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TMI Blog2013 (1) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... employees on its rolls to the respondent authorities. The application made by the petitioner on 23.12.1988 along with the list of the employees then engaged has been placed on record by the petitioner. The petitioner has thereafter been filing annual returns with the respondent authorities which, inter alia, contain the details of the employees of the petitioner from time to time. Copies of these returns have also been placed on record from the period 01.04.1999 to 31.3.2000 onwards. 3. The petitioner submits that a show cause notice dated 06.05.1989 was issued by the respondent authorities alleging that the petitioner M/s Indersons Motors Pvt. Ltd. is functioning from the premises No. 17-C, Model Basti, New Delhi, which is the address of M/s Bombay Okara Carrier (Regd.) - covered under the Act with effect from 15.10.1969. It was alleged that the petitioner is a unit of M/s Bombay Okara Carriers (Regd.). M/s Bombay Okara Carriers (Regd.) - respondent No. 2 was required to show cause as to why the petitioner may not be covered from the date of its set up i.e. with effect from 01.08.1988 by resort to clubbing under Section 2A of the Act. 4. Another notice was issued on 09.05.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich proved beyond doubt that the petitioner is a concern/branch/department of respondent No. 2. 7. The petitioner preferred an appeal before the Tribunal. One of the grounds taken by the petitioner specifically in the said appeal reads as follows:- (22) That in the proceedings conducted under Section 7A on 16.11.1988, Shri Parshot Lal, Enforcement Officer representing the Department stated that the factual stand taken by the Department in 7A proceedings can be proved by Shri K.L.Khurana, whose report has been made basis for initiating 7A proceedings for the purpose of coverage of the appellant. Shri Parshot Lal in the said proceedings sought production of Shri K.L.Khurana as departmental witness. His request was allowed by the then R.P.F.C. But the Department failed to produce Shri K.L.Khurana as their witness despite number of opportunities availed by them. Report of Shri K.L.Khurana was not supplied to the appellant or to the respondent No. 2. The appellant as well as respondent No. 2 had been kept in dark about the said report. [Emphasis supplied] At this stage itself, I may also quote the response of the respondent to the said ground of Appeal. The same reads as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest holders in respondent No. 2 and the interest holders in the petitioner. Whereas respondent No. 2 was a partnership concern having four partners, namely, Smt. Basant K. Sud (40%), S.Inder Singh (20%), S.Narender Pal Singh (20%) and S.Tarvinderpal Singh (20%), the shareholding in the petitioner company is that of S.Inder Singh and some of his family members. It is pointed out that Smt. Basant K. Sud-who held the largest single share in the partnership i.e. respondent No. 2, had no interest in the petitioner company. 11. Learned counsel submits that the respondent No. 2 continued to exist till 01.07.1986. The petitioner company, though established on 05.09.1985, voluntarily got itself covered under the Act on 01.11.1988. Therefore, the period to which the enquiry could relate was 05.09.1985 to 01.07.1986, whereas the show cause notice has been issued for the period 05.09.1985 to 09.05.1989 without any basis. Counsel points out that the approach of the Tribunal is flawed inasmuch, as, the Tribunal has proceeded on the basis of mere probability of intermixing of staff not being ruled out . 12. The orders have been passed on the basis of surmise only and are not found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned counsel for the respondent, on the other hand, emphasized on the identity of the persons having ownership of interest in the petitioner and the respondent No. 2. He submits that Inder Singh is the Managing Director of the petitioner, and was also the managing partner of respondent No. 2. Learned counsel submits that the identity of the address, telephone number, telex and even the counsels who were representing the petitioner and respondent No. 2 shows the deep connection between these two establishments. Learned counsel submits that the petitioner and respondent No. 2 have adopted the modus operandi of incorporating the petitioner only with a view to evade the provident fund dues of the employees. He also places reliance on the observations of the RPFC that there was interchangeability between the employees of the petitioner and respondent No. 2. Learned counsel has placed strong reliance on the decision of the Supreme Court in M/s L.N.Gadodia Sons Anr. Vs. Regional Provident Fund Commissioner 2011 (11) SCALE 22 in support of his submissions. 