*THE HON'BLE SRI JUSTICE P.S.NARAYANA +W.P.No.219 of 2007 % 10-10-2007 # Marvel Granites Represented by its Managing Partner S.Kishore Babu .. Petitioner And $ The Regional Provident Fund Commissioner, Employees Provident Fund Organisation, Sub-Regional Office, 3rd Lane, Krishna Nagar, Guntur .. Respondent <GIST: >HEAD NOTE: ! Counsel for petitioner : Sri T.Rajendra Prasad ^ Counsel for respondent : Sri R.N. Reddy ?CASES REFERREDL 1. 1996 SCC (L&S) 1265 2. 2000(I) LLJ 1518 3. 1993(1) LLJ 811 4. 1994 FJR 400 5. 1960(I) LLJ 1 6. 1994(1) LLN 584 7. 1988(2) LLN 778 8. 2000(1) LLJ 624 9. 1993(1) LLJ 369 10. 1999-III LLJ (Supp.) 215 11. 1987(1) LLJ 427 (S.C.) 12. 1977(35) F.L.R. 80 (Orissa) 13. 1971(2) LLJ 513 (S.C.) 14. 1960(1) LLJ-I (S.C.) 15. 2005-II LLJ 1117 16. 1998-I LLJ 1060 17. 1995-I LLJ 120 (Kant). 18. 1994-I LLJ 369 (Bombay) 19. 1992-II LLJ 647 (Bombay) 20. AIR 1964 S.C. 477 21. 1960-I LLJ 497 22. 2005-II LLJ 112 THE HON'BLE SRI JUSTICE P.S.NARAYANA W.P.No.219 of 2007 Date : 10-10-2007 Between : Marvel Granites Represented by its Managing Partner S.Kishore Babu .. Petitioner And The Regional Provident Fund Commissioner, Employees Provident Fund Organisation, Sub-Regional Office, 3rd Lane, Krishna Nagar, Guntur .. Respondent THE HON'BLE SRI JUSTICE P.S.NARAYANA W.P.No.219 of 2007 ORDER: 1. This Court on 4-1-2007 issued rule nisi and while ordering notice in W.P.M.P.No.280/2007 it was ordered: “Pending further orders there shall be interim stay as prayed for, for a period of four weeks, from today”. 2. The Writ Petition is filed for a Writ of Mandamus declaring the orders of the respondent dated 16-6-2005 in proceedings No.AP/RO/GNT/APFC(ENF)/7A order/2005/166 and also the orders of the Employees Provident Fund Appellate Tribunal, New Delhi dated 7-11- 2006 in ATA No.576(1)/2005 as illegal, arbitrary, unconstitutional, discriminatory, void, against the principles of natural justice and unsustainable and consequently to set aside the orders of the respondent dated 16-5-2005 in proceedings No.AP/RO/GNT/APFC(ENF)/7A Order/2005/166 and to pass such other suitable orders. 3. Sri T.Rajendra Prasad, the learned Counsel representing the writ petitioner had taken this Court through the averments made in the affidavit filed in support of the Writ Petition and also further had taken this Court through the order in ATA 476(1)/2005 made by the Employees Provident Fund Appellate Tribunal, Newl Delhi and also further had taken this Court through the order made by the Assistant Provident Fund Commissioner dated 16-5-2005. The learned Counsel would maintain that on the mere relationship of the parties or on the mere ground that the phone numbers are common and they had been using the common office room, the petitioner cannot be fastened with the liability. The learned Counsel would maintain that the three units have been maintaining separate account books and separate business licences and operating the business separately and hence it cannot be said that there is any functional integrity whatsoever to treat all these units as one establishment. The learned Counsel also placed strong reliance on several decisions to substantiate his submissions. 4. On the contrary Sri R.N.Reddy, the learned Standing Counsel representing the respondent would contend that both the original authority and the appellate Tribunal recorded concurrent findings in relation to the question whether these units by the treated as separate units or the same to be treated as an establishment for the purposes of Employees Provident Fund and Miscellaneous Provisions Act 1952, hereinafter in short referred to as “Act” for the purpose of convenience. The learned Counsel also would maintain that the findings recorded by the Assistant Provident Fund Commissioner would clearly establish functional integrity among these units and hence for the purposes of applicability of the Act, the same to be treated as an establishment within the meaning of the Act and hence the findings recorded by the Assistant Provident Fund Commissioner, as confirmed by the Employees Provident Fund Appellate Tribunal, New Delhi, not to be disturbed and the Writ Petition is liable to be dismissed. The learned Counsel also placed strong reliance on certain decisions to substantiate his submissions. 5. Heard the Counsel and perused the records. 