Case: Shree Vishal Printers Ltd Vs. Fund Commissioner, Jaipur and Ors

same building as BCCL, Jaipur, albeit stated to be at a different floor. One of the clauses, which has been referred to, which shows that there was no exclusivity of dealing, is clause 28, which reads as under: "28. ?SHREE VISHAL? will be at full liberty to undertake any other contract for printing newspaper/journals from any other party/s provided it ensures timely printing of the daily newspapers of ?Bennett? and complies with Clause 32 of this agreement.? 34. In the aforesaid context, it may be noted that clause 32 referred to in this clause is only a ‘Confidentiality Clause?.35. A great emphasis was laid by learned senior counsel appearing for the said entity on the ‘Non-Exclusivity Clause? in the agreement between the two parties, i.e., clause 28. Once again, the emphasis was on the two companies being separate legal entities, there being no commonality of directors or shareholders, or direct financial control. The balance sheet and profit and loss accounts were also separate. Another aspect emphasised was that the printing press of SVPL was located at a different premises from where the business was really being carried on, though naturally, the control of the business would be from the office located in the same premises as BCCL, Mumbai. It is not, however, disputed that SVPL had, at its own cost, given adequate covered area adjacent to the printing press to BCCL, Mumbai for storing the newspaper/printing. The consideration, which was being paid to SVPL for printing included the cost of making available the aforesaid space for packaging and storage operations.36. Learned counsel for the respondent, once again, sought to emphasise the functional dependence between the companies. The aspect of Mr. Sunil Gupta, Manager of BCCL signing papers relating to SVPL was emphasised, including notices of closure, as discussed in the case of TPHL. The common factor, again, is of BCCL, Mumbai issuing orders on the letter pad of SVPL. In fact, the nature of communications and orders issued do suggest that all three were working towards the common object of bringing out a newspaper.37. The aforesaid would not have been sufficient by itself, but for the application of the functional integrality test, which linked them to be part of the same establishment.38. We may add here that in the impugned orders it is not very clear as to whether the reference is being made to BCCL, Mumbai or to BCCL, Jaipur. However, as noticed before, the same is not of much consequence for the reason that BCCL, Jaipur is admittedly a branch office of BCCL, Mumbai.39. We have examined this case more closely because of the factual pleas raised by learned senior counsel for SVPL. We have also taken note of the fact that as per the submissions of the learned senior counsel, the said unit was subsequently merged into another company, an aspect already noticed aforesaid.40. Despite the aforesaid, in the complete conspectus of facts, after divorcing different aspects of the three establishments, we are unable to come to a conclusion different from the one which we have come to for TPHL. We believe that the very nature of the working of SVPL and the other two entities show the functional integrality test to be satisfied. They may be different legal entities, an arrangement may have been made to have different directors and shareholders, but the nature of control and integrality of functionality, between the three entities is quite apparent from the facts set out hereinabove. Each one of the facts by itself may not be conclusive, but taken as a whole, there can be no other conclusion, than the one arrived at by the RPFC. We are doing so, quite conscious of the fact that there is undoubtedly some jumbling which has arisen in the order of the RPFC, which has been affirmed throughout. But then, the case of the appellants was built on the principle that all these three entities have really no functional integrality vis-à-vis BCCL, Mumbai. As it emerged subsequently, and was conceded before us; there is little doubt that BCCL, Jaipur is a unit of BCCL, Mumbai, and the other two units have linkages and are controlled by BCCL, Jaipur in a manner which would satisfy the functional integrality test.41. The said Act being a beneficial legislation, the object of excluding the infancy period of five years (later reduced to three years) from the rigours of the Act, was only to provide to new establishments, a period to establish their business, and not to permit different kinds of routes to be created to evade the liability under the said Act. Conclusion:42. We have, thus, no hesitation in coming to the conclusion that the findings qua all the three appellants satisfy the functional integrality and the general unity of purpose test, and the same are met in the facts of the present case.43. We may also notice another aspect before parting with the case. On a Court query as to what would be the liability arising from the impugned orders, it was stated to be in the range of only about Rs.15 lakh for which five judicial forums have now been troubled. The other aspect is that this matter has been prolonged over so many years and the only avenue open for the RPFC is to impose damages under Section 14B of the said Act, which, at the relevant time, limited the damages amount to twice the original amount. The net result is that the liability would only double during this long period, over the last more than thirty years. It is only by a subsequent legislative amendment, now repealed, by introduction of Section 7Q, inserted w.e.f. 1.7.1997, that the provision was made for interest to be payable at 12 per cent per annum, which would naturally apply prospectively. Thus, the appellants are getting away lightly on the issue of such liability, the exact amount of which is to be determined. The liability of each of these establishments would be co- extensive with BCCL, Mumbai.