17. Having heard learned counsel for the parties, I am of the view that the proceedings initiated against the respondent No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal to the effect that the order passed under Section 7A is not only premised on the reports, would not take away the prejudice that the petitioner has obviously suffered on account of the reliance placed by the authorities on the inspection reports. The allegation that there was interchangeability of employees between respondent No. 2 and the petitioner is as vague as it could be, since the name of not a single person has been provided except the two names aforesaid of Shri R.K.Bhatnagar and Ms. Gurmeet Kaur who, according to the petitioner, had been freshly appointed by them after discontinuation of their service with respondent No. 2. The absence of the inspector‟s reports assumes even greater significance in the light of such vague and non-specific allegations with regard to interchangeability of the employees. In my view, on this short ground, the impugned orders cannot be sustained and are liable to be quashed and set aside. 20. Even otherwise, I find merit in the petitioner‟s submission that there is no identity or similarly in the two establishments - one run by respondent No. 2 and that established by the petitioner. The issue of clubbing of two establishme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /establishments in question before they can be clubbed under Section 2A of the Act. In the present case, there is no evidence to establish supervisory, financial or managerial control of the same management over the establishment of respondent No. 2 and that of the petitioner. The ownership of the respondent No. 2 firm is not the same as that of the petitioner. The largest stake holder in the respondent No. 2 firm Mrs. B.K.Sud (40% share holder) was not an interest holder in the Petitioner Company. The activities carried out by Respondent No. 2 were of transportation business, whereas the business of the Petitioner to run the dealership of Swaraj Mazda vehicles. Only because they both involve commercial vehicles is no reason to draw a conclusion of similarity of the businesses. It cannot be said that the two establishments are interdependent, or even one is dependent on the other for its business. Whereas the business of Respondent No. 2 was to offer and sell its services, that of the Petitioner was to sell vehicles, i.e., goods. They are markedly different. The respondent authorities have not established on the record that the employees of Respondent No. 2 and those of the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng with a case where the petitioner M/s Sunder Transport - a partnership firm, was carrying on business of transport of chassis and trucks and products of Bharat Petroleum. There was another entity M/s Bafna Motors-also a partnership firm. It was holding a dealership of international tractors and parts thereof. M/s Bafna Investment Industries was another partnership firm in the field of investments. M/s Bafna Finance was yet another partnership firm. There was some commonality between the partners of these firms. What is important is that they were operating from the same office premises and using the same/common telephone numbers and post box numbers. They were also using the services of the same persons to write accounts. The Provident Fund authorities sought to invoke Section 2A in respect of these establishments. The Bombay High Court after examining the businesses carried on by these firms turned down this move of the authorities. The Bombay High Court, inter alia, observed as follows: ...........The factors, such as, situation of the office of these firms is one premises, user of a common telephone number and post box number and employing the services of the same person t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Employees State Insurance Act, 1948, observed that the corporation had to collect information itself initially, and make a provisional demand on the basis of the information collected by it. In this regard, reliance was placed on the Supreme Court decision in the Employees State Insurance Corporation, Bhopal Vs. The Central Press Anr. AIR 1977 SC 1351. In this judgment, the Supreme Court while dealing with the Employees State Insurance Act, held as follows: We find that S. 75(2) of the Act provides, inter alia, that a claim for the recovery of contributions shall be decided by the Employees' Insurance Court. Not only is the mandatory duty cast upon it to decide such disputes, but it is armed with the powers of a Civil Court, including summoning and enforcing the attendance of witnesses, compelling the discovery and production of documents and material objects, under Section 78 of the Act. I see no reason why the same principle would not apply even in respect of the provisions of the Act. 25. In Employees State Insurance Corporation Vs. Om Prakash (FAO No. 401/2002 and connected appeals) decided on 13.08.2009, this Court also took the view that initial onus is ..... 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