Case: The Associated Industries (P) Ltd Vs. The Regional Provident Fundcommissioner, Kerala Trivandrum

The appellant is a Company which runs a tile factory and an engineering works at Quilon. The tile factory began its career in July, 1943, and the engineering works in September, 1950. It is common ground that these two industries are separate and distinct and that they are carried on by the same Company and on the same premises. It is also common ground that a licence issued under the Factories Act, 1948 has been issued to the appellant for the entire premises and it is under this licence that the said premises are allowed to be used as one factory under the said Act and the rules framed thereunder.2. It appears that the respondent, the Regional Provident Fund Commissioner, Vanchiyoor, Trivandrum, intimated to the appellant on March 10, 1953, that the Act as well as the scheme framed under it were applicable to the appellants factory, and so, the appellant was called upon to deposit in the Sub-Office of the Imperial Bank of India the contributions and administrative charges as required by S. 6 of the Act. The same requisition was repeated on March 25, 1953 and April 24, 1953. The appellant disputed the correctness of the view taken by the respondent that the appellants factory fell under the purview of the Act, and so, it refused to comply with the respondents requisition. Thereupon, the respondent wrote to the appellant on June 16, 1953 informing it that appropriate action would be taken to compel the appellant to make the necessary deposit and submit returns as required by the Act in case it failed to comply with the notices issued in that behalf. At this stage, the appellant moved the High Court of Kerala by a writ petition (O. P. No. 97/1953) in which it claimed a writ of certiorari quashing the notices issued by the respondent against it and restraining the respondent from proceeding further in the matter and for other incidental reliefs.3. The main contention raised by the appellant before the High Court was that the appellants factory was not an establishment to which S. 1 (3) of the Act applied. The High Court has rejected this contention. Then it was urged before the High Court on behalf of the appellant that the effect of the notices served on the appellant by the respondent was retrospective in character and it was urged that the said notices were illegal. This argument was also rejected by the High Court. The appellant further contended before the High Court that since for the relevant period the employees had not made their contributions, it would be inequitable to enforce the notices against the appellant.The High Court noticed the fact that it had been conceded by the respondent that he did not propose to collect the employees share of the contribution to the fund for the relevant period from the appellant, and it held that the concession so made was proper and fair and so, there was no substance in the grievance made by the appellant that giving effect to the notices served on it by the respondent would be inequitable and unjust. On these findings, the writ petition filed by the appellant was dismissed with costs. It is against this order that the appellant has come to this Court with a certificate granted by the High Court.

Court's reasoning:
6. Having dealt with this aspect of the matter, this Court proceeded to consider the question as to whether numerical requirement of the employment of 50 persons, as the section then stood, applied to the factory or to the industry, and it held that the said test applied not to the industry but to the factory. Thus, the conclusion was that in order that a factory should fall under S. 1 (3) (a), it must be shown that it is engaged in any such industry as is specified in Sch. I, and the number of its employees should not be less than 50.7. This decision makes it clear that S. 1 (3) (a) is not confined only to factories which are exclusively engaged in industrial work to which Sch. I applies, but it also takes in composite factories which run industries some of which fall under Sch. I and some do not. In order to make the position clear let us state the true legal position in respect of the scope of the application of S. 1 (3) (a) in categorical terms. If the factory carries on one industry which falls under Sch. I and satisfies the requirement as to the number of employees prescribed by the section, it clearly falls under S. 1 (3) (a). If the factory carries on more than one industry all of which fell under Sch. I and its numerical strength satisfies the test prescribed in that behalf, it is an establishment under S. 1 (3) (a). If a factory runs more industries than one, one of which is the primary and the dominant industry and the other are its feeders and can be regarded as subsidiary, minor, or incidental industries in that sense, then the character of the dominant and primary industry will determine the question as to whether the factory is an establishment under S. 1 (3) (a) or not. If the dominant and primary industry falls under Sch. I, the fact that the subsidiary industries do not fall under Sch. I