Case: Sayaji Mills Limited Vs. P.A. Bhaskar

out the intention of the legislation". The learned Judge refers to the definition of the "factory" in Section 2 (g) and concludes that the change of ownership cannot start a fresh date of the establishment of a factory, nor even the fact that subsequently, the original machinery was reconditioned. According to the learned Judge, the emphasis in the Scheme is on the factory which carries on manufacturing process and on the employees who are the beneficiaries under the Act, and the exemption cannot apply merely because the factory has changed hands. The same view has been taken by Mr. Justice Grover. as His Lordship then was, in Hindustan Electric Co. Ltd. v. Regional Provident Fund Commr. , AIR 1959 Punj 27. In that case the Government of India sold a factory belonging to it on the 17th February, 1955. The Regional Provident Fund Commissioner called upon the purchasers to contribute to the Provident Fund but they contended that they established the factory after their purchase in October, 1955 and, therefore, they would be entitled to the protection available to the infant factories under Section 16 (1) of the Act This contention was rejected on the ground that the date of the establishment of a factory is the date when the factory starts its manufacturing process and the fact that a new company or concern subsequently takes over acquires the factory,. does not shift the date of the establishment of the factory to the date of its being taken over. The period of three years under Section 16 (1) was held to begin from the date of the original establishment of the factory and not from the date when the purchasers started manufacturing operations.(24) This judgment went in appeal in Regional Provident Fund Commissioner, Punjab v. Lakshnri Ratten Engineering Works Ltd. . AIR 1962 Punj 507 where a Division Bench, consisting of Dulat J. and Dua, J. (as His Lordship then was) affirmed the view of Grover, J. In regard to the interpretation of Section 16 (1) of the Act. The learned Judges held that what was exempted by Section 16 was only the factory which was not established for more than three years. If the factory was being used for manufacturing purposes long before the new purchasers acquired it, it could not be said that the factory was not established for more than three yeara(25) The only decision which has struck a discordant note is that of Anant-narayanan, J. In Vittaldas Jagannathdas v. Regional Provident Fund Commr. , AIR 1965 Mad 508 in which it was held:--"that an establishment means an "organised body of men maintained for a purpose". . . . . Where, therefore, on the entire complex of facts of a given case, it can be concluded that the legal entity "the establishment" had come totally to an end. and was succeeded by a fresh legal entity, then that fresh entity is the entity to which the Act applies as a first impact and, if that entity is entitled to infancy protection, that protection will have to be granted as a matter of course; even if it happens by coincidence to have employed a large part of the personnel of the previous establishment". That was a case of a lease of a cinema house and the learned Judge held that on the termination of the old lease of the talkies a new establishment must be deemed to have come into existence so as to attract the exemption of Section 16 (1). With respect we are unable to agree with this decision. In the case of a lease of a cinema house, it would, in our opinion, be difficult to hold that the new lessee who conducts the same business has set up a new establishment so as to be able to claim the exemption under Section 16 (1). If a new lessee or a new purchaser comes on the scene one may say that a new concern has come into existence. What Is, however, relevant for the purposes of Section 16 is not whether it is an old or a new concern, but whether it is a new establishment.(26) The decision of Anantanarayan, J. was overruled by a Division Bench in M/s. E. L. Sahni and Co. v. Union of India, AIR 19s6 Mad 416, while hearing an appeal in another matter. The learned Chief Justice who delivered the Judgment of the Bench savs that the exemption under Section 16 (1) is available to the establishment as such and not to the owner or the lessee or the manager thereof. It cannot be postulated that each time there is a change of hands, a new establishment comes into existence. In taking this view, the Division Bench has followed the decision of the High Courts of Calcutta and Punjab, to which we have referred earlier,(27) A Division Bench of the High Court of Kerala in Kunnath Textiles v. Regional Provident Fund Commr. , AIR 1959 Ker 3 , a Division Bench of the High Court of Andhra Pradesh in Nazeena Traders (P) Ltd. v. Regional Provident Fund Commr, Hyderabad, AIR 1965 Andh Pra 200 and a single Judge" of the High Court of Guj-rat in New Ahmedabad Bansidar Mills Pvt. Ltd. , v. Union of India, AIR 1968 Guj 71 , have taken the same view. The decision of the Kerala High Court is not apposite to the point before us because there the existing owners had resorted to a subterfuge for evading their liability under the Act. The Judgment of the Andhra Pradesh High Court does not refer to previous authorities, but the learned Judge of the Guiarat High Court has relied on the judgment of Tendolkar, J. and on AIR 1958 Punj 55 and AIR 1959 Cal 783 , to which we have already referred.(28) In the result, we hold that the provisions of the Act and the Scheme are applicable to the plaintiffs. They are, therefore, liable to make their contribution to the Employers Provident Fund.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 0

