M/s. Shree Vishal Printers Ltd., Jaipur vs Regional Provident Fund Commissioner, Jaipur & Anr.

HELD: 1.1 Civil Appeal No.4475/2010 is by BCCL, Jaipur, which is not a separate legal entity but was really claimed to be an establishment of the parent company, albeit set up in Jaipur. The counsels appearing for the appellants were of the belief that it was facts of this case which had caused confusion in the mind of the Regional Provident Fund Commissioner as, in their perspective, exemption could not have been really sought within the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. This is so, as BCCL, Jaipur was not a separate legal entity, but, part of the parent company directly. The case would, thus, be fully covered by the provisions of Section 2A of the said Act and mere location of departments and branches in other cities would not have extended the benefit of the exemption to this company. [Para 4, 11][153-B; 157-C-D]

1.2 As regards Civil Appeal No. 4476/2010, the agreement dated 25.7.1986 between the two parties, which gave rise to the Provident Fund Commissioner to initiate proceedings, was in supersession of an earlier agreement dated 13.12.1985. The business reason stated for entering into this agreement was the commencement of publication of the Jaipur edition of the daily newspapers of BCCL, Mumbai, i.e., The Times of India and Navbharat Times. The agreement records that TPHL had opened an office in Jaipur, where it had equipped itself with trained and experienced staff and all infrastructural, secretarial, administrative and marketing facilities. Since 23.9.1985, it had been providing various services to BCCL, Mumbai, including office space for use and occupation, accounting facilities, stenographers, typing, and so on. The services which were now further sought to be provided to BCCL, Mumbai included marketing, development work, realisation of dues, adequate office space, accounting facilities, infrastructure, packing/bundling of daily newspapers (at the cost of BCCL, Mumbai), etc. BCCL, Mumbai was to pay to TPHL an amount calculated @ 5% as commissions on Net Advertisement Revenue and Net Circulation Revenue. [Para 12, 13, 14][157-E-H; 158-A, D]

1.3 Once that is conceded that 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. [Para 18][159-C]

1.4 In the instant case, a branch or a unit of BCCL, Mumbai is not dealt with. 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. [Para 20][159-G; 160-A]

1.5 It was submitted that the two companies were functionally dependent. Practically all three companies were working from the same building, albeit on different floors, and the office of TPHL was open for the use of BCCL, Mumbai employees. It was also sought to be contended that the Manager of BCCL, Mumbai was signing papers relating to TPHL and notices relating to the closure of offices of the two on Mahashivratri and Holi. However, a perusal of the documents in question shows that they were really endorsements to TPHL, which would be natural considering that there would be no requirement of work to be sourced in case the office of BCCL, Mumbai itself was closed, and no editing, marketing work was required to be carried out. On the issue of security staff, since the building was one, logically common directions were possible. The executive of TPHL was using the letterpad of BCCL, Mumbai. Furthermore, the nature of the agreement 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, electricity bill, maintenance costs, etc., were to be borne by TPHL. If the said facts are analysed 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. Thus there is no doubt in rejecting the case of TPHL. [Para 22-24, 28][160-D-H; 161-A, F]

1.6 SVPL for the relevant period of time, was carrying out exclusive work only for BCCL, Mumbai, it was pleaded that there was no commonality of directors and shareholders of the two companies, nor was there a cross shareholding, an aspect for which charts have been filed. The subsequent fact was also that, at some stage, it got merged with another company. As regards 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. There was ‘Non-Exclusivity Clause’ in the agreement between the two parties. 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 emphasized 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 said space for packaging and storage operations.[Para 32, 33, 35][162-F-H; 163-A-B, D-F]

1.7 Respondent sought to emphasise the functional dependence between the companies. The aspect of the Manager of BCCL signing papers relating to SVPL was emphasised, including notices of closure. 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. The said 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. [Para 3637][163-F-H]

1.8 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, the same is not of much consequence for the reason that BCCL, Jaipur is admittedly a branch office of BCCL, Mumbai. In the complete conspectus of facts, after divorcing different aspects of the three establishments, the conclusion different from the one which has come to for TPHL cannot be arrived at. 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. 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. This is done, 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; 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. [Para 38, 40]

1.10 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. [Para 41][164-G]

1.11 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 instant case. [Para 42] [164-H; 165-A]

1.12 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. The costs is imposed on all the three appellants, but of varying amounts. As there was no case whatsoever of BCCL, Jaipur, appellant in CA No. 4475/2010, the appeal is dismissed with costs of Rs.50,000/-, while imposing costs on the other two appellants of Rs.20,000/- each. [Para 43, 44][165-D-E]

L.N. Gadodia& Sons and Anr. v. Regional Provident Fund Commissioner (2011) 13 SCC 517; Management of Pratap Press, New Delhi v. Secretary, Delhi Press Workers’ Union, Delhi & Its Workmen AIR 1960 SC 1213; Associated Cement Companies Limited, Chaibassa Cement Works, Jhinkpani v. Workmen AIR 1960 SC

56 – referred to.