T. A. ZAINULABDEEN v. REGIONAL P. F. COMMISSIONER — 1974 DIGILAW 156 (KER)

Judgment :- 1. This petition has come up before us on a reference order made by Isaac J. on the 27th June, 1973 and pursuant to the direction of the Chief Justice to post the case before a Full Bench. The order of reference of Isaac J. is in these terms: "The question raised in this case is precisely covered by a Division Bench decision of this Court in Mohammed Kutti (K. M.) v. R. P. F. Commr. (1968) 2 L.L.J. 466. This decision was cited before me in O. P. 6131 of 1970 which was decided by me on 28 51970. It appears to me that in the light of the clear provision contained in sub-s. (5) of S.1 and S.2A of the Employees' Provident Fund Act, 1952, and the decisions of the Supreme Court in Lakshmi Rattan Engineering Works v. The Regional Provident Fund Commissioner, Punjab and others (1966) 1 L.L.J. 741, and The State of Punjab v. Satpal, (1970) 2 L.L.J. 64, the view expressed by the Division Bench is open to doubt. I, therefore, direct the case to be placed before the Honourable Acting Chief Justice for being posted before a larger Bench." 2. The petitioner is one of the legal heirs of the late Sri Abdul Kadir Musaliar. Musaliar died on 21st May, 1961. In 1962 the heirs of Abdul Kadir formed a partnership for running the rubber estate left behind by Abdul Kadir. According to the petitioner, this firm consisting of Abdul Kadir managed the estate, which remained undivided, till the 13th of March, 1966. By that time, it is alleged, dissensions among the heirs reached a stage which made it impossible for the firm to continue the management of the estate. It is said that the management of the estate was therefore entrusted, as agreed upon by the partners, with one Sri O. M. Abraham, an advocate. Sri. O. M. Abraham managed the estate on behalf of the sharers till the end of June 1966 and according to him the estate, as desired by the sharers, was partitioned into eight plots and he handed over possession of specific portions of the estate to the erstwhile partners of the firm, the heirs of the said Abdul Kadir. He also said that the services of the workmen were terminated after payment of retrenchment compensation after due notice, and provident fund benefits. He also said that the services of the workmen were terminated after payment of retrenchment compensation after due notice, and provident fund benefits. He filed an affidavit dated 14 21970 before the 1st respondent, the Regional Provident Fund Commissioner dated 14 21970, and a copy of that affidavit has been produced as Ext. P4. The case of the petitioner is that the old establishment which admittedly was governed by the Employees' Provident Funds Act, 1952 (for short the Act) got disintegrated and gave rise to separate and distinct establishments and that the Act was not applicable to these different units since the owners of those units did not employ 20 or more persons. This case was placed before the 1st respondent is clear and it can be seen from the order Ext. P5 passed by him rejecting the claim put forward by the petitioner and others. The relevant part of the order Ext. P5 in this regard is Para.2 thereof which we shall extract: "It has been intimated that the estate was partitioned among 8 partners on 30-6-66 and that after the partition the estate was not functioning till 8/66. As the partition of the estate took place subsequent to coverage of the estate under the Act, the change in management/ ownership which occurred subsequently does not affect the continuity of coverage under the Employees' Provident Funds Act and Scheme thereunder. The employers were repeatedly requested to comply with the requirements so as to avoid action under the penal provisions of the Employees' Provident Funds Act and the Scheme 1952." 3. It is clear from what is stated in Para.2 that the 1st respondent has proceeded on the basis that even if there was a partition as alleged by the petitioner and others there will be no change in the liability under the Act as the original establishment was covered by the provisions of the Act. This view is clearly opposed to that taken by this court in Mohammed Kutti v. Regional Provident Fund Commissioner, Trivandrum and others (1968 (2) L.L.J. 466). Chief Justice M.S. Menon concluded his judgment thus: "What we have before us, however is not a change in the ownership of an establishment which continues to exist as before; but the cessation of an establishment by disruption into three separate establishments by the partition effected among the petitioner and his two sisters on 1 July 1964. Chief Justice M.S. Menon concluded his judgment thus: "What we have before us, however is not a change in the ownership of an establishment which continues to exist as before; but the cessation of an establishment by disruption into three separate establishments by the partition effected among the petitioner and his two sisters on 1 July 1964. The questions to be considered in such a case are: (a) Is the partition real and bonafide? (b) Did it disrupt the integrity of the establishment and create three separate establishments? (c) And does the separated establishment with which we are concerned employ less than twenty persons?" 