REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4474 OF 2010

M/S. SHREE VISHAL PRINTERS LTD., JAIPUR                ….Appellant(s)

VERSUS

REGIONAL PROVIDENT FUND COMMISSIONER, JAIPUR & ANR.      ….Respondent(s)

WITH

CIVIL APPEAL NO. 4476 OF 2010 CIVIL APPEAL NO. 4475 OF 2010

J U D G M E N T

SANJAY KISHAN KAUL, J.

1. Welfare economics,  enlightened self-interest  and the pressure of

trade unions led larger factories and establishments to introduce schemes

that would benefit  their employees, including schemes like that of the

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provident fund.1  However, with an increasing number of small factories

and  establishments  coming  into  the  market,  the  employees  of  such

fledgling units remained deprived of these benefits.  In order to diffuse

such  benefits  in  establishments  across  the  market,  the  legislature

promulgated  the  Employees’  Provident  Funds  and  Miscellaneous

Provisions Act, 1952 (hereinafter referred to as the ‘said Act’). The said

Act was enacted with the avowed object of providing for the security of

workers  in  organised  industries,  in  the absence  of  any social  security

scheme  prevalent  in  our  country.   To  avoid  any  hardship  to  new

establishments, a provision was made for exempting them from the aegis

of the said Act, for a period of five years.  This period was reduced to

three years in 1988 and the exemption provision was completely removed

from 22.9.1997.

2. The relevant provision of the said Act is reproduced hereinunder:

“16. Act not to apply to certain establishments. - (1) This Act shall  not apply- …. …. …. …. …. …. (d) to  any other  establishment  newly set  up,  until  the expiry of  a period of three years from the date on which such establishment is, or has been, set up.

1 L.N. Gadodia & Sons and Anr. v. Regional Provident Fund Commissioner, (2011)  13 SCC 517  

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Explanation: For the removal of doubts, it is hereby declared that an establishment  shall  not  be  deemed to  be  newly  set  up  merely  by reason of a change in its location.”

3. The present appeals are concerned with this exemption provision

as the three establishments in question claimed exemption in respect of

application of this provision of the said Act.   

4. The three appeals filed before us are by three limited companies

(two  separate  legal  entities  and  one,  an  establishment  of  the  parent

company), though the question of their exemption has been dealt with by

a  common  order  of  the  Regional  Provident  Fund  Commissioner,

Rajasthan (for short ‘RPFC’).  This is so, as all the three establishments

are sought to be denied exemption on the ground that they are effectively

part of the same parent establishment, being M/s. Bennett, Coleman &

Company  Limited  (for  short  ‘BCCL’),  Mumbai.   Civil  Appeal  No.

4475/2010 is by BCCL, Jaipur.  We may note that the said Company is

not a separate legal entity but was really claimed to be an establishment

of  the  parent  company,  albeit  set  up  in  Jaipur.   Civil  Appeal  No.

4476/2010 is by M/s. Times Publishing House Limited, Jaipur (for short

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‘TPHL,  Jaipur’)  while  Civil  Appeal  No.  4474/2010  is  by  M/s.  Shree

Vishal Printers Limited, Jaipur (for short ‘SVPL, Jaipur’).

5. Before  we  proceed  with  the  factual  matrix  as  to  how  the

controversy arose, it would be appropriate to examine the contours within

which this aspect would have to be examined.  It would be appropriate to

take note of another provision, Section 2A of the said Act, which was

inserted by Act 46 of 1960, w.e.f. 31.12.1960.  We may note that there is

no  definition  of  an  “establishment”  under  the  said  Act,  and thus,  the

jurisprudence that developed resorted to the provisions of the Industrial

Disputes Act, 1947 (for short ‘ID Act’) for the said purpose.  Section 2A

of the said 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.”

6. The  aforesaid  provision  was  introduced  so  as  to  obviate  the

chances  of  creation  of  different  departments  and  branches  by  an

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establishment and then seek exemptions on the basis of the same being

new establishments.

7. There is really no dispute on the jurisprudential aspect, as all the

learned counsels for the parties, i.e., Mr. Joydeep Gupta, learned senior

counsel in Civil Appeal Nos. 4475/2010 and 4476/2010 and Mr. Dhruv

Mehta, learned senior advocate in Civil Appeal No. 4474/2010, as well as

the  counsel  for  the  Department,  Mr.  Keshav  Mohan,  Advocate  have

relied upon the same set of judicial pronouncements.  To put the legal

perspective at the threshold would, thus, be appropriate.

