Case: M/S L.N.Gadodia &amp; Sons  Vs. Regional Provident Fund Commr

the two private limited companies. The two companies have seen to it that on record each of the two entities engage less than twenty employees, although the number of employees engaged by them is more than twenty when taken together. The entire attempt of the petitioners is to show that the two entities are separate units so that the Provident Funds Act does not get attracted. The material on record however, leads to only one pointer that the two entities are parts of the same establishment and in which case they get covered under the Provident Funds Act. 15. As the preamble of the Provident Funds Act states, `it is an act to provide for the institution of provident funds, pension fund and deposit-linked insurance fund for employees in factories and other establishments. The term factory is defined under section 2 (g) of the Act, however, there is no definition of an establishment or a commercial establishment in the statute. Inasmuch as the petitioners are entities situated in Delhi, we may profitably rely upon the definition of `establishment and `commercial establishment under the Delhi Shops and Establishments Act, 1954. The definition of establishment is available in section 2 (9) and that of commercial establishment in section 2 (5) thereof. These two definitions read as follows:- “Section 2(9) Establishment- “establishment” means a shop, a commercial establishment, residential hotel, restaurant, eating house, theatre or other places of public amusement or entertainment to which this Act applies and includes such other establishments as Government may, by notification in the Official Gazette, declare to be an establishment for the purposes of this Act; Section 2(5) Commercial establishment 2(5) “commercial establishment” means any premises wherein any trade, business or profession or any work in connection with, or incidental or ancillary thereto, is carried on and includes a society registered under the Societies Registration Act 1860 (XXI of 1860) and charitable or other trust, whether registered or not, which carries on any business, trade or profession or work in connection with or incidental or ancillary thereto, journalistic and printing establishments, contractors and auditors establishments quarries, and mines not governed by the Mines Act, 1952 (XXXV of 1952), educational or other institution run for private gain and premises in which business of banking, insurance, stocks and shares, brokerage or produce exchange is carried on, but does not include a shop or a factory registered under the Factories Act, 1948 (LXIII of 1948), or theatres, cinemas, restaurants, eating houses, residential hotels, clubs or other places of public amusement or entertainment;” It cannot be denied that the two petitioners carry on a trade or business for private gain from the premises wherein the two companies are situated. They would therefore, fall within the definition of `commercial establishment and consequently, under the definition of `establishment. The only question is whether they are to be treated as two separate establishments or one establishment for the purposes of this act. 16. The petitioners have contended that the two entities are two separate establishments. They have tried to draw support from section 2(A) of the Act which declares that where an establishment consists of different departments or has branches whether situated in the same place or in different places, all such departments or branches shall be treated as parts of the same establishment. It was submitted that only different departments or branches of an establishment can be clubbed together, but not different establishments altogether. In this connection, what is to be noted is that, this is an enabling provision in a welfare enactment. The two petitioners may not be different departments of one establishment in the strict sense. However, when we notice that they are run by the same family under a common management with common workforce and with financial integrity, they are expected to be treated as branches of one establishment for the purposes of Provident Funds Act. The issue is with respect to the application of a welfare enactment and the approach has to be as indicated by this Court in Sayaji Mills Ltd. (supra). The test has to be the one as laid down in Associated Cement Company (supra) which has been explained in Management of Pratap Press (supra).17. The Provident Fund Department had issued notice to the petitioners on 11.6.1990 on the basis of their inspection. It had relied upon the 1988 Audit Report of the petitioners. The petitioners had full opportunity to explain their position in the inquiry before the Provident Fund Commissioner conducted under Section 7A of the Provident Funds Act. The petitioners, however, confined themselves only to a facile explanation. If according to them, the management, workforce and financial affairs of the two companies were genuinely independent, they ought to have led the necessary evidence, since they would be in the best know of it. When any fact is especially within the knowledge of any person, the burden of proving that fact lies on him. This rule (which is also embodied in section 106 of the Evidence Act) expects such a party to produce the best evidence before the authority concerned, failing which the authority cannot be faulted for drawing the necessary inference. In the facts and circumstances of the present case, the Provident Fund Commissioner was therefore justified in drawing the inference of integrity of finance, management and workforce in the two petitioners on the basis of the material on record.18. The Regional Provident Funds Commissioner was therefore, entirely justified in taking the view that on the facts and law, the two petitioners had to be clubbed together for the purposes of their coverage under the Provident Funds Act. The Appellate Tribunal clearly erred in re-appreciating the facts on record and applying wrong propositions of law thereto. The learned Single Judge was therefore required to set-aside the order of the Appellate Tribunal in view of his conclusion that the order was contrary to the facts and the law, and was perverse. The Division Bench has rightly confirmed the order passed by the learned Single Judge.

