Wednesday, October 18, 2023

When Can Two Establishments Clubbed Together For EPF Act Coverage? Supreme Court Explains

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A Division Bench of the Supreme Court recently determined the legal position pertaining to the clubbing of different institutes for the purpose of coverage under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act).

After referring to several decisions with respect to the subject matter, the Court concluded that there is a financial integrity between the two institutes and thus, they can be interconnected and can be clubbed for the purpose of coverage.

the Court highlighted that under the provisions of the EPF Act, if any establishment employs 20 or more persons, the same shall be covered under the provisions of the EPF Act for grant of various benefits thereunder to the employees working there.

Moving forward, the Court also narrowed the issue raised in the present appeal and clarified that the same is not regarding the calculation of dues under the EPF Act, rather it is regarding the coverage of the EPF Act by clubbing of two Institutes.

It thereafter relied upon several precedents that laid down the law regarding the adjudicated issue. These decisions included Associated Cement Co. v. Workmen, AIR 1960 SC 56, wherein it was opined that it is impossible to lay down any one test as absolute and invariable for all cases to determine the issue regarding clubbing of two establishments for the purpose of coverage under the EPF Act. The real purpose is to find out true relations between the two establishments and finally opine thereon. In one case, ‘unity of ownership, management and control’ may be an important test whereas in another ‘functional integrity’ or ‘general unity’ may be important. There can also be a case where the test can be of the ‘unity of employment’.

The Court also placed its reliance upon Noor Niwas Nursery Public School v. Regional Provident Fund Commissioner and others, (2001) 1 SCC 1 wherein it was held that no straight jacket formula or test can be laid down for the purpose of clubbing of the two establishments and coverage under the EPF Act.

After perusing various orders and documents produced on record, the Cout was of the opinion that the appellant had taken the case very casually. At the foremost, the Court observed that after the inspection of the institute, report was submitted by the Enforcement Officer on July 01, 2003, wherein it was stated that the establishment would be covered under the provisions of the EPF Act.

The coverage was confirmed vide order dated August 12, 2003. At this, the Court pointed out that both these orders were not challenged by the appellant. It is only after the order was passed by the Commissioner on September 23, 2005, under Section 7-A of the EPF Act, that the proceedings were initiated.

When the matter travelled to the Tribunal, therein it was recorded that the onus to prove that the employees were less than 20 for exclusion of the applicability of EPF Act before the Commissioner, was on the appellant and the appellant had failed to discharge the same. Thus, it did not interfere with the order of the commissioner.

At the end, the Court opined that the documents produced by the appellant themselves show that it is not an independent establishment but an arm of the Society.

Pertinently, one of the documents was the letter dated 09.12.1987 from the University Grants Commission conveying the Registrar, Gulbarga University, Gulbarga, about the inclusion of the appellant college in the list of the approved colleges under the non-Government colleges, teaching upto Bachelor’s degree. The name of the college was mentioned as ‘The Ideal Fine Arts Society’s College of Visual Art’.

It is in this context, the Court held that “the College is nothing but an extended arm of the Society”, while refusing to accept the appellant’s contentions and dismissing the appeal.

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