8. The first judgment is in Management of Pratap Press, New Delhi

v. Secretary, Delhi Press Workers’ Union, Delhi & Its Workmen 2.  The

dispute was one under the ID Act and also dealt with the publication of a

newspaper as in the present case.  Pratap Press was sought to be treated

as part of the same industrial unit as Vir Arjun and Daily Pratap.  The

tests  are  taken  from  an  earlier  judgment,  in  Associated  Cement

Companies Limited, Chaibassa Cement Works, Jhinkpani v. Workmen3,

and it was observed in para 5 as under:

2 AIR 1960 SC 1213 3 AIR 1960 SC 56

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“5. In Associated Cement Co., Ltd. v. Workmen, this Court had to consider the question whether the employer's defence to a claim for lay-off compensation by the workers of the Chaibasa Cement Works that  the  laying  off  was  due  to  a  strike  in  another  part  of  the establishment, viz., limestone quarry at Rajanka was good. In other words  the  question  was  whether  the  limestone  quarry  of  Rajanka formed  part  of  the  establishment  known  as  the  Chaibasa  Cement Works  within  the  meaning  of  Section  25E(iii)  of  the  Industrial Disputes Act. While pointing out that it was impossible to lay down any one test as an absolute and invariable test for all cases it observed that  the  real  purpose  of  these  tests  would  be  to  find  out  the  true relation between the parts, branches, units etc. This court  however mentioned certain tests which might be useful in deciding whether two units form part of the same establishment. Unity of ownership, unity  of  management  and  control,  unity  of  finance  and  unity  of labour,  unity  of  employment  and  unity  of  functional  "integrality" were the tests which the Court applied in that case. It is obvious there is an essential difference between the question whether the two units form part of one establishment for the purposes of Section 25E(iii) and the question whether they form part of one single industry for the purposes of calculation of the surplus profits for distribution of bonus to workmen in one of the units. Some assistance can still nevertheless be obtained from the enumeration of the tests in that case. Of all these tests  the  most  important  appears  to  us  to  be  that  of  functional "integrality" and the question of unity of  finance and employment and of labour. Unity of ownership exists ex hypothesi. Where two units belong to a proprietor there is almost always likelihood also of unity of management.  In all  such cases therefore the Court  has to consider with care how far there is "functional integrality" meaning thereby such functional  interdependence that  one unit  cannot  exist conveniently  and  reasonably  without  the  other  and  on  the  further question whether in matters of finance and employment the employer has actually kept the two units distinct or integrated.”

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9. The  second  judgment  relied  upon  for  this  purpose  is  in  L.N.

Gadodia & Sons and Anr. v. Regional Provident Fund Commissioner4.

This  case  dealt  with  the  said  Act  and  the  question  which  arose  was

whether  two  sister  concerns,  having  different  dates  of  incorporation,

could  be  treated  as  two  separate  establishments.   The  judgments  in

Associated  Cement  Companies  Limited5 and  Management  of  Pratap

Press, New Delhi6 were referred to for the said purpose.  In para 16 of

this  case,  the observations  qua the  Associated Cement Companies7 in

para 11, insofar as relevant is extracted as under:

“…11. … What then is ‘one establishment’ in the ordinary industrial or business sense? … 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.  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 a 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

4 (2011) 13 SCC 517 5 (supra) 6 (supra) 7 (supra)

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several  tests  may  fall  for  consideration  at  the  same  time.  The difficulty of applying these tests arises because of the complexities of modern  industrial  organization;  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.”

10. Thereafter,  while  discussing  some  subsequent  judgments,  the

following observations were made:

“18. Accordingly, depending upon the facts of the particular case, in some cases  the   units  concerned were  held  to  be  the  part  of  one establishment whereas, in some other cases they were held not to be so.  Regl.  Provident  Fund Commr.  v..  Dharamsi  Morarji  Chemical Co. Ltd. reported in [(1998) 2 SCC 446] and  Regl. Provident Fund Commr. v. Raj’s Continental Exports (P) Ltd. reported in [(2007) 4 SCC 239] are cases where the two units were held to be independent. In  Dharamsi Morarji (supra), the appellant company was running a factory  manufacturing  fertilizers  at  Ambarnath  in  District  Thane, Maharashtra since 1921. The appellant established another factory at Roha in the adjoining district in the year 1977 to manufacture organic chemicals  with  separate  set  of  workers,  separate  profit  and  loss account, separate works manager, plant superintendents and separate registration under the Factories Act. The two were held to be separate for the purposes of coverage under the Provident Funds Act. In Raj’s Continental  Export (supra),  Dharamsi  Morarji was followed since the  two  entities  had  separate  registration  under  the  Factories  Act, 1948,  Central  Sales  Tax  Act,  1956,  Income  Tax  Act,  1961, Employees’ State  Insurance Act,  1948 separate  balance sheets  and audited statements and separate employees working under them.

