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

(2) Since about 1931, a Cotton Mill in Bombay run by Hirji Mills Ltd. used to manufacture textile goods. On a petition filed by their creditors, Hirii Mills Ltd. were ordered to be wound up under an order of this Court, dated 17th December, 1954. On 22nd July, 1955, the plaintiffs, Shri Sayaji Mills Ltd. , a public limited company registered under the Indian Companies Act, purchased the assets of the Hirji Mills Ltd. for Rs.from the Official Liquidator. The conveyance in favour of the plaintiffs was executed on the 5th of December, 1955. Theof the consideration shows that, Rs. 5,00,000/was the price of the land, Rs.the price of the structures and the balance viz. . Rs.the price of the plant, machinery andThe plaintiffs neither acquired the goodwill of the business nor did they purchase the assets of the Hirji Mills Ltd. , as a going concern. The manufacturing operations carried on by the Hirji Mills Ltd. , had come to an end some time prior to 17th December. 1954 when the winding up order was passed. The Mills had discharged their workers prior to the winding up order.(4) After their purchase, the plaintiffs commenced the manufacturing operations on the 12th November, 1955. On the 28th February, 1956 the Regional Provident Fund Commissioner for this State, who is the defendant to the suit, made certain enquiries of the plaintiffs and called for the relevant information under the Act, The defendant then asked the plaintiffs to make the employers contribution to the Provident Fund under the Act, but the plaintiffs contended that they were an infant factory within the meaning of Section 16 of the Act and were, therefore, not liable to make contributions to the Provident Fund for a period of three years from the 12th November, 1955 when they commenced manufacturing operations. This contention was rejected by the defendant, who by a letter of 12th December, 1956 called upon the plaintiffs to remit to him contributions payable by them under the Scheme framed under the Act.(5) The plaintiffs thereafter filed a Writ Petition in this Court under Article 226 of the Constitution challenging the right of the defendant to enforce the provisions of the Act against them for a period of three years from the 12th November 1955. That petition was withdrawn and Thereafter the plaintiffs brought the present suit.(6) The learned Principal Judge of the City Civil Court, Bombay, who tried the suit, held by his judgment dated 12th December 1963 that the plaintiffs had not established a new factory on the 12th November 1955 as alleged by them and that the provisions of the Act and the Scheme applied to them from the very date that they commenced manufacturing operations, viz. , the 12th November, 1955. The correctness of this judgment is challenged by the plaintiffs in this appeal.

Court's reasoning:
(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.