2025 INSC 849

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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 9540 OF 2018

M/S TORINO LABORATORIES PVT.

LTD. ...APPELLANT(S)

VS.

UNION OF INDIA & ORS. ...RESPONDENT(S)

J U D G M E N T

K.V. Viswanathan, J.

1. The present appeal arises out of a judgment and order of

the Division Bench of the High Court of Madhya Pradesh,

Bench at Indore dated 22.04.2016 in Writ Petition No. 2503 of

2011. By the said judgment and order, the High Court

dismissed the writ petition under Article 227 of the

Constitution of India filed by the appellant-herein and upheld

the order of the Employees’ Provident Fund Appellate

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Tribunal, (for short ‘the Appellate Tribunal’) New Delhi dated

24.01.2011 which order had, in turn, upheld the order dated

17.02.2006 passed by the Assistant Provident Fund

Commissioner, (for short ‘APFC’) Indore. The APFC had

held that the appellant was part and parcel of M/s Vindas

Chemical Industries Private Limited (hereinafter referred to as

‘Vindas’) – the third respondent herein for the purpose of

applicability of the Employees’ Provident Funds and

Miscellaneous Provisions Act, 1952 (for short the ‘EPF Act’)

with effect from September, 1995. Appropriate consequential

directions to remit the dues were also passed. Aggrieved by

the judgment and order of the High Court, the appellant has

preferred this appeal, by way of special leave.

BRIEF FACTS: -

2. Indisputably, on 22.11.1988, Dr. Darshan Kataria and

his brother Niranjan Kataria set up the respondent No.3-

Vindas for manufacturing injections and capsules of certain

specified drugs.

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2.1 The factory was situated at Plot No.65, Sector-1,

Pithampur, District Dhar, Madhya Pradesh. Vindas was

incorporated with the Registrar of Companies, Madhya

Pradesh.

2.2 Subsequently, on 05.09.1990, Shri Vasudev Kataria and

Smt. Rajni Kataria, wife of Darshan Kataria incorporated the

appellant-Company with the Registrar of Companies in the

State of Maharashtra. Later it transpires from the record that

Mr. Darshan Kataria was also a director in the appellant-

Company.

2.3 However, the factory of the appellant was set up and

business of production of tablets and later liquid syrups was

set up at Plot No. 65/1, Sector-1, Pithampur, Dhar, Madhya

Pradesh. It is also undisputed that Vindas was covered under

the EPF Act.

2.4 Inspections were carried out at the appellant’s premises

on 17/20.01.2005 and a communication was sent on

24.01.2005 to deposit the provident fund contribution and

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administrative charges w.e.f. 01.04.2004, though it was

mentioned that the date was liable to change and a final

decision would be taken after the inspection of previous

records.

2.5 The appellant, by its reply of 04.02.2005, opposed the

applicability of the EPF Act on the ground that the

workers/employees did not exceed the prescribed number. It

must also be pointed out that in the communication of

20.01.2005, the issue that was highlighted by the Department

was about the number of employees exceeding twenty.

2.6 Another inspection was carried out on 28.03.2005 and in

the inspection note it was categorically stated that the

establishment of the appellant was situated within the premises

of Vindas-the third respondent and common security was

employed for both the establishments and that the Managing

Director of Vindas was Dr. Darshan Kataria.

2.7 Thereafter, on 29.04.2005, a summons to appear in

person under Section 7A of the EPF Act was issued to the

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appellant. Section 7A empowers the authorities to conduct

such enquiry as they may deem necessary and pass orders with

regard to disputes about coverage of establishments under the

EPF Act. The appellant was asked to produce all the attested

copies of the relevant records to determine the amount due for

the period April, 2004 to March, 2005.

2.8 The appellant, though by its reply dated 03.05.2005,

denied any liability however, stated that they were voluntarily

accepting coverage of the unit and will start contributing from

01.04.2005. Hence, this appeal really concerns the period

prior to 01.04.2005 and the liability thereon. The appellant

also responded to the summons by its letters of 13.06.2005,

10.10.2005 and 17.10.2005.

2.9 What is significant is in the submission of 10.10.2005,

the appellant adverted to the proceedings at the hearing on

23.09.2005 wherein they were informed that the authorities are

evaluating the possibility of clubbing the unit of the appellant

with Vindas-respondent No.3 and that the appellant was

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provided with the inspection reports of the unit of Vindas-

Respondent No.3. The appellant also in the submission of

10.10.2005 dealt with in detail as to how clubbing with

Vindas-Respondent No.3 was not warranted and how the

appellant was an independent and separate entity.

2.10 It is also not in dispute that the Inspection Report of

28.03.2005 along with the Inspection Report of 17.01.2005

and 20.01.2005 have been furnished to the appellant on

10.10.2005, as set out in the written submissions filed before

us.

2.11 When matters stood thus, it appears that there was a

further report of 10.11.2005 where again clubbing of the two

units, namely, of the appellant and of Vindas was adverted to

by the Department to which the appellant filed its submission

on 20.12.2005 disputing the said position.