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

Explanation:
0[ds]18. We may note at this stage itself that though, in principle, there can be no dispute on this proposition, it does not really appeal to us for the reason that it was intrinsically predicated on the ground that BCCL, Jaipur was a different establishment. Once that is conceded as not so, BCCL, Jaipur was really only a part of BCCL, Mumbai. The connection of the other two establishments with BCCL, Mumbai or, for that matter, BCCL, Jaipur would, thus, not cause an intrinsic fallacy in the order of the RPFC.If the aforesaid factual matrix is analysed within the principles of what would constitute one establishment, as set out in the Associated Cement Company case, AIR 1960 SC 56 it is obvious that there are various parameters dependent on the factual matrix of each case, which have to be examined. Undoubtedly we are not dealing, in this case, with a branch or a unit of BCCL, Mumbai. Thus, a test of unity of ownership, management and control may not really be applicable, but the test would be of functional integrality or general unity of purpose, in the given factual situation. There is no direct unity of employment. In any case, it is the test of functional integrality or general unity of purpose which would have to be applied in the present facts if the two establishments have to be clubbed for the purposes of the provisions of the said Act.21. We may note that one of the arguments of learned senior counsel for the appellant was based on the business model of outsourcing and it was sought to be suggested that if one aspect of work is outsourced to another company, the same would not satisfy the aforesaid tests. However, we did point out to the learned senior counsel that the business model of outsourcing really does not have history that old or was not much prevalent in respect of the time period which we are discussing; but it is a relatively later phenomenon and, thus, that principle would not really be applicable for testing the nature of linkage, if any, for the time with which we are concerned.The important aspect, in our view, which was emphasised by learned counsel for the respondent was the nature of the agreement which provided for both the space and the staff to be made available by TPHL for the benefit of BCCL, Mumbai. The expenses of the establishment, for example, electricity bill, maintenance costs, etc., were to be borne by TPHL.24. If we analyse the aforesaid facts on the touchstone of functional integrality or general unity of purpose, it is difficult, if not impossible, to disagree with the reasoning of four forums, which are sought to be assailed before us.Now examining the agreement with BCCL, Mumbai, dated 1.10.1985, BCCL, Mumbai, having commenced publication of the Jaipur edition of the two newspapers is stated to have approached SVPL for printing the said newspapers on a contract basis. SVPL was to employ the necessary personnel for carrying out various tasks and had to print the newspapers. The remuneration was payable by BCCL, Mumbai to SVPL at Rs.24,000/- per day, for the two daily newspapers. The printing press was elsewhere, but the business office of SVPL was also located in the same building as BCCL, Jaipur, albeit stated to be at a different floor. One of the clauses, which has been referred to, which shows that there was no exclusivity of dealing, is clause 28, which reads as?SHREE VISHAL? will be at full liberty to undertake any other contract for printing newspaper/journals from any other party/s provided it ensures timely printing of the daily newspapers of ?Bennett? and complies with Clause 32 of this agreement.In the aforesaid context, it may be noted that clause 32 referred to in this clause is only a ‘Confidentiality Clause?.35. A great emphasis was laid by learned senior counsel appearing for the said entity on the ‘Non-Exclusivity Clause? in the agreement between the two parties, i.e., clause 28. Once again, the emphasis was on the two companies being separate legal entities, there being no commonality of directors or shareholders, or direct financial control. The balance sheet and profit and loss accounts were also separate. Another aspect emphasised was that the printing press of SVPL was located at a different premises from where the business was really being carried on, though naturally, the control of the business would be from the office located in the same premises as BCCL, Mumbai. It is not, however, disputed that SVPL had, at its own cost, given adequate covered area adjacent to the printing press to BCCL, Mumbai for storing the newspaper/printing. The consideration, which was being paid to SVPL for printing included the cost of making available the aforesaid space for packaging and storage operations.36. Learned counsel for the respondent, once again, sought to emphasise the functional dependence between the companies. The aspect of Mr. Sunil Gupta, Manager of BCCL signing papers relating to SVPL