M/s Torino Laboratories Pvt. Ltd. vs Union of India & Ors.

Held: Appellant and respondent No.3 were engaged in the same industry i.e. pharmaceutical; they carried on business in premises built on contiguous plots of land; shared common telephone and facsimile numbers; had common website and e-mail IDs; their Registered Office/Head Office and administrative office were the same; both employed common security to guard the premises; there was unity of management inasmuch as while the two brothers were Directors of respondent No.3; one of them was also the Director of the appellant while another brother and wife of one the brothers were Directors in the appellant Company – There was also unity of finance inasmuch as the HUF of one the brothers and his family members funded both the companies – These findings by the APFC cumulatively establish beyond doubt that the two entities were rightly treated as common for the purpose of the EPF Act – Plea of the appellant that since the appellant and respondent No.3 are two different juristic entities thus, s.2A cannot be applied and also, the theory of clubbing cannot be invoked is rejected – Authorities justified in seeking remittance of the dues from September 1995 – No merit in the appeal – Theory of clubbing. [Paras 12, 31, 34-37] Theory of clubbing – Determination of unity of ownership; unity of management and control; features demonstrating the presence of functional integrality – Tests for: Held: No absolute and invariable test can be laid down for all cases – The real purpose of the test is to find out the true relation between the Parts, Branches and Units – If in their true relation they constitute one integrated whole, it could be said that establishment is one and if not, they are to be treated as separate units – Each case has to be decided on its own peculiar facts, with regard to the scheme and object of the statute under consideration and in the context of the claim – In a given case, unity of ownership, management and control may be the important test, while in certain other cases Functional Integrality or general unity may be the determinative consideration – In some instances, unity of employment could be the most vital test – The employer/management’s own conduct in mixing up or not mixing up the capital, staff and management could in a given case be a significant pointer – Mere separate registration under the different statutes cannot be a basis to claim that the units are separate – Similarly, maintenance of separate accounts and independent financial statement is also not conclusive – Onus lies on the employer/management to lead necessary evidence to bring home their contention – Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 – s.2A. [Para 34] Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 – s.2A – Establishment to include all departments and branches – Plea of the appellant that since the appellant and respondent No.3 are two different juristic entities thus, s.2A cannot be applied and also, the theory of clubbing cannot be invoked:

Held: Rejected – While s.2A sets out that the establishment will include all departments and branches it does not deal with a scenario as to the tests for determining whether two juristic entities are set up as an artificial device and subterfuge to sidestep the provisions of the Act – Artificial devices, subterfuges and facades are commonly resorted to, to create a smokescreen of separate entities for a variety of purposes – Courts faced with such a scenario have a duty to lift the veil and see behind applying the well-established tests to determine whether the entities are really separate entities or are they really a single entity – Hence, the contention that s.2A cannot be applied if ostensibly two separately registered entities under the Companies Act are involved is rejected, especially when the Court is interpreting a beneficial legislation like the EPF Act. [Paras 12, 31] Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 – s.16(1)(d) – Benefit of infancy protection for the period 26.09.1995 to 22.09.1997 u/s.16(1)(d) as it then stood, if to be given: Held: No – In the present case, the claim for infancy protection under the erstwhile s.16(1)(d) would not arise in view of the finding of clubbing – Being an integrated unit of respondent no.3 since 1995, no separate infancy protection will enure to the benefit of appellant. [Para 36]