2.12 On 17.02.2006, the APFC passed an order rejecting the

contentions of the appellant, including the contention on the

locus standi of the Trade Union which had raised the issue of

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the two units being the same by holding that the issue of locus

standi was immaterial if otherwise a case for clubbing was

established. The APFC found the following common factors:-

a) that both the units dealt with products of pharmaceutical

industry;

b) that both worked from the same premises with the

common entry and without any visible demarcation with

addresses of the appellant being Plot No. 65/1, Sector-1,

Pithampur and of Vindas – Respondent No.3 being Plot

No. 65, Sector-1, Pithampur, District Dhar;

c) that the telephone nos. of both the appellant and Vindas-

respondent No.3 were common and the order set out the

actual telephone no. That the entire factory was guarded

by the same security personnel, namely, M/s Benaras

Security Services;

d) that both the companies maintained their common

Administrative Office at 102, Prabhudeep Apartment, 11

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Indrapuri Colony, Indore and the Administrative Office

had common telephone nos. and facsimile no.;

e) That the two companies shared the same website and

same e-mail IDs;

f) that the Registered Office of the appellant at 210, Adamji

Building, 413, Narsi Natha Street, Masjid Bunder Road,

Mumbai was the Head Office of Respondent No.3-

Vindas with same telephone no. and facsimile no.

g) That there was commonality of some Directors and that

too belonging to the same Hindu Undivided Family.;

h) That the source of finance was the same Hindu

Undivided Family in the name of Director, Creditor or

Shareholder;

2.13 In view of this, the APFC found that there was Unity of

Purpose and Functional Integrality as there was common

factory, common administration/Head Office/Registered

Office, common e-mail ID/website and common source of

finance. The APFC disregarded the aspect of separate

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registration with the Registrar of Companies and different

Government Departments and held that the two units are one

and the same for the purpose of the EPF Act.

2.14 The appellant filed an appeal under Section 7-I of the

EPF Act before the Appellate Tribunal. According to the

appellant, after the Appellate Tribunal adjourned the hearing

to 09.12.2010, the files were not traceable and no further

notice of hearing after 09.12.2010 was received. In spite of

that, on 24.01.2011, the Appellate Tribunal dismissed the

appeal.

2.15 A Writ Petition being W.P. No. 2503 of 2011 filed before

the High Court of Madhya Pradesh, Indore Bench was

unsuccessful. That is how the case presents itself before us.

CONTENTIONS OF LEARNED COUNSEL : -

3. We have heard Mr. Gagan Gupta, learned Senior

Advocate, for the appellant and Mr. Siddharth, learned counsel

for the APFC-Respondent No. 2 Authorities and Mr. Brijender

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Chahar, learned Additional Solicitor General for the Union of

India.

4. Mr. Gagan Gupta, learned Senior Advocate, contends

that initially the Authorities proceeded on the basis of the

numerical strength of the employees being in excess of 20 at

the appellant’s unit and the aspect of clubbing was introduced

as an afterthought. That notice of clubbing ought to have been

issued to Vindas-respondent No.3 instead of issuing to the

appellant; that Section 2A of the EPF Act cannot apply to two

juristic entities; that both the appellant and the respondent

No.3-Vindas are separately registered under the Drugs and

Cosmetics Act, 1940, the Factories Act, 1948 and the two

entities hold separate account numbers/registrations under the

Central Sales Tax, Central Excise, Service Tax, ESI and also

hold separate PAN and Corporate Identification Nos.

5. Learned Senior Advocate contends that the electricity

and water connections for both the establishments are separate

and that the Municipal Corporation Property Tax is being

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separately levied. Learned Senior Advocate further contends

that the summon issued was for the period April, 2004 to

March, 2005. However, the APFC, by its order, has directed

compliance from September, 1995. Learned Senior Advocate

contents that admittedly there was no interchange of

employees. Learned Senior Advocate relied on the award of

the Labour Court dated 21.07.2010 where the stand of the

employees of the appellant that they should be permitted to

work at Respondent No.3-Vindas was rejected. Learned

Senior Advocate contended that there was no functional

integrality or interdependence between the two establishments

and that while the appellant manufactures tablets and syrup,

respondent No.3-Vindas manufactures injections and

capsules. Without prejudice, learned Senior Advocate

contends that in the event of the submissions being rejected,

the benefit of infancy protection be given for the period

26.09.1995 to 22.09.1997 under Section 16(1)(d) of the EPF

Act as it then stood. Learned Senior Advocate relied on the

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judgments of this Court in Management of Pratap Press, New

Delhi vs. Secretary, Delhi Press Workers’ Union, Delhi and

Another, AIR1960 SC 1213, Regional Provident Fund

Commissioner and Another vs. Dharamsi Morarji Chemical

Co. Ltd., (1998) 2 SCC 446 and Regional Provident Fund

Commr. vs. Raj’s Continental Exports (P) Ltd, (2007) 4 SCC

239 in support of his submissions.

6. Mr. Siddharth, learned counsel for the EPF Authorities

countered the submissions by contending that the question as

to what constitutes an establishment is a mixed question of fact

and law which ought to be answered in the context of the facts

of the given case, keeping in mind the object of the statute.

The learned counsel contended that the appellant and

Vindas-Respondent No.3 constituted a common establishment

for the purpose of the EPF Act and that the findings of the

APFC on the aspect of the two entities being engaged in the

pharmaceutical business, carrying on the business in the same

factory premises by sharing the common telephone/facsimile

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nos., same website and e-mail ID called for no interference.

According to the learned counsel the unity in management and

unity in finance and the existence of common

administrative/Head Office/Registered Office also pointed to

the functional integrality. Learned counsel contended that the

burden to establish that there was no unity was on the appellant

which the appellant failed to discharge; that since the appellant

and respondent No.3 would be collectively assessed but since

the liability will be only for the respective employees of the

units there was no need to issue separate summons to Vindas-

Respondent No.3; that the order of the Labour Court cannot

bind the authorities under the EPF Act as the rights under the

two Acts are different and that the Labour Court when it

decided that there was no unity of employment did not have

occasion to deal with the other aspects dealt with by the APFC.