was emphasised, including notices of closure, as discussed in the case of TPHL. The common factor, again, is of BCCL, Mumbai issuing orders on the letter pad of SVPL. In fact, the nature of communications and orders issued do suggest that all three were working towards the common object of bringing out a newspaper.37. The aforesaid would not have been sufficient by itself, but for the application of the functional integrality test, which linked them to be part of the same establishment.38. We may add here that in the impugned orders it is not very clear as to whether the reference is being made to BCCL, Mumbai or to BCCL, Jaipur. However, as noticed before, the same is not of much consequence for the reason that BCCL, Jaipur is admittedly a branch office of BCCL, Mumbai.39. We have examined this case more closely because of the factual pleas raised by learned senior counsel for SVPL. We have also taken note of the fact that as per the submissions of the learned senior counsel, the said unit was subsequently merged into another company, an aspect already noticed aforesaid.40. Despite the aforesaid, in the complete conspectus of facts, after divorcing different aspects of the three establishments, we are unable to come to a conclusion different from the one which we have come to for TPHL. We believe that the very nature of the working of SVPL and the other two entities show the functional integrality test to be satisfied. They may be different legal entities, an arrangement may have been made to have different directors and shareholders, but the nature of control and integrality of functionality, between the three entities is quite apparent from the facts set out hereinabove. Each one of the facts by itself may not be conclusive, but taken as a whole, there can be no other conclusion, than the one arrived at by the RPFC. We are doing so, quite conscious of the fact that there is undoubtedly some jumbling which has arisen in the order of the RPFC, which has been affirmed throughout. But then, the case of the appellants was built on the principle that all these three entities have really no functional integrality vis-à-vis BCCL, Mumbai. As it emerged subsequently, and was conceded before us; there is little doubt that BCCL, Jaipur is a unit of BCCL, Mumbai, and the other two units have linkages and are controlled by BCCL, Jaipur in a manner which would satisfy the functional integrality test.41. The said Act being a beneficial legislation, the object of excluding the infancy period of five years (later reduced to three years) from the rigours of the Act, was only to provide to new establishments, a period to establish their business, and not to permit different kinds of routes to be created to evade the liability under the said Act. Conclusion:42. We have, thus, no hesitation in coming to the conclusion that the findings qua all the three appellants satisfy the functional integrality and the general unity of purpose test, and the same are met in the facts of the present case.43. We may also notice another aspect before parting with the case. On a Court query as to what would be the liability arising from the impugned orders, it was stated to be in the range of only about Rs.15 lakh for which five judicial forums have now been troubled. The other aspect is that this matter has been prolonged over so many years and the only avenue open for the RPFC is to impose damages under Section 14B of the said Act, which, at the relevant time, limited the damages amount to twice the originalnet result is that the liability would only double during this long period, over the last more than thirty years. It is only by a subsequent legislative amendment, now repealed, by introduction of Section 7Q, inserted w.e.f. 1.7.1997, that the provision was made for interest to be payable at 12 per cent per annum, which would naturally apply prospectively. Thus, the appellants are getting away lightly on the issue of such liability, the exact amount of which is to be determined. The liability of each of these establishments would be co- extensive with BCCL, Mumbai.We are, however, not able to persuade ourselves to agree with the submission of the learned senior counsel for the appellant for the reason that what has effectively been done in the present case, under the agreement in question, is that TPHL has handed over its office space, employees and control to BCCL, Mumbai, for all practical purposes, to the extent that the letter pads are also being used without any due regard as to which entity the instructions are being issued from. This is not a case of a singular document being issued, but a number of documents where this practice has been followed. Just to make an endeavour on paper to somehow keep these two segregated for various labour law ramifications would not be an appropriate principle to accept, more so taking into consideration the very purpose for which the said Act was enacted.28. We have, thus, no doubt in rejecting even the case of