6. Marvel Granites, represented by its Managing Partner Sri S.Kishore Babu, filed the present Writ Petition questioning the order of the respondent dated 16-5-2005 in proceedings No. AP/RO/GNT/APFC(ENF)/7A order/2005/166 and also the order made by the Employees Provident Fund Appellate Tribunal dated 7- 11-2006 in ATA No.576(1)/2005 on certain grounds. It is averred that the petitioner firm was established in the year 1996 which is a partnership firm and they had taken certain land on lease from his father for establishing the polishing unit by entering into a registered lease agreement dated 26-11-1996 vide document No.5396. Thereafter the petitioner-firm started the unit after obtaining necessary permissions and approvals from the competent authorities and they are regularly paying the necessary taxes etc., and also rent to his father. It is stated that only ten employees are working in the petitioner-firm and they are regularly paying contribution under the Employees State Insurance Act for all the said employees. The petitioner-firm is registered as Small Scale Industry and it is doing its own business independently since inception and is not doing business in collaboration with any other firm. It is also stated that the father’s brother’s wife of the petitioner one Smt.S.Padmana had established a firm namely Sai Priya Granites with her own funds in the year 1997 and it is a proprietary concern and the said firm is a separate firm and it is no way concerned with the petitioner-firm. The father of the petitioner and his two brothers had partitioned their properties about 20 years back and they are separately and independently enjoying the said properties allotted to their shares. The total extent of the land located in Sy.No.398 of Throvagunta village is Acs.8.64 guntas which is an ancestral property of the petitioner’s family and the said property is located adjacent to National High Way No.5 and it is a road facing land. The said property was partitioned about 20 years back and the father of the petitioner and his brothers are separately enjoying the property of their shares separately and independently. Subsequently, the Government acquired an extent of Acs.2.67 cents for the purpose of laying the National Highway and now each family is in possession and enjoyment of Acs.1.95 cents each. Out of their share one of the petitioner’s father’s brother’s wife S.Padmaja established Sai Priya Granites in the year 1997 and the petitioner’s wife purchased an extent of 20 cents of land from his father through registered sale deed and later she established one unit namely Sri Sai Teja Enterprises with her own funds in the year 2000 and all the three firms are separate and independent firms. The petitioner-firm is a partnership firm whereas the firms established by the wife of the petitioner and the wife of petitioner’s father’s brother are proprietary concerns. It is also further stated that all the firms are running their units independently and paying sales tax, income tax etc., separately. While the matters stood thus, suddenly to the surprise of the petitioners, the petitioner-firm received coverage intimation dated 27-1- 2005 from the respondent in which it is stated that their establishment had employed 21 persons on 1-4-2000 and therefore the provisions of Employees Provident Fund Act and all the Schedules framed thereunder are applicable from 1-4-2000 with retrospective effect which is unsustainable and incorrect and to the said proceedings a letter dated 28-1-2005 is also enclosed requesting the petitioner-firm to submit a copy of the partnership deed. On receipt of the said proceedings and also the letter, the petitioner-firm submitted a representation dated 10-2-2005 stating that the Employees Provident Fund Act and Miscellaneous Provisions Act 1952 is not at all applicable to their firm as only ten employees are working in their firm and requested the respondent to verify and scrutinize the entire records of the firm. The petitioner-firm submitted relevant records and material along with the representation. Thereafter the petitioner-firm received the proceedings dated 16-5-2000 wherein it is stated that the petitioner-firm had been covered under the provisions of the Act by clubbing the employment strength of the other two firms also which are no way concerned with the petitioner firm on the ground that the three units are functioning in the same premises and also stated that the employees of the three units are having common office room and the letter heads of all the three establishments is having the same telephone number which is not at all correct. The said orders were passed without even giving the petitioner reasonable opportunity of personal hearing and in violation of the principles of natural justice. It is also further stated that the petitioner-firm is a partnership firm and the petitioner’s father’s brother’s wife established her unit in the land allotted to her husband in partition of the properties about 20 years back. It is also further stated that the petitioner’s wife’s unit is established in the property purchased by her through registered sale deed with her own funds and they had established the unit by taking the land on lease from the petitioner’s father. All the firms are separate and independent in nature and having independent ownerships. The firms are maintaining individual and separate account books, records etc., and they are filing income-tax and other tax returns separately. Merely because the above said firms are established in the land