Learned counsel refuted the arguments of the appellant that

they were not heard by the Tribunal since no document was

placed to establish the fact that no notice was issued to the

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appellant by the Tribunal and that, in any event, the said

argument was not raised before the High Court. Learned

counsel relied on the judgments of this Court in Associated

Cement Companies Limited, Chaibassa Cement Works,

Jhinkpani vs. Workmen, AIR 1960 SC 56, L.N. Gadodia &

Sons vs. Regional Provident Fund Commissioner, (2011) 13

SCC 517, Shree Vishal Printers Ltd. vs. Provident Fund

Commissioner, (2019) 9 SCC 508 and Regional Provident

Fund Commissioner vs. Naraini Udyog, (1996) 5 SCC 522 to

make good his submissions.

7. We have considered the submissions of the respective

parties and carefully perused the records of the case.

QUESTION FOR CONSIDERATION : -

8. The question that arises for consideration is whether the

EPF Authorities were justified in treating the appellant and the

Vindas-Respondent No. 3 as one unit for the purpose of the

EPF Act?

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CERTAIN PRELIMINARY ASPECTS : -

9. Before we deal with the main issue, we would, at the

outset, dispose of certain preliminary points raised for

consideration. The aspect of violation of natural justice before

the Tribunal was not argued before the High Court. In any

event, we are considering the matter in detail on merits here

and, as such, that aspect need not detain us any further. The

contention based on the award of the Labour Court dated

21.07.2010 also does not carry the case of the appellant any

further. First of all, the APFC, by its order of 17.02.2006,

elaborately considered the matter applying the various tests

and concluded that the two units are the same for the purpose

of the EPF Act. The issue before the Labour Court was about

the entitlement of the workers of the appellant to claim

employment in Vindas-respondent No.3 and while answering

that reference the Labour Court held that there was no clear

evidence regarding the aspect of the workers of the appellant

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having worked in the unit of respondent No.3-Vindas. None

of the other indicia for clubbing referred to by the APFC were

considered relevant. In any case, in view of the multiplicity of

factors adverted to by the APFC, the award has no bearing for

the determination of the issue.

ANALYSIS AND REASONS : -

EPF ACT - A BENEFICIAL LEGISLATION

10. The EPF Act is a beneficial legislation intended to

provide for the institution of provident funds, pension fund and

deposit-linked insurance fund for employees in factories and

other establishments. It is a welfare legislation intended to

ameliorate the conditions of workmen in factories and other

establishments. This Court in Sayaji Mills Ltd. vs. Regional

Provident Fund Commissioner, 1984 Supp. SCC 610 has held

that the EPF Act should be construed so as to advance the

object with which it is passed and any construction which

would facilitate evasion of the provisions of the Act should be

avoided.

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LAW ON CLUBBING: -

11. The crucial issue that arises for consideration in this case

is - whether the authorities were justified in treating the

appellant and Vindas-respondent No.3 as one unit for the

purpose of the EPF Act and were the correct tests to determine

the same applied? Section 2-A of the EPF Act reads as under:-

“2A. Establishment to include all departments and

branches.—For the removal of doubts, it is hereby

declared that where an establishment consists of

different departments or has branches, whether situate

in the same place or in different places, all such

departments or branches shall be treated as parts of the

same establishment.”

12. The argument of the learned Senior Counsel for the

appellant that since the appellant and Vindas-respondent No.3

are two different juristic entities and that would not be covered

within the sweep of Section 2A is only stated to be rejected.

While Section 2A sets out that the establishment will include

all departments and branches it does not deal with a scenario

as to the tests for determining whether two juristic entities are

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set up as an artificial device and subterfuge to sidestep the

provisions of the Act.

13. The question in this case has to be answered by applying

the well-established theories to determine what would

constitute unity of ownership or unity of management and

control and the features that will demonstrate the presence of

functional integrality. This issue is no longer res integra and

has been settled by a long line of judgments of this Court.

14. The earliest case where this issue was discussed was in

Associated Cement Companies Ltd. (supra) where this Court

had to examine the question whether the lay off of the workers

in certain sections of the Chaibasa Cement Works due to a

strike on the part of the workmen at the Rajanka limestone

quarry was justified under Section 25-E (iii) of the Industrial

Disputes Act, 1947. Section 25-E (iii) of the I.D. Act stated

that no compensation was to be paid to workmen who have

been laid off due to a strike or slowing-down of production on

the part of workmen in another part of establishment. In the

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process of examining the said question, this Court held as

under:-

“11. The Act not having prescribed any specific tests

for determining what is ‘one establishment’, we must

fall back on such considerations as in the ordinary

industrial or business sense determine the unity of an

industrial establishment, having regard no doubt to the

scheme and object of the Act and other relevant

provisions of the Mines Act, 1952, or the Factories

Act, 1948. What then is ‘one establishment’ in the

ordinary industrial or business sense? The question of

unity or oneness presents difficulties when the

industrial establishment consists of parts, units,

departments, branches etc. If it is strictly unitary in the

sense of having one location and one unit only, there

is little difficulty in saying that it is one establishment.

