J G VAKHARIA Vs. REGIONAL PROVIDENT FUND COMMISSIONER

JUDGEMENT

(1.) THIS petition discloses a rather glaring attempt at resorting to a subterfuge in order to defeat the law and the question that we have to consider is whether the subterfuge has succeeded and whether the subterfuge should be permitted in order to circumvent the law of the land. The petitioner is the father of two major and two minor sons. In October 1949 there was a partnership between the petitioner and his father in the name of Standard Silk Mills and this partnership was doing business of manufacturing silk and dealing in silk yarn and silk cloth. Although the partnership was commenced in October 1949, the actual business of manufacturing silk was started from 13 November 1950. It seems that subsequent to 1950 the father died and there was new partnership sometime in November 1951 consisting of the petitioner and his two major sons. On 22 October 1953 this partnership purported to close its manufacturing business and it entered into an agreement which is dated 24 October 1953 which sets out the fact that the business of manufacturing silk was being closed on account of slackness In business and on account of lack of purchase of goods and on account of financial difficulties and therefore this business was being discontinued from 22 October 1953. This agreement further recorded that in future if any of the parties wanted to start any department, that party would be entitled to start that department of his own accord and at his own costs by executing rent notes to the partnership firm of Standard Silk Mills. Lest anyone should throw any doubt either on the sanity of the parties to this agreement or to the wisdom of the transaction which it was evidencing, at the foot of the agreement it is solemnly stated that the parties wore signing this agreement without any intoxication. It is the case of the petitioner that subsequent to this agreement five units were started which did manufacturing processes which wore being originally done by the Standard Silk Mills, and these units were:

(2.) ON these facts the petitioner contends before us that there is no factory now in existence to which the Employees' Provident Funds Act can apply, and therefore the demand made by the Regional Provident Fund Commissioner upon him to pay the contribution necessary under that Act is an illegal demand. The Employees' Provident Funds Act was passed in 1952 and under Sub-section (3) of Section 1, it applied in the first instance to all factories engaged in any industry specified in Schedule I in which fifty or more persons are employed, and it is not disputed that the factory in question is engaged in the industry specified in Schedule I. But the contention of the petitoner is that if these five units are to be treated as separate units, then none of these units employ fifty or more persons. Attention is also drawn to Section 16 which exempts from the operation of the Act under Sub-section (b) any other factory, established whether before or after the commencement of the Act, unless three years have elapsed from its establishment. These factories are known as infant factories and the contention of the petitioner is that as these five factories came into existence on 4 November 1953, they are infant factories and the Act cannot apply them. The answer given by the Regional Provident Fund Commissioner is that the factory to which the Act is sought to be applied is the Standard Silk Mills. Admittedly it came into existence on 13 November 1950; admittedly if that factory is looked upon as a factory constituted by all the five units now separately working, it employs more than fifty workers, and therefore, three years after it came into existence the Act applied to it and there is a liability upon that factory to make the contribution to the employees' provident fund as laid down in the Act.

(3.) THERE are certain striking and salient facts in this case to which attention must be drawn. The five units which it is suggested constitute five separate factories are all run by members of one undivided family. In the first place, there is the father himself, the petitioner and then we have not only the two major sons but also the two minor sons. The premises in which these so-called factories are being run continue to belong to the partnership formed of the Standard Silk Mills and even the machinery for the different processes also belongs to the partnership. The Standard Silk Mills originally did the work of various processes which resulted in the manufacture of silk and it also sold yarn and cloth. Those very processes in identical condition and in identical location are being carried on with only this difference that instead of those processes being carried on by the Standard Silk Mills they are now allowed to be carried on by five separate units. In this connexion it is important to draw attention to the rent notes that were signed by the five persons who were running these five units. There is no lease of the premises at all. The only lease is of the machinery and even this lease is not for any specific duration, but the lease agrees to hand over possession of the said machineries as and, when demanded without any notice and dispute. If the lessee does labour work on the machineries taken on lease, then they agree that the first preference would be given to the lessor and it is only if the lessor cannot afford to give the lessee labour work that the lessee would be entitled to do the labour work of somebody else. A right is also expressly reserved for workmen working in one part of the premises going to another. Therefore, this lease excepting the clever device or subterfuge does not bring about any change whatsoever in the conditions that prevailed before this lease was executed and subsequent to it. The same machinery is being used for the same purpose. Instead of the Standard Silk Mills manufacturing silk by different processes, the silk is being manufactured by the very same processes in the very same machinery by these five units artificially set up which are under a clear obligation to manufacture silk by various processes on behalf of what might be called the parent company.