesne profits, damages, costs, interest etc. as may deem expedient and fair conforming to justice to be done in the facts of the case. But in giving such relief, the court should not be oblivious of any unmerited hardship to be suffered by the party against whom action by way of restitution is taken. In deciding appropriate action by way of restitution, the court should take a pragmatic view and frame relief in such a manner as may be reasonable, fair and practicable and does not bring about unmerited hardship to either of the parties. 21. He also placed reliance upon the judgment of the Supreme Court in South Eastern Coalfields Ltd. -vs- State of M.P. and others ((2003) 8 SCC 648) and referred to para 28 of the said judgment, which reads as follows:- 28. That no one shall suffer by an act of the court is not a rule confined to an erroneous act of the court; the “act of the court” embraces within its sweep all such acts as to which the court may form an opinion in any legal proceedings that the court would not have so acted had it been correctly apprised of the facts and the law. The factor attracting applicability of restitution is not the act of the court being wrongful or a mistake or error committed by the court; the test is whether on account of an act of the party persuading the court to pass an order held at the end as not sustainable, has resulted in one party gaining an advantage which it would not have otherwise earned, or the other party has suffered an impoverishment which it would not have suffered but for the order of the court and the act of such party. The quantum of restitution, depending on the facts and circumstances of a given case, may take into consideration not only what the party excluded would have made but also what the party under obligation has or might reasonably have made. There is nothing wrong in the parties demanding being placed in the same position in which they would have been had the court not intervened by its interim order when at the end of the proceedings the court pronounces its judicial verdict which does not match with and countenance its own interim verdict. Whenever called upon to adjudicate, the court would act in conjunction with what is real and substantial justice. The injury, if any, caused by the act of the court shall be undone and the gain which the party would have earned unless it was interdicted by the order of the court would be restored to https://hcservices.ecourts.gov.in/hcservices/ or conferred on the party by suitably commanding the party liable to do so. Any opinion to the contrary would lead to unjust if not disastrous consequences. Litigation may turn into a fruitful industry. Though litigation is not gambling yet there is an element of chance in every litigation. Unscrupulous litigants may feel encouraged to approach the courts, persuading the court to pass interlocutory orders favourable to them by making out a prima facie case when the issues are yet to be heard and determined on merits and if the concept of restitution is excluded from application to interim orders, then the litigant would stand to gain by swallowing the benefits yielding out of the interim order even though the battle has been lost at the end. This cannot be countenanced. We are, therefore, of the opinion that the successful party finally held