Case: State of Punjab Vs. Satpal &amp; Another

2. The facts disclosed in the case are as follows:One Tirath Ram (who was examined as P. W. 4) started a factory by the name of Net Ram Tirath Ram on November 9, 1957. The factory was manufacturing in the yearser blades. Later, the name of this manufacturing concern was changed to Jai Bharat Metal Industries. Tirath Ram was then the sole proprietor of the concern. In September 1962, Satpal the present accused and three others joined Tirath Ram as Partners. The firm, however, continued under the same name till February 13, 1963. On that date the older partnership was dissolved. Tirath Ram went out of the business and the remaining partners continued running the factory jointly. This went on till April 30, 1963. The factory was run in the same premises with the same labour and under the same name. In April 1963, the factory was removed to other premises, a new electrical connection was obtained but the old machinery of the factory save the electric motor was installed, and the factory continued, although not for the original business, but for the business of manufacturing iron nails for shoes for the bullocks.3. The firm did not at that time maintain a register of provident, funds. It appears that it had been employing less than 20 workmen till November 13, 1962 when it began to employ 20 or more workmen. The factory reached the figure of 20 in the employment of workmen while the factory was still in the old premises. In other words, when the factory first employed 20 workmen, a period of 5 years had already elapsed from the initial establishment of the factory by Tirath Ram.4. Several pleas were taken in defence by the respondents. Only one of them prevailed in the Court of trial and that was that the prosecution had not led any evidence to show that the factory ever employed 20 persons prior to November 13, 1962. It was, therefore, held that the period of 5 years grace allowed by Section 16 (1) (b) of the Employees Provident Funds Act would have elapsed on November 13, 1967 and no prosecution for the breach of the section in respect of 1964 and 1965 could have been started in these three cases. On the other points the findings of the trial court were against the respondents. However, in view of this point, acquittal was ordered. In appeal to the High Court, the State of Punjab took the ground that the infancy period to 5 years during which the factory was exempt from the operation of Section 16 (1) (b) was to be reckoned from the date on which the establishment was or had been set up, and not from the date of which factory establishment first began to employ 20 or more workmen. This ground was not accepted by the High Court. Hence these appeals.

Court's reasoning:
We do not think that this makes any difference. In fact, the business had already changed in the hands of the partnership long before the establishment changed its premises. The business of the partnership was running anfor the manufacture of iron articles and the factory continued even though the manufacturing process changed from one articles to another. We must, therefore, hold that the same factory continued in spite of the change from Tawas to iron nails in the manufacturingHere again, we are not concerned with the law of partnership but with the Employees Provident Funds Act.The law takes into account only the existence of establishments and the employment of a certain number of persons in factories over a given period. It is for this purpose that change of location or change of composition of partners or even a change in the manufacturing process is not considered vital in the application of this law.This was laid down by this Court in very explicit terms in Civil Appeals Nos. 572 and 573 of 1964, D/(SC) (Lakshmi Rattan Engineering Works v. Regional Provident Fund Commissioner Punjab).This point is also covered in the case we have cited above. A further ruling on the subject exists in R. Ramakrishna Rao v. State of Kerala, (1968) 2 SCR 819  = (AIR 1968 SC 1367 ). In that case also employment of 20 or more persons began later than the commencement of the establishment.Explaining thethis Court states that the word is in theclearly indicates a newly started business, and the words has been a business which has been in existence before. It is, therefore, held that the period of infancy must be calculated from the first establishment of the factory and not from the moment of time when the figure of 20 or more is first reached.9. Applying these rulings, it is quite clear that in this case, the factory must be taken to have started in the year 1957 and that is the point of time when the establishment first came into existence. On 13th November, 1962, it had already a life of 5 years, and on that date when 20 workmen came to be employed, the scheme under the Employees Provident Funds Act began to apply. The learned Magistrate was therefore wrong in calculating the period of infancy from the first employment of 20 workmen. He had to calculate that period from the first day on which the establishment came into existence. The acquittal of the respondent Satpal in the three appeals was therefore erroneous and must be set aside.