Where, however, the industrial undertaking has parts,

branches, departments, units etc. with different

locations, near or distant, the question arises what tests

should be applied for determining what constitutes

‘one establishment’. Several tests were referred to in

the course of arguments before us, such as,

geographical proximity, unity of ownership,

management and control, unity of employment and

conditions of service, functional integrality, general

unity of purpose etc. To most of these we have referred

while summarising the evidence of Mr Dongray and

the findings of the Tribunal thereon. It is, perhaps,

impossible to lay down any one test as an absolute and

invariable test for all cases. The real purpose of these

tests is to find out the true relation between the parts,

branches, units etc. If in their true relation they

constitute one integrated whole, we say that the

establishment is one; if on the contrary they do not

constitute one integrated whole, each unit is then a

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separate unit. How the relation between the units will

be judged must depend on the facts proved, having

regard to the scheme and object of the statute which

gives the right of unemployment compensation and

also prescribes disqualification therefor. Thus, in one

case the unity of ownership, management and control

may be the important test; in another case functional

integrality or general unity may be the important test;

and in still another case, the important test may be the

unity of employment. Indeed, in a large number of

cases several tests may fall for consideration at the

same time. The difficulty of applying these tests arises

because of the complexities of modern industrial

organisation; many enterprises may have functional

integrality between factories which are separately

owned; some may be integrated in part with units or

factories having the same ownership and in part with

factories or plants which are independently owned. In

the midst of all these complexities it may be difficult

to discover the real thread of unity. In an American

decision (Donald L. Nordling v. Ford Motor

Company, (1950) 28 AIR, 2d 272 there is an example

of an industrial product consisting of 3800 or 4000

parts, about 900 of which came out of one plant; some

came from other plants owned by the same Company

and still others came from plants independently

owned, and a shutdown caused by a strike or other

labour dispute at any one of the plants might

conceivably cause a closure of the main plant or

factory.”

15. As was rightly pointed out, it is impossible to lay down

any one test as an absolute and invariable test for all cases.

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16. Associated Cement Companies Ltd. (supra) was

followed in Pratap Press (supra). In Pratap Press (supra),

the issue was whether the profit or loss of the Press and the

publications “Vir Arjun” and “Daily Pratap” were to be pooled

for the question of deciding bonus. While the employer

contended that the press and Vir Arjun were one establishment

and Daily Pratap was a separate partnership firm, the workers

contended that the accounts of all the three should be taken

into account or alternatively only the Press should be taken

into account. While answering the issue, the Court

acknowledged that the question whether the two activities in

which the single owner is engaged are one industrial unit or

two distinct industrial units was not always easy of solution

and no hard and fast rule could be laid down. It was also

acknowledged that each case has to be decided on its own

peculiar facts. It was held that in some cases, two activities

would be so closely linked that no reasonable man would

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consider them as independent industries. Para 2 of the said

judgment is set out hereunder:-

“2. The question whether the two activities in which

the single owner is engaged are one industrial unit or

two distinct industrial units is not always easy of

solution. No hard and fast rule can be laid down for the

decision of the question and each case has to be

decided on its own peculiar facts. In some cases the

two activities each of which by itself comes within the

definition of industry are so closely linked together

that no reasonable man would consider them as

independent industries. There may be other cases

where the connection between the two activities is not

by itself sufficient to justify an answer one way or the

other, but the employer's own conduct in mixing up or

not mixing up the capital, staff and management may

often provide a certain answer”.

17. This Court first examined the question whether the Press

and the paper were so interdependent that one could not exist

without the other. It concluded that there was no functional

interdependence between the press unit and the paper unit for

the two to be considered one industrial unit. Not stopping

there, this Court also held that it was necessary to further

consider the conduct of the businessman himself to see

whether he mixed up the capital of the two, the profits of the

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two and the labour force of the two units. This Court also

considered whether there was evidence to show as to whether

the capital employed in the two units came out from one fund.

Para 6 and 7 of Pratap Press (supra) are extracted

hereinbelow:-

“6. Coming now to the facts of the present appeals we

find that the functions of the Press and the Vir Arjun

paper cannot be considered to be so interdependent

that one cannot exist without the other. That many

presses exist without any paper being published by the

same owner is common knowledge and is not seriously

disputed. Nor is it disputed that an industry of

publishing a paper may well exist without the same

owner running a press for the printing of the paper. The

very fact that Daily Pratap owned by a partnership

firm, was being printed at the Pratap Press belonging

to Shri Narendra itself shows this very clearly. It

cannot therefore be said that there is such functional

interdependence between the press unit and the paper

unit that the two should reasonably be considered as

forming one industrial unit.

7. Along with this it is necessary to consider the

conduct of the businessman himself. Has he mixed up

the capital of the two, the profits of the two and the

labour force of the two units? These are matters on

which the employer is the best person to give evidence

from the records of his concerns. No evidence has

however been produced to show that at any time before

the dispute was raised he treated the capital employed

in the two units as coming from one single capital

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fund, nor anything to show that he pooled the profits

or that the workmen were treated as belonging to one

establishment. It is interesting to note that there is no

record showing whether for his own purposes he

treated the assets of the two units as forming one

composite whole or the assets of two distinct units has

been produced. The profit and loss accounts which we

find on the record appear to have been prepared

sometime in 26-12-1951, — apparently after the

reference had been made and the dispute whether these

units were one or two, had arisen. No weight can

therefore be attached to the fact that in this profit and

loss account — both the receipts from the press and the

receipts from the Vir Arjun were shown as the

income.”

Ultimately, this Court concluded that the Press was a

standalone unit.

18. The Honorary Secretary, South India Millowners’

Association and Others vs. The Secretary, Coimbatore

Distruict Textile Workers’ Union, [1962] Supp. 2 SCR 926,

was a case that arose in the context of award of bonus to

employees. This Court considered the question whether Saroja

Mills Ltd. Coimbatore and Thiagaraja Mills, Madurai run by

Saroja Mills Ltd. constituted separate units or they were to be

treated as one. While the Management contended that the

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units were separate, the workmen contended to the contrary.