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

Explanation:
0[ds]The Provident Funds Act, is a welfare enactment brought into force for that purpose. The Parliament was concerned with the issue of making an appropriate provision for the employees in the factories and the establishments after their retirement, and for the benefit of their dependents in case of early death of the employees. That is how the Provident Funds Act came to be enacted in the year 1952, which requires a compulsory contribution to the fund and which is independently managed by the Provident Fund Commissioner. The employer and employees covered thereunder, both contribute towards this fund. As per the present provision of section 6 of the Provident Funds Act, both of them have to contribute to the fund an amount equivalent to 10% of the basic wage and dearness allowance (and retaining allowance, if any) per month. The Central Government has the power to raise this contribution to 12% after making an appropriate enquiry. The contribution to fund earns an appropriate interest thereon. As stated above, after the retirement of the employee or in the event of need of finance for specified reasons, or in the event of his death prior thereto, the amount becomesThe petitioners have contended that the two entities are two separate establishments. They have tried to draw support from section 2(A) of the Act which declares that where an establishment consists of different departments or has branches whether situated in the same place or in different places, all such departments or branches shall be treated as parts of the same establishment. It was submitted that only different departments or branches of an establishment can be clubbed together, but not different establishments altogether. In this connection, what is to be noted is that, this is an enabling provision in a welfare enactment. The two petitioners may not be different departments of one establishment in the strict sense. However, when we notice that they are run by the same family under a common management with common workforce and with financial integrity, they are expected to be treated as branches of one establishment for the purposes of Provident Funds Act. The issue is with respect to the application of a welfare enactment and the approach has to be as indicated by this Court in Sayaji Mills Ltd. (supra). The test has to be the one as laid down in Associated Cement Company (supra) which has been explained in Management of Pratap Press (supra).17. The Provident Fund Department had issued notice to the petitioners on 11.6.1990 on the basis of their inspection. It had relied upon the 1988 Audit Report of the petitioners. The petitioners had full opportunity to explain their position in the inquiry before the Provident Fund Commissioner conducted under Section 7A of the Provident Funds Act. The petitioners, however, confined themselves only to a facile explanation. If according to them, the management, workforce and financial affairs of the two companies were genuinely independent, they ought to have led the necessary evidence, since they would be in the best know of it. When any fact is especially within the knowledge of any person, the burden of proving that fact lies on him. This rule (which is also embodied in section 106 of the Evidence Act) expects such a party to produce the best evidence before the authority concerned, failing which the authority cannot be faulted for drawing the necessary inference. In the facts and circumstances of the present case, the Provident Fund Commissioner was therefore justified in drawing the inference of integrity of finance, management and workforce in the two petitioners on the basis of the material on record.18. The Regional Provident Funds Commissioner was therefore, entirely justified in taking the view that on the facts and law, the two petitioners had to be clubbed together for the purposes of their coverage under the Provident Funds Act. The Appellate Tribunal clearly erred in re-appreciating the facts on record and applying wrong propositions of law thereto. The learned Single Judge was therefore required to set-aside the order of the Appellate Tribunal in view of his conclusion that the order was contrary to the facts and the law, and was perverse. The Division Bench has rightly confirmed the order passed by the learned Single Judge.