4. The decision recognises the position that an establishment need not in all circumstances continue to be the same establishment; a disruption of that establishment is possible on a real and bonafide partition of the estate. The Supreme Court had to deal with a similar question and it had no hesitation in holding that when an establishment had been closed down, the services of the workmen attached to it terminated, the running of the establishment suspended for some time and restarted after an interval employing only some of the workmen whose services had been terminated, the in fancy period for the purpose of S.16 of the Act, must be reckoned from the date of birth of the new establishment and not from the date on which the original establishment had come into being The Supreme Court thus clearly recognised the position that for the purpose of the Act it cannot be said once an establishment always the same establishment. 5. We do not find anything in the decisions of the Supreme Court referred to in the order of reference in Lakshmi Rattan Engineering Works v. Regional Provident Fund Commissioner, Punjab and others (1966 (1) LLJ. 741) and The State of Punjab v. Satpal and another (1970 (2) L.L.J. 64) which militates against the above proposition. In the earlier decision in Lakshmi Rattan Engineering Works v. Regional Provident Fund Commissioner the question was whether the period of three years provided by S.16(1)(b) of the Act should be reckoned from the date on which the establishment started employing 20 or more persons or from the date on which the establishment came into existence. In the earlier decision in Lakshmi Rattan Engineering Works v. Regional Provident Fund Commissioner the question was whether the period of three years provided by S.16(1)(b) of the Act should be reckoned from the date on which the establishment started employing 20 or more persons or from the date on which the establishment came into existence. It was ruled that it was the date on which the establishment came into being that is the relevant date and not the date from which 20 or more persons were employed. One further question arose and that was whether a change of ownership after the commencement of the establishment would avert the running of time and it was ruled that the running of time would not be averted. In The State of Punjab v. Satpal and another (1970 (2) L.L.J. 64) a similar question arose. It was a case of prosecution against a firm under S.14 of the Act read with S.76 of the Scheme framed under the Act. The prosecution resulted in an acquittal on the ground that the period of three years under S.16 (1) (b) has to be reckoned from the first employment of 20 workers. This decision was set aside by the Supreme Court by applying the principle in Lakshmi Rattan Engineering Works v. Regional Provident Fund Commissioner, Punjab and others (1966 (1) L. L. J. 741) that the period of three years must be calculated from the date from which the establishment came into existence. The Supreme Court in The State of Punjab v. Satpal and another (1970 (2) L.L.J. 64) had also to consider one other contention that the partnership changed and therefore a new business came into existence. "Here again, we are not concerned with the law of partnership but with the Employees Provident Funds Act. The law takes into account only the existence of establishments and the employment of a certain number of persons in factories over a given period. It is for this purpose that change of location or change of composition of partners or even a change in the manufacturing process is not considered vital in the application of this law. This was laid down by this court in very explicit terms in Civil Appeals Nos. 572 and 573 of 1964 decided on October 6,1965 (Lakshmi Rattan Engineering Works v. The Regional Provident Fund Commissioner, Punjab and others)." 6. This was laid down by this court in very explicit terms in Civil Appeals Nos. 572 and 573 of 1964 decided on October 6,1965 (Lakshmi Rattan Engineering Works v. The Regional Provident Fund Commissioner, Punjab and others)." 6. These rulings have no bearing on the question as to whether an original establishment ceased to be and gave rise to a new establishment as in the case in The Provident Fund Inspector, Trivandrum v. The Secretary, N.S.S. Co-operative Society, Changanacherry (AIR. 1971 S.C. 82) or whether the original establishment got disintegrated and gave birth to distinct and separate establishments pursuant to a real and bonafide partition effected as in the case decided by this Court in Mohammed Kutti v. Regional Provident Fund Commissioner, Trivandrum and others (1968 (2) L.L.J. 466). We do not find anything in the Supreme Court decisions that have shaken the authority of the pronouncement in Mohammed Kutti v. Regional Provident Fund Commissioner, Trivandrum and others (1968 (2) L.L.J. 466). On the other hand, we feel that the principle of the decision has been fortified by what Their Lordships said in AIR. 1971 S.C. 82. 