Answering the question, this Court while acknowledging that

the issue has to be determined in the light of the facts of each

case (at page 943) set out the following principles:-

“The question thus raised for our decision is not

always easy to decide. In dealing with the problem,

several factors are relevant and it must be remembered

that the significance of the several relevant factors

would not be the same in each case nor their

importance. Unity of ownership and management and

control would be relevant factors. So would the

general unity of the two concerns; the unity of finance

may not be irrelevant and geographical location may

also be of some relevance; functional integrality can

also be a relevant and important factor in some cases.

It is also possible that in some cases, the test would be

whether one concern forms an integral part of another

so that the two together constitute one concern, and in

dealing with this question the nexus of integration in

the form of some essential dependence of the one on

the other may assume relevance. Unity of purpose or

design, or even parallel or co-ordinate activity

intended to achieve a common object for the purpose

of carrying out the business of the one or the other can

also assume relevance and importance, vide

Ahmedabad Manufacturing & Calico Printing Co.

Ltd. v. Their Workmen [1951] 2 LLJ 657.”

19. It will be seen that this Court held that several factors are

relevant and the significance and importance of the several

26

relevant factors would not be the same in each case. It was also

held that unity of ownership and management and control,

general unity of the two concerns; unity of finance;

geographical location, functional integrality would all be

relevant factors depending on the facts of each case. It was

further held that unity of purpose or design or even parallel or

coordinate activity intended to achieve a common object for

the purpose of carrying out the business of the one or the other

would also assume relevance and importance.

20. Specifically repelling the argument of the Management

that the test of functional integrality was the only test and

absent functional integrality the units will have to be

considered separate, this Court in South India Millowners’

Association (supra) held as under: -

“Mr Sastri, however, contends that functional

integrality is a very important test and he went so far

as to suggest that if the said test is not satisfied, then

the claim that two mills constitute one unit must break

down. We are not prepared to accept this argument. In

the complex and complicated forms which modern

industrial enterprise assumes it would be unreasonable

27

to suggest that any one of the relevant tests is decisive;

the importance and significance of the tests would vary

according to the facts in each case and so, the question

must always be determined bearing in mind all the

relevant tests and corelating them to the nature of the

enterprise with which the Court is concerned. It would

be seen that the test of functional integrality would be

relevant and very significant when the Court is dealing

with different kinds of businesses run by the same

industrial establishment or employer. Where an

employer runs two different kinds of business which

are allied to each other, it is pertinent to enquire

whether the two lines of business are functionally

integrated or are mutually inter-dependent. If they are,

that would, no doubt, be a very important factor in

favour of the plea that the two lines of business

constitute one unit. But the test of functional

integrality would not be as important when we are

dealing with the case of an employer who runs the

same business in two different places. The fact that the

test of functional integrality is not and generally

cannot be satisfied by two such concerns run by the

same employer in the same line, will not necessarily

mean that the two concerns do not constitute one unit.

Therefore, in our opinion, Mr Sastri is not justified in

elevating the test of functional integrality to the

position of a decisive test in every case. If the said test

is treated as decisive, an industrial establishment

which runs different factories in the same line and in

the same place may be able to claim that the different

factories are different units for the purpose of bonus.

Besides, the context in which the plea of the unity of

two establishments is raised cannot be ignored. If the

context is one of the claim for bonus, then it may be

relevant to remember that generally a claim for bonus

is allowed to be made by all the employees together

when they happen to be the employees employed by

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the same employer. We have carefully considered the

contentions raised by the parties before us and we are

unable to come to the conclusion that the finding of the

Tribunal that the two mills run by the Saroja Mills Ltd.

constitute one unit, is erroneous in law.

In this connection, it would be necessary to refer

to some of the decisions to which our attention was

drawn. In the case of Associated Cement Companies

Ltd. and their Workmen, this Court held that on the

evidence on record, the limestone quarry run by the

employer was another part of the establishment

(factory) run by the same employer within the meaning

of Section 25-E(iii) of the Industrial Disputes Act. It

would thus be seen that the question with which this

Court was concerned was one under Section 25-E(iii)

of the Act and it arose in reference to the limestone

quarry run by the appellant Company and the cement

factory owned and conducted by it which are normally

two different businesses. It was in dealing with this

problem that this Court referred to several tests which

would be relevant, amongst them being the test of

functional integrality. In dealing with the question,

S.K. Das, J., who spoke for the Court, observed that it

is perhaps impossible to lay down any one test as an

absolute and invariable test for all cases. The real

purpose of these tests is to find out the true relation

between the parts, branches, units, etc. If in their true

relation they constitute one integrated whole, we say

that the establishment is one; if, on the contrary, they

do not constitute one integrated whole, each unit is

then a separate unit. It was also observed by the Court

that in one case, the unity of ownership, management

and control may be the important test; in another case,

functional integrality or general unity may be an

important test; and in still another case, the important

test may be the unity of employment. Therefore, it is

29

clear that in applying the test of functional integrality

in dealing with the question about the interrelation

between the limestone quarry and the factory, this

Court has been careful to point out that no test can be

treated as decisive and the relevance and importance

of all the tests will have to be judged in the light of the

facts in each case.”