19.  As  against  that  in  Rajasthan  Prem  Krishan  Goods  Transport Co.v. Regl. Provident Fund Commr. reported in [(1996) 9 SCC 454] and  Regl.  Provident  Fund  Commr.,  v.  Naraini  Udyog reported  in [(1996) 5 SCC 522] the concerned units were held to be the units of the same establishment. In Rajasthan Prem Krishan Goods Transport

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Co. (supra) the trucks plied by the two entities were owned by their partners,  ten  out  of  thirteen  partners  were  common,  the  place  of business  was  common,  the  management  was  common,  the  letter- heads bore the same telephone numbers. In  Naraini Udyog (supra) the two entities were located within a distance of three kilometers as separate small-scale industries but were represented by the members of  the  same  Hindu  Undivided  Family.  They  had  a  common  head office  at  New  Delhi,  common  branch  at  Bombay  and  common telephone at Kota.  The accounts of the two entities were maintained by the same set of clerks.  Separate registration under the Factories Act,  the  Sales  Tax  Act  and  the  ESI  Act  were  held  to  be  of  no relevance and the two units were held to be one establishment for the purpose of the Provident Funds Act.”

11. Now turning to the facts of the cases before us, we may note at the

inception itself, Civil Appeal No.4475/2010 was not really argued before

us.  In fact, the impression we got was that the counsels appearing for the

appellants  were of  the belief  that  it  was facts  of  this  case which had

caused  confusion  in  the  mind  of  the  RPFC  as,  in  their  perspective,

exemption could not have been really sought within the provisions of the

said Act in this case.  This is so, as BCCL, Jaipur was not a separate legal

entity, but, part of the parent company directly.  The case would, thus, be

fully covered by the provisions of Section 2A of the said Act and mere

location  of  departments  and  branches  in  other  cities  would  not  have

extended the benefit of the exemption to this company.  Thus, this appeal,

in any case, has to fail.

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12. Insofar as Civil Appeal No. 4476/2010 is concerned, learned senior

counsel sought to refer to the provisions of the agreement in question,

between  the  two  parties,  which  gave  rise  to  the  Provident  Fund

Commissioner  to  initiate  proceedings.   This  agreement  is  dated

25.7.1986.   It  appears  that  this  agreement  was  in  supersession  of  an

earlier  agreement  dated  13.12.1985.   The  business  reason  stated  for

entering into this agreement was the commencement of publication of the

Jaipur edition of the daily newspapers of BCCL, Mumbai, i.e., The Times

of India and Navbharat Times.

13. The agreement  records that  TPHL had opened an office  at  8-9,

Anupam Chambers, Tonk Road, Jaipur, where it had equipped itself with

trained  and  experienced  staff  and  all  infrastructural,  secretarial,

administrative  and  marketing  facilities.   Since  23.9.1985,  it  had  been

providing various services to BCCL, Mumbai, including office space for

use and occupation, accounting facilities, stenographers, typing, and so

on.   The  services  which  were  now further  sought  to  be  provided  to

BCCL, Mumbai  included marketing,  development  work,  realisation of

dues,  adequate  office  space,  accounting  facilities,  infrastructure,

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packing/bundling of daily newspapers (at the cost of BCCL, Mumbai),

etc.  Clause 1(g) of the agreement states as under:

“1.  “TPH”  shall  render  the  following  services  effective  from  1st

August, 1986 to “Bennett”:-

xxxx xxxx xxxx xxxx xxxx

(g) All staff employed by “TPH” will carry out the instructions given by “Bennett” and in case of working problems; “TPH” shall at the request of “Bennett” remove the problems.  The staff employed by TPH shall not be considered as employees of “Bennett” but they will remain  the  staff  of  “TPH” and “TPH” shall  be  responsible  to  the employees.”

14. BCCL, Mumbai was to pay to TPHL an amount calculated @ 5%

as  commissions  on  Net  Advertisement  Revenue  and  Net  Circulation

Revenue.