located in same survey number, they cannot be treated as one unit. It is further stated that admittedly, the petitioner-firm is a partnership firm and those firms are proprietary concerns. The proprietors of the other units are not partners the petitioner-firm and the petitioner-firm had produced all the necessary and required documents and also records i.e., Factory Licences, APGST, CST, SSI Registration Certificates, Electricity Meter Numbers and bills, Income Tax PAN Numbers and Returns, Mines Registration Number and the documents relating to the property. In support of the petitioner’s contention, they had also produced Gram Panchayat records and ESI coverage intimation sent to each firm separately and they had submitted written representations in which they had stated that all the firms are independent and separate firms and therefore they cannot be clubbed together and cannot be treated as one unit merely on the ground that the owners of the said firms are located in the same survey number of the land. Each and every person is having right to do any separate businesses or to establish separate units and admittedly all the firms are maintaining separate books of accounts and registrations are separate and the said units are paying the taxes separately and independently. Without considering all the aforesaid contentions raised by the petitioner and the documents submitted and without giving an opportunity of personal hearing, the respondent passed impugned orders clubbing and treating all the independent firms as one unit and brought the petitioner firm under the purview of the Act stating that because of (1) unity of ownership,(2) geographical proximity, (3) common nature of the business makes it functional integral and (4) financial integrity and also stating that because the funds are generated out of single family. It is further stated that in fact, the family of the brother of the petitioner’s father is a separate and independent family and hence on the face of it the findings of the respondent are unsustainable either under Law or on facts. Admittedly, the ownerships of the firms are different and merely because the units are established in the land located in the same Survey Number, they cannot be treated as geographically proximate as the units are established on the own property of the owners of the other units and either the petitioner-firm or the father of the petitioner is not having any right over the said properties. The petitioner-firm had taken one portion of the property of the father of the petitioner on lease under a registered lease deed and they are regularly paying the lease to his father and hence it is crystal clear that there is no geographical proximity. The geographical proximity cannot be taken as a ground to club the different and separate firms as one unit. It is also further stated that in Prakasam District at various places there are similar type of Granite units and the authorities are not treating the said firms located in the same area and survey number of the land as one unit. Therefore the said action of the respondent in treating the units located in the area alone as one unit is arbitrary and discriminatory. Similar common nature of business cannot be treated as functional integral. It is also further stated that in Prakasam District at several places there respondents many firms of common nature i.e., polishing of the Granite, excavation of the Granite etc., established by different firms. Common nature cannot be treated as functionally integral as every person has got independent right to establish similar units and anybody can do similar nature of business at any place including common place. The members of any family can do any business and can establish separate units or factory with their own funds and merely because the persons are members of one family, the units established by them cannot be treated as one unit on the ground that they are relatives and therefore the funds are generated out of single family. Each person has got every right to do any business or establish any unit with their own funds. The petitioner’s father and his brother are not the members of one joint family as they got separated long back i.e., more than two decades. The petitioner-firm had taken certain portion of the land from the petitioner’s father on lease and the petitioner’s wife started the unit by purchasing certain portion of the land from his father and therefore all these units cannot be treated as one unit and the findings of the respondent are not correct and unsustainable either under Law or on facts. It is also further stated that the funds are not generated out of single family as alleged by the respondent and the said observation is made without any basis or supporting either documentary or oral evidence and passed orders on presumptions and assumptions. The aforesaid three units are submitting income tax returns separately and