21. In Management of Wenger and Co. vs. Their Workmen,

(1963) Supp. 2 SCR 862, one of the questions considered was

whether industrial establishments owned by the same

management constituted separate units or they constituted one

establishment. In the said case, the question was whether the

wine shops and the restaurants form part of one establishment

or not. For the Management, in that case, it was contended

that absent functional integrality, it has to be necessarily

concluded that the units are separate in all cases. Rejecting

this argument, this Court held as under:-

“The question as to whether industrial

establishments owned by the same managements

constitute separate units or one establishment has

been considered by this Court on several occasions.

Several factors are relevant in deciding this

question. But it is important to bear in mind that the

significance or importance of these relevant factors

30

would not be the same in each case; whether or not

the two units constitute one establishment or are

really two separate and independent units, must be

decided on the facts of each case. Mr Pathak

contends that the Tribunal was in error in holding

that the restaurants cannot exist without the wine

shops and that there is functional integrality between

them. It may be conceded that the observation of the

Tribunal that there is functional integrality between

a restaurant and a wine shop and that the restaurants

cannot exist without wine shops is not strictly

accurate or correct. But the test of functional

integrality or the test whether one unit can exist

without the other, though important in some cases,

cannot be stressed in every case without having

regard to the relevant facts of that case, and so, we

are not prepared to accede to the argument that the

absence of functional integrality and the fact that the

two units can exist one without the other necessarily

show that where they exist they are necessarily

separate units and do not amount to one

establishment. It is hardly necessary to deal with this

point elaborately because this Court had occasion to

examine this problem in several decisions in the

past, vide Associated Cement Companies Ltd. v.

Their Workmen; Pratap Press, etc. v. Their

Workmen, Pakshiraja Studios v. Its Workmen;

South India Millowners' Association v. Coimbatore

District Textile Workers Union; Fine Knitting Co.

Ltd. v. Industrial Court and D.C.M. Chemical

Works v. Its Workmen.”

22. Hence, it is very clear that while the test of functional

integrality, namely, the test whether one unit can exist without

the other may be important in some cases, it may not be

31

stressed in every case without having regard to the relevant

facts of the case and it is not the correct legal position that

absent functional integrality the units have to be necessarily

concluded as separate. Thereafter, applying the law to the

facts, this Court held as under:-

“Let us then consider the relevant facts in the present

dispute. It is common ground that wherever the

employer runs a restaurant and a wine shop, the

persons interested in the trade are the same partners.

The capital supplied to both the units is the same. Prior

to 1956, wine shops and restaurants were not

conducted separately, but after 1956 when partial

prohibition was introduced in New Delhi, wine shops

had to be separated because wine cannot be sold in

restaurants. But it is significant that the licence for

running the wine shop is issued on the strength of the

fact that the management was running a wine shop

before the introduction of prohibition. In fact, LII

licence to run wine shops has been given in many cases

to previous restaurants on condition that the wine

shops are run separately according to the prohibition

rules. It is true that many establishments keep separate

accounts and independent balance-sheets for wine

shops and restaurants; but that clearly is not decisive

because it may be that the establishments want to

determine from stage to stage which line of business is

yielding more profit. Ultimately, the profits and losses

are usually pooled, together. Thus, generally stated,

there is unity of ownership, unity of finances, unity of

management and unity of labour; employees from the

restaurant can be transferred to the wine shop and vice

32

versa. Besides, it is significant that in no case has the

establishment registered the wine shops and the

restaurants separately under Section 5 of the Delhi

Shops and Establishments Act, 1954 (7 of 1954). In

fact, when Mr Nirula, the Secretary of the Employers’

Association, was called upon to register his wine shop

separately, he protested and urged that separate

registration of the several departments was

unnecessary; and that clearly indicated that wine shop

was treated by the establishment as one of its

departments and nothing more. The failure to register

a wine shop as a separate establishment is, in our

opinion, not consistent with the employers' case that

wine shops are separate and independent units. Having

regard to all the facts to which we have just referred,

we do not think it would be possible to accept Mr

Pathak's argument that the Tribunal was in error in

holding that the wine shops and restaurants form part

of the same industrial establishments.”

23. Thus, it will be seen that this Court considered unity of

ownership, unity of finance, unity of management and unity of

labour and the transferability of employees as relevant indicia.

24. It will be clear from South India Millowners’

Association (supra), Wengers (supra) and Pratap (supra) that

Courts cannot stop with only examining whether the two units

are so functionally integrated that one cannot exist without the

other and absent functional integrality conclude that the units

33

are separate. In the facts of the present case, it is the case of

the appellant that while the appellant’s unit manufactures

tablets and syrups, the respondent No.3-Vindas manufactures

injections and capsules. According to the written submissions,

the appellant contends that the establishments have completely

different range of products and any movement of man and

material between the two of these may cause gross

contamination and there is no interdependence of any raw

material. On the other hand, the authorities contend that while

the manufactured products may be different the industrial

activity is common, namely, they are part of the

pharmaceutical industry.

25. In Rajasthan Prem Krishan Goods Transport Co. vs.

Regional Provident Fund Commissioner, New Delhi and

Others, (1996) 9 SCC 454, the authorities found unity of

ownership, management, supervision and control,

employment, finance, and general purpose to treat M/s

Rajasthan Prem Krishan Goods Transport Co. and M/s

34

Rajasthan Prem Krishan Transport Company as a single

establishment for the purpose of the EPF Act. This was on the

finding that ten partners were common for both the entities;

the place of business, address and telephone numbers were

common and the management was also common. It was also

found that the trucks plied by the two entities were owned by

the partners and were being hired through both the units. This

Court endorsed the finding of the authorities and upheld the

clubbing of the two units.