7. The order of reference notices sub-section (5) of S.1. That subsection runs thus: 1(5) An establishment to which the Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty." 8. We are leaving out the proviso as it has no bearing. This section deals with "an establishment". The sub-section has been amended by Act 46 of 1960. The sub-section even as it stood before the amendment had not provided that an establishment cannot be disrupted to give rise to new and separate establishments either expressly or by implication. Nor do we find anything in S.2A which deals with branches or departments of an establishment which touches the principle of the decisions in Lakshmi Rattan Engineering Works v. Regional Provident Fund Commissioner, Punjab and others (1966 (1) L.L.J. 741) and The Provident Fund Inspector, Trivandrum v. The Secretary, N.S.S. Cooperative Society, Changanacherry (AIR. 1971 S.C. 82). In the judgment in Writ Appeals 340 and 346 of 1971 we have had occasion to consider in what circumstances establishments can be treated as departments or branches of another establishment. 1971 S.C. 82). In the judgment in Writ Appeals 340 and 346 of 1971 we have had occasion to consider in what circumstances establishments can be treated as departments or branches of another establishment. The question arising by the application of S.2A is different from the one posed before us whether the original establishment had been disrupted to give rise to new and separate establishments. For deciding this latter question the section is not helpful and when a disruption had taken place to give rise to distinct and separate establishments S.2A has no application, for distinct and separate establishments cannot be treated as departments or branches of another establishment. 9. The only question therefore is whether there has been a real and bonafide division which disrupted the original establishment and gave birth to new and separate and distinct establishments. This question had not been adverted to or considered in the order Ext. P5. The only reasoning contained in the order in Para.2 thereof which we have read proceeded on the basis that even if the partition was real it only involved a change of ownership and the integrity of the original establishment was not affected. This is a wrong approach. In the counter affidavit there are elaborate averments and reference is made to statements said to have been taken from persons who were allegedly in management of parts of the estate. These were not referred to at all in the order Ext. P5 and there is no averment that these statements have been made available to the petitioner. The order Ext. P5 cannot be sought to be sustained by statements made before this court in an affidavit. We must be satisfied that the respondent had considered those aspects and had those aspects in mind before he passed the order Ext. P5. There is nothing in the order to indicate that this has been done. Moreover if information had been collected by the 1st respondent he should have made it available to the petitioner before relying on it and the petitioner should have been given an opportunity to rebut what is contained in those statements. 10. It is said that the petitioner and others have been very negligent in furnishing information before the 1st respondent. It is not as though they did not furnish any information. 10. It is said that the petitioner and others have been very negligent in furnishing information before the 1st respondent. It is not as though they did not furnish any information. There was an affidavit from an Advocate before the 1st respondent in which it was categorically stated that there has been division, termination of the services of the workmen and the handing over possession of specific portions to the sharers who were once partners. Prima facie there was therefore indication that there was a partition and if there was a real and bonafide partition the principle of the decision in 1968 (2) LLJ. 466 would apply. 11. We are not satisfied that there has been a proper enquiry or investigation bearing in mind the correct principles to be applied. We therefore set aside the order Ext. P5 and direct the 1st respondent to deal with the matter afresh. If he wishes to rely on the statements referred to in the counter affidavit the petitioner and the other sharers must be given copies of the statements and afforded sufficient and reasonable opportunity to rebut those statements if they desire to do so. The petitioner and others will also be permitted to adduce further evidence if they have any. After complying with the above direction, the first respondent will dispose of the matter as expeditiously as possible. This O. P. is ordered as above. There will be no order as to costs.