will not help to exclude the application of S. 1 (3) (a). If the dominant and primary industry does not fall under Sch. I, but one or more subsidiary, incidental, minor and feeding industries fall under Sch I, then S. 1 (3) (a) apply. If the factory runs more industries than one all of which are independent of each other and constitute separate and distinct industries, S. 1 (3) (a) will apply to the factory even if one or more, but not all of the industries run by the factory fall under Sch. I. The question about the subsidiary, minor, or feeding industries can legitimately arise only where it is shown that the factory is really started for the purpose of running one primary industry and has undertaken other subsidiary industries only for the purpose of sub serving and feeding the purposes and objects of the primary industry; in such a case, these minor industries merely serve as departments of the primary industry; otherwise if the industries run by a factory are independent, or are not so integrated as to be treated as part of the same industry, the question about the principal and the dominant character of one industry as against the minor or subsidiary character of another industry does not fall to be considered.It is true that since this Court dealt with the two respective cases of the Company and the Mills in one judgment, the test as to the principal character of the industrial activity of one industry in relation to the character of the minor industry came to be considered; but the application of the said test became necessary essentially because of the case of the Oudh Sugar Mills. In the case of the Company, however, the several activities were not minor or subsidiary, but were independent, and it was held that the factory of the company fell under S. 1 (3) (a).Therefore, in our opinion, there is no scope for the argument in the present case that the engineering industry which the appellant runs is not the primary or dominant industry but the manufacture of tilesour opinion, this argument is plainly untenable. If the tiles industry and the engineering industry are independent of each other, then no question arises as to which is principal and which is subsidiary. As soon as it is shown that the factory is carrying on two industries independent of each other one of which falls under Sch. I, it becomes a composite factory to which S. 1 (3) (a) applies. When S. 1 (3) (a) requires that the factory should be engaged in any industry specified in Sch. I. considerations as to whether the industrial activity is major or minor can arise only where some activities are dominant and others are of the nature of feeding activities, but not otherwise. Where the industrial activities are independent and the factory is running separate industries within the same premises and as part of the same establishment and under the same licence, it is difficult to accept the argument that in dealing with such a factory, enquiry would be relevant as to which of the industries is dominant and primary, and which is not. Therefore, in our opinion, the High Court was plainly right in rejecting the appellants case that its factory did not attract the provisions of S. 1 (3) (a) of the6 of the unamended Act provides, inter alia, that the contribution to be paid by the employer to the fund shall be 6-1/4% of the basic wages, dearness allowance and retaining allowance, if any, for the time being payable to each of the employees, and the employees contribution shall be equal to the contribution payable by the employer in respect of him. This section further provided that the employee was competent to make a higher contribution not exceeding 8 and one-third per cent of his emoluments specified in the said section. By the amendment made in 1962, this rate has been enhanced to 8% in respect of any establishment or class of establishments which the Central Government, after making such enquiry as it deems fit, may by notification in the Official Gazette specify. We were told that in regard to the engineering industry, this amended sub-section has been extended by a notification, and Mr. Pais apprehension is that if the factory of the appellant is held to be an establishment to which S. 1 (3) (a) applies on the ground that it is a composite factory which runs several industries one of which falls under Sch. I, it is likely that the increased rate may be made applicable to the factory as a whole. We ought to add that Mr. Pai conceded that subsequent to the decision of the appellants writ petition in the High Court, the tiles industry has also been included in Sch. I, but the revised rate has been made applicable to it.Pai contends that if the factory is treated as falling under S. 1 (3) (a), distinction should be made in the different industries run by the factory for the purpose of calculating the contribution of the employer to the Providentdo not propose to deal with this contention in the present appeal. That is a matter which may well have to be decided by the respondent, and it is not open to Mr. Pai to request this Court to decide such a hypothetical question in the present proceedings.