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TMI BlogCLUBBING OF ESTABLISHMENTS UNDER EMPLOYEES’ PROVIDENT FUND AND MISCELLANEOUS PROVISIONS ACT, 1952X X X X Extracts X X X X X X X X Extracts X X X X ..... CLUBBING OF ESTABLISHMENTS UNDER EMPLOYEES’ PROVIDENT FUND AND MISCELLANEOUS PROVISIONS ACT, 1952 - By: - Mr. M. GOVINDARAJAN - Other Topics - Dated:- 28-5-2016 - - The Employees Provident Funds and Miscellaneous Provisions Act, 1952 is applies to every establishment which is a factory engaged in any industry specified in Schedule I and in which 20 or more persons are employed and to any other establishment employing 20 or more persons or class of such establishments which the Central Government may, by notification in the official gazette, specify in this behalf. Section 2A of the Act provides that the establishment is to include all department and branches. The section provides that for the removal of doubts, it is hereby declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that where an establishment consists of different departments or has branches, whether situate in the same place or in difference places, all such departments or branches shall be treated as parts of the same establishments. In this article it is discussed as to whether different establishments may be clubbed together as a single establishment for the purpose of this Act with reference to decide case laws. There is a number of disputes in the interpretation of Section 2A of the Act. In Noor Nivas Nursery Public School V. Regional Provident Fund Commissioner 2000 (12) TMI 900 - SUPREME COURT the Supreme Court held that an establishment will include all departments and branches and if the two units are put together as a singl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e establishment, the Act will be applicable and otherwise not. The dominant test to determine as to one unit forms the part of others is the geographical proximity and the functional as well as financial integrity. Also it is to be seen whether one unit can conveniently exist independently without the other. The following cases decide against the clubbing of establishments for the purpose of this Act: In Sundar Transport V. Regional Provident Fund Commissioner 1992 (9) TMI 359 - BOMBAY HIGH COURT it was held that from a plain reading of Section 2A of the Act, it becomes clear that it was enacted for removal of doubts which has arisen in the past in regard to treatment of different department or branches of an establishment s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituated in the same place or different places. It presupposes that one establishment having different departments or branches. It does not provide that different establishments may be clubbed together and treated as one establishment for the purposes of this Act. There is a clear distinction between different departments or branches of one establishment and different establishments . It is the omission to take not this glaring distinction that has given rise to the controversy in the present case. In Regional Provident Funds Commissioner V. M/s Moti Warping Factory 2007 (4) TMI 712 - RAJASTHAN HIGH COURT it was held that merely two firms are having geographical proximity but are separately registered under the Factories A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, CST Act, Sales Tax Act, Central Excise Act, ESI Act and even registration under the Small Scale Industries, that will not be a factor in clubbing them for coverage under the EPF Act. In Evans Food Corporation V. Union of India 1994 (1) TMI 279 - KERALA HIGH COURT it was held that two different establishments will not be clubbed together for application of Employee s Provident Fund and Miscellaneous Provisions Act merely because they carry on business at the same place. In Devesh Sandeep Associates V. Regional Provident Fund Commissioner 1996 (6) TMI 348 - KARNATAKA HIGH COURT it was held that mere common ownership of two establishments will not justify their clubbing under the Act. In Varanasi Fan Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P) Limited, Rewa V. Regional Provident Fund Commissioner, Jabalpur 1998 (1) TMI 522 - MADHYA PRADESH HIGH COURT it was held that while determining as to one unit is a branch of another, financial integrality and employment will be decision criterion. In Metazine Private Limited V. R.M. Gandhi, Regional Provident Fund Commissioner, Bangalore (1992) 2 Cur LR977 it was held that when the functional integrity is missing e.g., the concerns are altogether different in their work, functions, though the owner or finances is the same, they cannot be clubbed together to bring them in the ambit of the Act. Thus where three concerns were registered separately and there has been no connection inter se between them, they cannot be regarded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as one establishment, though the owner is the same. The following case laws justified the clubbing of establishments for the purposes of EPF Act: In Katari Coloring Factory V. Regional Provident Fund Commissioner 1999 (8) TMI 968 - DELHI HIGH COURT it was held that for clubbing two units for applicability of the Act , separate registration under Delhi Shops and Establishments Act is not of much consequence as the two units were closely interconnected, there was unit of purpose, the place of business being common, several documents being common, letter heads, telephone number, etc., being the same and the dominant test to establish relationship of master and servant i.e., extent of control and supervision of one over the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her are sufficient to justify in piercing the veil for clubbing of two units for coverage of the establishments under the Act. In Nav Financiers V. Union of India 2007 (3) TMI 755 - ALLAHABAD HIGH COURT i t was held that clubbing of four establishment allegedly shown to be different entities cannot be held to be improper when all the four units belong to the same family and have interconnectivity amongst them with a common management, functional integrality and geographical proximity. In Eddy Current Contracts (India) Limited V. Regional Provident Fund Commissioner 1993 (7) TMI 343 - KERALA HIGH COURT it was held that the factories situated in different places and having separate licences but same registered office, act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities, Managing Director, Finance Manager and Secretary empowered to operate bank account of both and balance sheet, income and expenditure account common to both is treated as parts of the same establishment. Before making the order clubbing the establishments the Authority should give reasonable opportunity to the party concerned. In Indersons Motors Private Limited V. Regional Provident Fund Commissioner- II - 2013 (1) TMI 862 - DELHI HIGH COURT the establishment of the petitioner was clubbed with Bombay Okara Carriers by the EPF Authority, covering the establishment of the petitioner under the Act, thereby demanding arrears of contributions right from 1985 onwards by initiating proceedings under Section 7A of the Act. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he EPF Tribunal dismissed the appeal filed by the petitioner, upholding the order of EPF authority. The writ petition filed by the petitioner was dismissed by the High Court with their observations that the impugned orders are hit by the non compliance of the principles of natural justice as the petitioner was never supplied the copies of reports of the Inspectors. It caused prejudice to the petitioner since he could not rebut the allegations leveled against him. The allegations made by the EPF Authority on the points of interchangeability of employees financial or managerial control etc., are vague and non specific. A single owner of two units was not sufficient by itself to establish supervisory, financial or managerial control. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... single person can have more than one establishment. It does not mean that both can be clubbed. Hence, impugned orders cannot sustain in view of the well settled law that nobody can be deal with the material which may be relied upon by the Authority to arrive at a decision adverse to the party. The petition stands disposed of accordingly. As a conclusion we may refer the case law in Milan Biri Factory V. The Regional Provident Fund Commissioner, West Bengal 2014 (7) TMI 1198 - CALCUTTA HIGH COURT it was held that important factors for clubbing two or more units/establishments for coverage under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 Act may be- the unity of ownership, management, control, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employment, conditions of service, functional integrality and general unity of purpose; the employer s own conduct in mixing up or not mixing up the capital, staff and management; if all units constitute one integrated whole, they would be treated as one but in case it is to the contrary, then each unit is a separate one; whether one unit can exist conveniently and reasonably without the other or not. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... 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