26. In Regional Provident Fund Commissioner, Jaipur vs.

Naraini Udyog and Others, (1996) 5 SCC 522, the question

was whether two entities M/s Naraini Udyog, Kota and M/s

Modern Steels, Kota were to be treated as one for the purpose

of the EPF Act. The authorities found that there was common

Head Office, common Branch Office, common telephone for

residence and factories. It was found that the submission of

the Department that the office of M/s Modern Steels was

situated in the premises of M/s Naraini Udyog and accounts of

35

the two units were maintained by the same set of clerks was

not controverted by the employer. The contention of the

employer was that they have registered the two entities

separately under the Factories Act, Sales Tax Act and ESIC

Act; that the units were located at a distance of three

kilometers apart and had separate central excise nos. and were

registered as separate small-scale industries and hence should

be treated as separate units. The employer also denied the

assertion of the authorities that workers of one unit were

working in the other. The authorities considered the aspect of

separate registration as a point devoid of merit. With regard

to denial of interchange of workers, the authorities held that

the aspect was not crucial to the point at issue. On a challenge

before the High Court, the Division Bench in the said case held

in favour of the employer by holding that since they were

registered under the Companies Act as two different individual

identities though represented by members of the same family,

and that the companies were independent. On a challenge to

36

the said judgment by the authorities, this Court held that the

findings of the High Court that due to the separate registration

under the Companies Act, they were different individual

identities was wholly unjustified. This Court held that there

was functional unity and integrality and that the authorities

were justified in clubbing the two units.

27. In Regional Provident Fund Commissioner and

Another vs. Dharamsi Morarji Chemical Co. Ltd., (1998) 2

SCC 446, this Court held in favour of the employer on the

finding that there was no evidence of supervisory, financial or

managerial control and the only communicating link was that

both was owned by the common owner. It was held on facts

that that by itself was not sufficient unless there was

interconnection between the two units and there was common

supervisory, financial or managerial control. This case cannot

help the appellant as it turned on its own peculiar facts as was

clearly recorded in para five of the said judgment.

37

28. In Raj’s Continental Exports (P) Ltd. (supra), this

Court found for the employer that there was total

independence of the two units and upheld the judgment of the

learned Single Judge and of the Division Bench. Here again,

the case turned on the peculiar facts of the case and can be of

no assistance to the appellant.

29. In Sumangali vs. Regional Director, Employees’ State

Insurance Corporation, (2008) 9 SCC 106, this Court found

that the authorities had held that the clubbing of the entities

was justified and there was functional integrality, unity in

management, financial unity, geographical proximity, unity in

supervision and control and general unity of purpose. It was

also found by the authorities and the High Court that even if

each unit had separate registration under different statutes, all

units were inter-dependent and were supplementary and

complementary to each for the sake of their textile business.

This Court upheld the finding of the authorities and the High

Court and dismissed the appeal of the employer.

38

30. In L.N. Gadodia and Sons and Another vs. Regional

Provident Fund Commissioner, (2011) 13 SCC 517, the issue

was whether the appellant - L.N. Gadodia and Sons and

appellant No.2 in that case M/s Delhi Farming and

Construction (P) Ltd. were rightly clubbed by the authorities

as one entity for the purpose of the EPF Act? The Registered

Office was common; one Director was admittedly common;

the authorities found that there was a common Managing

Director; that there were loans advanced by the appellant No.2

in that case to appellant No.1; two officers were found to be

common, the telephone numbers were common and even the

gram nos. “Gadodia Son” were common. The Tribunal

reversed the finding of the authorities on the ground that the

entities were separately registered. On a challenge by the

authorities before the High Court, the High Court restored the

finding of the Provident Fund Commissioner, after holding

that the Tribunal was swayed by the factum of the companies

being separate legal entities. On a further challenge to this

39

Court, this Court upheld the finding of the Provident Fund

Commissioner. Dealing with the question on the

interpretation of Section 2-A of the Act and the submission

that only different departments of an establishment can be

clubbed but not different establishments altogether, this Court,

while rejecting the submission held as under:-

“23. The petitioners have contended that the two

entities are two separate establishments. They have

tried to draw support from Section 2-A of the Act

which declares that where an establishment consists of

different departments or has branches whether situated

in the same place or in different places, all such

departments or branches shall be treated as parts of the

same establishment. It was submitted that only

different departments or branches of an establishment

can be clubbed together, but not different

establishments altogether. In this connection, what is

to be noted is that, this is an enabling provision in a

welfare enactment. The two petitioners may not be

different departments of one establishment in the strict

sense. However, when we notice that they are run by

the same family under a common management with

common workforce and with financial integrity, they

are expected to be treated as branches of one

establishment for the purposes of the Provident Funds

Act. The issue is with respect to the application of a

welfare enactment and the approach has to be as

indicated by this Court in Sayaji Mills Ltd. [1984 Supp

SCC 610.] The test has to be the one as laid down

in Associated Cement Companies Ltd. [AIR 1960 SC

40

56] which has been explained in Pratap Press [AIR

1960 SC 1213].”

31. Hence, it will be clear from this judgment that the

contention of the appellant herein that once there are two

separate juristic entities, theory of clubbing cannot be invoked

is completely untenable and is only stated to be rejected. It is

common knowledge that artificial devices, subterfuges and

facades are commonly resorted to, to create a smokescreen of

separate entities for a variety of purposes. The Court of law

faced with such a scenario has a duty to lift the veil and see

behind applying the well-established tests to determine

whether the entities are really separate entities or are they

really a single entity. Myriad fact situations may arise. Hence,

the contention that Section 2A cannot be applied if ostensibly

two separately registered entities under the Companies Act are

involved, has only to be stated to be rejected. This is especially

so when the Court is interpreting a beneficial legislation like

in the present case, namely, the EPF Act.

