M/S Torino Laboratories Pvt. Ltd vs Union Of India

2025 INSC 849 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)

JUDGMENT

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 Signature Not Verified Digitally signed by RADHA SHARMA Date: 2025.07.15 Constitution of India filed by the appellant-herein and upheld 17:51:23 IST Reason:

the order of the Employees’ Provident Fund Appellate

1 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.

2 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 3 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 4 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 5 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 6 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

7 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 8 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

9 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 10 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 11 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 12 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 13 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?

14 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 15 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.

16 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 17 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 18 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 19 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.

20

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

21 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

22 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

23 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

24 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

25 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 26 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 27 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 28 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 29 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 30 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

31 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

32 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 33 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 34 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 35 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. 36

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. 37

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 38 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 39 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.

40

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

41 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 42 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 43 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.

44

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 45 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.

46