Reasoning from the judgment:
0[ds](14) We are unable to accept this argument. In the first place, it is necessary to clarify that no evidence was led by the plaintiffs to show that they had in fact renovated the old Mills or that they had brought in new capital. Mr.says that the averments made by the plaintiffs in paragraph 3 of the plaint, that they had put in their own capital, that they had brought new machinery, that they had renovated the old machinery, that they had employed new staff and workmen, entered into fresh commitments for supply of raw materials, made new arrangements for the sale of finished goods and commenced production of goods of an entirely different type, were not traversed by the defendant in his written statement. Now, by paragraph 7 of his written statement the defendant denied that the factory set up by the plaintiffs on 12th November, 1955 was a new factory within the meaning of the Act. The defendant also denied that on the closure of the Hirji Mills Ltd. , the provisions of the Act had ceased to apply to the factory run by them, because according to the defendant, the Act would apply to the factory irrespective of the closure of the Mills. The burden of establishing that the exemption contained in Section 16 (1) applied to the particular establishment was on the plaintiffs. It was not enough for them to say in the plaint that they had brought in fresh capital or had renovated the old machinery or had purchased new machinery. Pleadings are not evidence, and therefore, we cannot assume the existence of the multifarious facts on which the plaintiffs counsel relies.(15) The importance of considerations such as those referred to by the plaintiffs in paragraph 3 of the plaint is that whether the exemption under Section 16 (1) of the Act can apply, i. e. , whether a particular establishment is an infant factory, must primarily depend upon the facts and circumstances of each case. The mere circumstance that the ownership has changed hands, cannot justify the conclusion that the Act will cease to apply to the particular establishment if prior to the change of hands, the Act was applicable toThe learned Judge rejected the contention of the Company that the Mills ceased to be established when the liquidation order was passed, that they ceased to be established for a second time when the lease of Kotak and Co. expired or that the new establishment was set up when Messrs. Babulal Shrivallabh obtained a fresh lease. After referring to the provision contained in Section 1 (3) of the Act, the learned Judge says: "the important point to notice about this provision is that the Act is made applicable to factories and not to the owners thereof; or, in other words, it applies to factories irrespective of who the owners from time to time may be". The learned Judge proceeds:"the question is whether the order of liquidation and the consequent temporary discontinuance of business until a lease was granted to Kotak and Company has the consequence of making the factory which was established cease to be established. In my opinion the answer to this question must be in the negative. A temporary cessation of the activities of an established factory cannot lead to the result that the factory ceases to be established for the purposes of the Employees Provident Funds Act, for if it did, the class of employers who spare no ingenuity in seeking to deprive the employees of all the benefits conferred upon them by statute would have convenient handle whereby the activities of an established factory have to be discontinued for a few months in order to deprive the employees of the benefits under the Employees Provident Funds Act. I take it that the establishment of a factory involves that the factory has gone into production and no more. . . . . but once it goes into production, a temporary cessation of its activities, for whatever reasons that cessation takes place, cannot, in my opinion, take the factory out of the category of an established factory for the purposes of the Employees Provident Funds Act. "towards the conclusion of his judgment, the learned Judge says that:". . . . . even a complete change in the whole body of employees cannot make a factory which is established, cease to be established. In any event, the Employees Provident Funds Act is a beneficial legislation for the benefit of the employees and every construction of its provisions which would defeat the object of the legislation and lead to an evasion, must be rejected, unless the clear language of the Act leave no option to the Court but to accept such an interpretation. "we are in respectful agreement with thisIn the result, we hold that the provisions of the Act and the Scheme are applicable to the plaintiffs. They are, therefore, liable to make their contribution to the Employers Provident Fund.