Case: Shubham Knit Wear Private Limited, Mumbai Vs. The Regional Provident Fund Commissioner, Mumbai &amp; Others

admittedly covered by the Act as it was an old establishment since 1921. The Supreme Court noted that the effect of Section 2A is that where an establishment is found to consist of different departments or branches, even if those departments and branches are situated at different places they would be a part and parcel of the parent establishment. However, in that case the only connecting link was 21998(3) LLN 932 that both the factories were owned by the Appellant. The Supreme Court held that there was no evidence to indicate any interconnection between the two factories in the matter of supervisory, financial or managerial control. The mere fact that both the factories belonged to a common owner was held not to be sufficient to attract the provisions of Section 2A: 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. 17. A Division Bench of this Court had occasion to consider the impact of the provisions of Section 2A in Kadamba Suburban Transport Corporation Ltd. vs. Assistant Provident Fund Commissioner. In that case, the Government of Goa had initially incorporated a company for operating buses on long routes. Consequently the Government took a policy decision to set up another Company for City and suburban routes and the Petitioner came to be incorporated. Some of the buses of the erstwhile 31999 II CLR 1264 Company were purchased by the new Company, part of the consideration being treated as the share capital of the erstwhile Company in the petitioner. However, the Boards of Directors of both the Companies were different, the shareholders were different and their spheres of operation were different. Employees of both sets of Companies were maintained independently. On these facts, the Division Bench held that though both the Companies were owned by the Government that would not be sufficient to attract the provisions of Section 2A. 18. The facts of the present case would have to be assessed on the basis of the plain intendment and language of Section 2A bearing in mind the interpretation that has been placed in the judgments to which a reference has already been made. The material that has been placed on record would show that both the Appellant and the Second Respondent are independent bodies each with its distinct corporate personality. There is absolutely no material to establish that there was a unity of management, supervision, control or employment. The workforce of the Appellant was not the same as that of the Second Respondent. Each of the two Companies had its own workforce and an employee of one Company was not transferable to the other. There was no financial inter-connection. The only basis on which the First Respondent came to hold that the Appellant is a part of the establishment of the Second Respondent was the agreement dated 1 May 1984 that was entered into between the parties. By the agreement, the Second Respondent permitted the Appellant to use the registered Trade Mark Victor on a non-exclusive basis in the territories of the States of Maharashtra and Madhya Pradesh in relation to four designs of mens undergarments against the payment of royalty. The agreement between the parties undoubtedly does contemplate that the Second Respondent as a registered holder of the Trade Mark would be entitled to ensure that the products manufactured by the Appellant met the standard of quality that was associated with the mark of the Second Respondent. The conditions that have been imposed in the agreement in that regard are only intended to subserve the object of ensuring that the distinctiveness of the Trade Mark of the Second Respondent is not diluted. A Trade Mark has associated with it the goodwill generated by the business of the owner. A proprietor of a mark who permits the use of the mark by another, is entitled to impose conditions that ensure that the goodwill associated with the mark is not diluted and that the distinctiveness of the mark is not obliterated. The conditions of such an agreement, in this case, however, do not efface the position that both the Appellant and the Second Respondent were independent entities which had entered into an arms length transaction for a limited purpose. The Appellant produced material to indicate that it was engaged in the manufacture of several products besides those for which it was licensed by the Second Respondent. The balance- sheet of the Appellant for the year ending 31 March 1985 showed total sale of Rs. 53.58 lakhs against which royalty payable to the Second Respondent was only Rs.2,39,999/-. The royalty, therefore, constituted 0.55% of the total income from sales. Similarly, the material produced by the Appellant showed that gents undergarments manufactured under licence for that year constituted approximately 2227 dozen valued at Rs. 1.5 lakhs while similar products of the Appellant which were not under licence were to the extent of 4438 dozen valued at Rs. 5.18 lakhs. Apart from this, there is absolutely no evidence of functional integrality. The closure of the unit of the Appellant would not result in the closure of the unit of the Second Respondent or vice versa. There is no commonality of ownership, management or of the workforce. 19. In these circumstances, the finding of the Learned Single Judge in affirming the order passed by the First Respondent is clearly in error. The decision of the First Respondent was clearly contrary to the law as interpreted in the judgment of the Supreme Court in Dharamsi Morarji (supra) and the judgments of this Court to which a reference has been made earlier.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]Similarly, the material produced by the Appellant showed that gents undergarments manufactured under licence for that year constituted approximately 2227 dozen valued at Rs. 1.5 lakhs while similar products of the Appellant which were not under licence were to the extent of 4438 dozen valued at Rs. 5.18 lakhs. Apart from this, there is absolutely no evidence of functional integrality. The closure of the unit of the Appellant would not result in the closure of the unit of the Second Respondent or vice versa. There is no commonality of ownership, management or of the workforce19. In these circumstances, the finding of the Learned Single Judge in affirming the order passed by the First Respondent is clearly in error. The decision of the First Respondent was clearly contrary to the law as interpreted in the judgment of the Supreme Court in Dharamsi Morarji (supra) and the judgments of this Court to which a reference has been made earlierSimilarly, the material produced by the Appellant showed that gents undergarments manufactured under licence for that year constituted approximately 2227 dozen valued at Rs. 1.5 lakhs while similar products of the Appellant which were not under licence were to the extent of 4438 dozen valued at Rs. 5.18 lakhs. Apart from this, there is absolutely no evidence of functional integrality. The closure of the unit of the Appellant would not result in the closure of the unit of the Second Respondent or vice versa. There is no commonality of ownership, management or of the workforce19. In these circumstances, the finding of the Learned Single Judge in affirming the order passed by the First Respondent is clearly in error. The decision of the First Respondent was clearly contrary to the law as interpreted in the judgment of the Supreme Court in Dharamsi Morarji (supra) and the judgments of this Court to which a reference has been made