in the said returns all the particulars with regard to the generation and source of the funds are also mentioned and they are paying necessary taxes etc., regularly and separately. It is also further stated that either in the provisions of the Act or the Rules framed thereunder, no where it is stated that any separate units of a family have to be clubbed together and treated as one unit. Further, it is stated that the aforesaid units do not belong to one family. Every citizen has got a right to choose his employment or to engage in any business or trade independently. The contentions and the observations made by the respondent are affecting the independent right of the petitioner guaranteed under Article 19(1) of the Constitution of India and therefore the order of the respondent is illegal, arbitrary, unconstitutional, discriminatory, unwarranted, void, against the principles of natural justice and unsustainable either under Law or on facts. Further, it is not the case of the respondent that the father of the petitioner and his brothers are the members of the joint family. It is also further stated that the petitioner filed Appeal before the Employees Provident Fund Appellate Tribunal, New Delhi questioning the orders of the respondent and the Appellate Tribunal dismissed the Appeal filed by the petitioner confirming the order of the respondent without properly considering the contentions, grounds raised and also the documents submitted by the petitioner. It is further stated that the lower Appellate Court had not considered various contentions raised by the petitioner and dismissed the Appeal only on the ground that the letter heads of the three units bear same telephone numbers and all the partners of the appellants are close relatives of the proprietors of the other units and the cranes used by two entities are owned by the appellant without making any payments whatsoever, which is not correct. Merely because the letter heads are containing same phone number the said units cannot be treated as one unit. The necessity of phone usage is very less in this type of unit and the proprietors of the said units are having separate cell phones. In the orders passed by the respondent it is stated that the squad of enforcement officers found that all the firms are using common crane, which is not correct. In the said orders no where it is stated that the other units are using the cranes without making any payments. There is no documentary evidence to establish that all the firms are using common crane to lift the rock granite blocks moving on fixed steel rails. Even assuming that the same is correct, it is the responsibility of the party who brought the raw material for polishing to any of the unit of his choice to pay the necessary charges for using the crane of the petitioner’s firm and the other units need not pay any charges to our firm. Therefore the payment of amount by the other units to the petitioner’s firm does not arise as the petitioner’s firm is directly collecting the charges from the customers. In fact, the other firms are not regularly using the crane of the petitioner’s firm and on some occasions they are using the cranes of some other firms located at nearby area by paying necessary charges by collecting the same from the customer who approached the said unit. Even assuming that the above said contention is correct, the three units cannot be treated as one unit on that ground as admittedly the said units are registered, established separately and running independently. It is also further stated that under the provisions of the Act there is no provision prescribing any specific tests or principles for determining what is “one establishment”. If the statute does not say what constitutes one establishment, the petitioner’s firm and the other units cannot be treated as one unit as no particular test can be adopted or prescribed either under the Act or under the Rules. All the three units are different and distinct units and there is no interconnection amongst the said units and the said units are not established of mutual dependence of one unit over the other unit and therefore it cannot be said that one unit cannot function without the other unit and it cannot be held all the units to be one. Further, when there is no supervisory, managerial control between the units having separate ownership, employees and existence under various Acts, one cannot be said to be a branch of another or all the units cannot be treated as one unit merely because the owners are relatives. Admittedly there is no supervisory and managerial controls to the petitioner’s firm on the aforesaid other firms. All the three firms are separately incorporated and registered and have to pay their own taxes separately on the income earned by them. The financial, managerial and functional integrity had not been established by the respondent and all the units are owned by different persons. All these