41

32. In L.N. Gadodia (supra), dealing with the aspect of

burden of proof, this Court had the following pertinent

observations to make:-

“24. The Provident Fund Department had issued

notice to the petitioners on 11-6-1990 on the basis of

their inspection. It had relied upon the 1988 Audit

Report of the petitioners. The petitioners had full

opportunity to explain their position in the inquiry

before the Provident Fund Commissioner conducted

under Section 7-A of the Provident Funds Act. The

petitioners, however, confined themselves only to a

facile explanation. If according to them, the

management, workforce and financial affairs of the

two companies were genuinely independent, they

ought to have led the necessary evidence, since they

would be in the best know of it. When any fact is

especially within the knowledge of any person, the

burden of proving that fact lies on him. This rule

(which is also embodied in Section 106 of the

Evidence Act) expects such a party to produce the best

evidence before the authority concerned, failing which

the authority cannot be faulted for drawing the

necessary inference. In the facts and circumstances of

the present case, the Provident Fund Commissioner

was therefore justified in drawing the inference of

integrity of finance, management and workforce in the

two petitioners on the basis of the material on record.”

33. The last in the line that we propose to discuss is Shree

Vishal Printers Limited, Jaipur vs. Regional Provident Fund

42

Commissioner, Jaipur and Another, (2019) 9 SCC 508. This

Court emphasised that facts would have to be viewed as a

whole while each one of the facts by itself may not be

conclusive. What is important is to consider cumulatively the

facts of the case while applying the different tests laid down

(See para 40).

34. A survey of the cases cited hereinabove reveal that it will

be impossible to lay down any one test as an absolute and

invariable test for all cases. The real purpose of the test is to

find out the true relation between the Parts, Branches and

Units. If in their true relation they constitute one integrated

whole, it could be said that establishment is one and if not, they

are to be treated as separate units. Each case has to be decided

on its own peculiar facts, regard being had to the scheme and

object of the statute under consideration and in the context of

the claim. In a given case, unity of ownership, management

and control may be the important test, while in certain other

cases Functional Integrality or general unity may be the

43

determinative consideration. In some instances, unity of

employment could be the most vital test. Several tests may fall

for consideration at the same time since the mandate of the law

is that the facts will have to be viewed as a whole. While each

aspect may not by itself be conclusive, what is important is to

consider cumulatively the facts while applying the different

tests. The employer/management’s own conduct in mixing up

or not mixing up the capital, staff and management could in a

given case be a significant pointer. Mere separate registration

under the different statutes cannot be a basis to claim that the

units are separate. Similarly, maintenance of separate accounts

and independent financial statement is also not conclusive.

The onus lies on the employer/management to lead necessary

evidence to bring home their contention.

35. Applying the above principles to the case, the findings

arrived at by the APFC that the appellant and Vindas-

respondent No.3 were engaged in the same industry; they

carried on business in premises built on contiguous plots of

44

land; that they shared common telephone and facsimile

numbers; they shared common website and e-mail IDs; that

their Registered Office/Head Office and administrative office

were the same; they have employed common security to guard

the premises; that there was unity of management inasmuch as

while Dr. Darshan Kataria and Niranjan Kataria – the two

brothers were Directors of respondent No.3-Vindas; Dr.

Darshan Kataria was also the Director of the appellant while

the other brother Vasudev Kataria and Mr. Rajni Kumari –

wife of Darshan Kataria were Directors in the appellant-

Company; that there was unity of finance inasmuch as the

Hindu Undivided Family of Darshan Kataria and his family

members funded both the companies, cumulatively establish

beyond doubt that the two entities were rightly treated as

common for the purpose of the EPF Act. If a common man

were to be asked as to whether the two units are the same, the

answer will be an emphatic yes.

45

36. The claim for infancy protection under the erstwhile

Section 16(1)(d) would also not arise in view of our finding of

clubbing. Being an integrated unit of Vindas respondent no. 3

since 1995 no separate infancy protection will enure to the

benefit of appellant. Equally, untenable is the argument that

the show cause notice originally being issued for coverage

from 01.04.2004 the authorities were not justified to direct

deposit of dues from September 1995. In fact, as would be

clear from the factual narration hereinabove from the

submissions of 10.10.2005 of the appellant itself it is clear that

the authorities were evaluating the possibility of clubbing.

Apart from this, in the communication of 24.01.2005 it was

clearly indicated that the stipulated date of 01.04.2004 was

liable to change and a final decision was to be taken after

inspection of previous report. The further report of 10.11.2005

furnished to the parties clearly dealt with the aspect of

clubbing and appellant also responded to the same by its

submission of 20.12.2005. In view of the same, we have no

46

hesitation in rejecting the submissions of the appellant that the

authorities were not justified in seeking remittance of the dues

from September 1995. Similarly, the contention of the

appellant that notice of clubbing ought to have been issued to

Vindas-respondent No.3 also lacks merit. As rightly

contended for the Authorities since the ultimate contribution

was to be levied only for the respective employees of the units

and since employees of Vindas-respondent No.3 were already

covered for the period in question, there was no necessity for

issuing notice to Vindas-respondent No.3.

37. For the reasons stated above, we find no merit in the

appeal. The appeal is dismissed. No order as to costs.

…..…………………J.

(K.V. Viswanathan)

…....…………………J.

(Joymalya Bagchi)

New Delhi;

July 15, 2025.