SUTARIA AUTOMOBIBES Vs. REGIONAL PROVIDENT FUND COMMR

JUDGEMENT

(1.) This appeal is presented against the order dt.24/27-2-1975 in WP.2992 of 1973 passed by Jagannatha Shetty, J. The writ petition presented under Art. 227 of the Constitution was directed against the order made by the Regional Provident Fund Commissioner in Mysore, Bangalore, under S.7A of the Employees Provident Funds Act, 1952, hereinafter referred to as the Act. Mis Sutaria Automobiles (P) Ltd is a company having its registered office at Fort Road, Belgaum. It was carrying on automobile business at Belgaum and also at Hubli where it had its branch office. Its establishment was covered by the provisions of the Act. On 31-12-1970 a meeting of the Board of Directors of the Company was held and a resolution was passed authorising the sale of the building, lease plot and all the spare parts which were in slock at the Branch Office at Hubli, to a partnership firm called 'Sutaria Automobiles'. Pursuant to the resolution, the partnership firm Sutaria Automobies became an assignee of the lease-hold interest of the company in its Hubli Branch for a consideration of Rs,32,000 under a deed of assignment dt.l-l-1971. The partnership firm also purchased all the stock-in-trade of the Branch Office of the company at Hubli for Rs.67,575. The partnership firm, Sutaria Automobiles, came into existence with effect from 1-1-71 under a registered deed of partnership. According to the case of the appellant partnership firm, the previous employees of the company working in that part of the establishment at Hubli resigned as on 31-12-70 and were taken on duty by the partnership firm on the next day i.e. on 1-1-71. The firm did not pay the contribution of providet fund payable in respect of those employees. The Regional Provident Fund Commissioner after hearing the representative of the firm, made an order under S.7A calling upon the firm to pay the provident fund contribution and administrative charges for the period from 1-1-1971 to Decr 1972. The partnership firm Sutaria Automobiles presented the writ petition challenging the above-said order. The learned single Judge held that the petitioner-firm is not entitled to exemption under S. 16 (1) '(b) of the Act since he found that the same old business of the company was continued by the petitioner with all the establishment, stock-in-trade and fixtures. But since it was contended by the petitioner that the employees who had resigned frcm their jobs had also been included as members of the fund while determining the provident fund contribution for the period during which they were not in service, the learned single Judge quashed the impugned order reserving liberty to the Provident Fund Commr to redetermine the amount of contribution payable by the firm after notice to the petitioner according to law. It is against this order that the petitioner firm has come up in appeal.

(2.) It is the contention of Mr. B. P. Bopanna, appearing for the appellant, that the appellant is entitled to exemption from the application of the provisions of the Act. The relevant part of S.16 reads as follows : 16. Act not to apply to certain establishments : (1) This Act shall not apply-(a) * * * (b) to any other establishment employing fifty or more persons or twenty or more, but less than fifty persons, until the expiry of three years in the case of the former and five years in the case of the latter, from the date on which the establishment is, or has been, set up. Explanation :-For the removal of doubts, it is hereby declared that an establishment shall not be deemed to be newly set up merely by reason of a change in its location." The term 'establishment' has not been defined in the Act. The contention of the appellant is that the appellant-firm is a different legal entity which came into existence on 1-1-71 and has nothing to do with the company which was carrying on its business at the branch office at Hubli before 1-1- 1971, that the business carried on by the appellant-firm is an establishment newly set up on 1-1-71 and therefore entitled to exemption under S.16(1) (b) of the Act. On the other hand, the respondent contends that the mere change of ownership of the business carried on at Hubli does not entitle the appellant to such an exemption.

(3.) The scope of S.16(l)(b) was considered by the Supreme Court in Lakshmi Rattan Engineering Works v. Regl PF Commr (1966) 1 LLJ. 741.. In that case, the Govt of India had started a diesel engine factory at Faridabad in 1952. The appellant purchased the factory from the Govt of India in 1955. The main dispute was whether the factory must be deemed to have been established in 1952, as contended by the Commr or whether the period of three years allowed under Sec. 16(1) (b) should count from the date on which the appellant purchased the factory from the Govt of India. The relevant part of S.16(l) (b) which was applicable to the factory in that case read as follows : (1) This Act shall not apply to-(a) * * (b) any other establishment, established whether before or after the commencement of this Act, unless three years have elapsed from its establishment. Rejecting the contention of the appellant, it was observed as follows : The words of S.16 (1) (b) are quite clear and leave no room for doubt that the period of three years should count from the date on which the establishment was first established and the fact that there has been a change in the ownership makes no difference to the counting of this period of three years, so long as the establishment has continued to work all along. It was held that under the terms of the agreement between the appellant and the Govt of India, the appellant took over the running factory and therefore, there was a mere change of ownership in 1955 and that the date of establishment must remain the date of its first establishment in 1952.