aspects had not been considered either by the respondent or by the Appellate Tribunal. The Appellate Tribunal went wrong in holding that a legitimate inference can be drawn that if the appellant establishment is closed, the other units may not be survived as the said units are operating from the same premises of the appellant as well as using all the business, infrastructure of the appellant which is totally incorrect. The Appellate Tribunal came to such a conclusion only on presumptions and assumptions. Even if the appellant establishment is closed, the other units can survive on their own and therefore the question of closing the said units does not arise and the Appellate Tribunal went wrong in coming to such a conclusion on presumptions and assumptions. The premises cannot be treated as same premises merely because the said land is located in the same survey number. Admittedly the ownership of the premises of the units are different. Each unit is established separately and even if the petitioner’s firm and the unit established by the petitioner’s wife is clubbed together, the provisions of the Act are not at all applicable as the number of employees are lesser than the quantity prescribed under the provisions of the Act. It is also further stated that the petitioner’s firm had been established in the leased premises in the year 1996 and the petitioner’s brother’s wife established the unit in the year 1997 in the land allotted to their family in partition. The petitioner’s wife established the unit in the premises purchased by her through registered sale deed and these aspects were not at all considered by the Appellate Tribunal. The business infrastructure are also different and separate. The machinery and equipment of the three units are separate and the workers are separate. The payment of taxes, insurances and other charges are also separate. The petitioner had furnished all the required and necessary information and documents in support of their contention and either the respondent or the Appellate Tribunal had not at all considered several of the contentions and grounds raised. In the impugned order itself it is stated that the three establishments are having separate books of accounts, registration, PAN number etc., and admittedly neither the petitioner’s wife nor the brother of the petitioner’s father or his wife are partners of the petitioner’s firm. The ownerships of the area in which the three units had been established are also different and the same had not at all been considered either by the respondent or the Appellate Tribunal. The decision relied on by the respondent in Rajasthan Prem Krishan Goods Transport Co. Vs. Regional Provident Fund Commissioner[1] is not all applicable to the facts of the present case and whereas the decision cited on behalf of the petitioner’s firm squarely is applicable. The proceedings of the respondent and also the findings of the Appellate Tribunal are only on presumptions and assumptions and these orders are not sustainable either under Law or on facts. The Appellate Tribunal had not considered the fact that the respondent made the assessment and called upon the contribution said to have been found by the said Assessing Authority without even making the proprietors of the other firms either as parties or even without issuing any notice to them calling any explanation or information before coming to such a conclusion and the documents i.e., various licences and permissions issued by the Government and the concerned competent authority filed by the petitioner’s firm also had not been considered. The non-consideration of the material and the documents submitted by the petitioner is also illegal, arbitrary, erroneous and materially irregular. In such circumstances, the petitioner approached this Court by praying for the appropriate reliefs in the Writ Petition. 7. It may be appropriate to have a look at the order made in No.AP/RO/GNT/APFC(ENF)7A ORDER/2005/166, dated 16-5-2005 which reads as hereunder : “Whereas M/s.Marvel Granites, Throvagunta, Ongole has been brought under the purview of EPF & MP Act, 1952 w.e.f. 1-4-2000. In the present case three establishments viz., M/s.Marvel Granites, M/s.Sri Priya Granites and M/s. Sri Sai Teja Enterprises has been clubbed together to reach the required employment of more than nineteen. These establishments were initially clubbed and covered vide Enforcement Officer’s report dated 11- 1-2005. Accordingly coverage intimation was issued on 27-2-2005. Aggrieved by the coverage intimation, employer had made his representation vide his letter dated 10-2-2005 that EPF & MP Act, 1952 is not applicable to his establishment. Therefore, following the principle of natural justice the Assistant Provident Fund Commission & the authority under Section 7A of the Act, issued summon under Section 7A(1)(a) to examine the applicability of Act. Sri K.Rajendra Prasad, authorized representative of the