15. On all the three establishments being called upon to comply with

the provisions of the said Act, all three of them sought exemption under

Section 16(1)(d) of the said Act.   In view thereof, the RPFC initiated

proceedings under the said Act, and issued a notice under Section 7A of

the said Act, dated 28.10.1987.  The proceedings were held thereafter,

and  the  RPFC  passed  a  common  order  in  respect  of  all  the  three

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establishments on 4.10.1990 opining that they were not entitled to the

exemption.   The  appeal  filed  before  the  Employees’ Provident  Fund

Appellate Tribunal by all the three establishments also failed, as it was

dismissed  on  10.10.1997.   The  same  fate  befell  all  three  in  the

proceedings before the learned Single Judge, vide order dated 20.12.2006

and  the  Division  Bench  of  the  High  Court,  on  11.4.2008.   Thus,

practically  four  forums have  scrutinised  the  cases  qua all  these  three

establishments.

16. The  learned  senior  counsel,  Mr.  Joydeep  Gupta,  appearing  for

TPHL, however, contended that the fallacy which came in the order of

the RPFC was of  jumbling of  the  facts  in  issue,  relating to  the  three

establishments, and thereafter, there has really been no scrutiny before

any of the forums, other than giving their imprimatur to the said order.  In

fact, the High Court effectively refused to look into the matter as two

forums had already gone into that aspect.

17. Learned senior counsel for the appellant, TPHL, sought to take us

through the order of the RPFC, Rajasthan, as according to him, that was

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the material order to show that from the inception, there was a problem

arising  from  the  manner  in  which  the  facts  relating  to  the  three

establishments  were  mixed  up.  He  contended  that  each  of  these

establishments were required to be connected to BCCL, Mumbai, and, it

was not a case which could have been built on with connectivity with

BCCL, Jaipur, as was sought to be done.

18. We may note at this stage itself that though, in principle, there can

be no dispute on this proposition, it does not really appeal to us for the

reason  that  it  was  intrinsically  predicated  on  the  ground  that  BCCL,

Jaipur was a different establishment.  Once that is conceded as not so,

BCCL, Jaipur was really only a part of BCCL, Mumbai.  The connection

of the other two establishments with BCCL, Mumbai or, for that matter,

BCCL, Jaipur would, thus, not cause an intrinsic fallacy in the order of

the RPFC.

19. Learned senior counsel sought to emphasise the distinctive features

why it could not be said that there was any direct connect between the

two establishments, i.e. BCCL, Jaipur and TPHL.  A great emphasis was

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laid on the facts that these are two separate registered companies, under

the then Companies Act, 1956, that there is no commonality of directors

or shareholders and no direct financial unity.  The balance sheet as well

as profit and loss accounts are separate, and there were varying figures of

independent and separate employees of the two entities, with there being

no transfer of employees inter se BCCL, Mumbai and TPHL or, for that

matter, between BCCL, Jaipur and TPHL.

20. If the aforesaid factual matrix is analysed within the principles of

what would constitute one establishment,  as set  out in the  Associated

Cement Company  case,8 it is obvious that there are various parameters

dependent on the factual matrix of each case, which have to be examined.

Undoubtedly we are not dealing, in this case, with a branch or a unit of

BCCL, Mumbai.  Thus, a test of unity of ownership, management and

control may not really be applicable, but the test would be of functional

integrality  or  general  unity  of  purpose,  in  the  given  factual  situation.

There is  no direct  unity of  employment.  In any case,  it  is  the test  of

functional integrality or general unity of purpose which would have to be

applied in the present facts if the two establishments have to be clubbed

8 AIR 1960 SC 56

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for the purposes of the provisions of the said Act.

21. We may note that one of the arguments of learned senior counsel

for the appellant was based on the business model of outsourcing and it

was sought to be suggested that if one aspect of work is outsourced to

another  company,  the  same  would  not  satisfy  the  aforesaid  tests.

However, we did point out to the learned senior counsel that the business

model of outsourcing really does not have history that old or was not

much prevalent in respect of the time period which we are discussing; but

it  is  a relatively later  phenomenon and, thus,  that  principle would not

really be applicable for testing the nature of linkage, if any, for the time

with which we are concerned.

22. Learned counsel for the respondent sought to emphasise that the

two companies were functionally dependent.  In fact, what was pointed

out was that practically all three companies were working from the same

building, albeit on different floors, and the office of TPHL was open for

the  use  of  BCCL,  Mumbai  employees.   It  was  also  sought  to  be

contended that Mr. Sunil Gupta, Manager of BCCL, Mumbai was signing

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papers relating to TPHL and the examples given of the same are notices

relating to the closure of offices of the two on Mahashivratri and Holi.

However, a perusal of the documents in question shows that they were

really endorsements to TPHL, which would be natural considering that

there would be no requirement of work to be sourced in case the office of

BCCL, Mumbai itself was closed, and no editing, marketing work was

required to be carried out.  Similarly, on the issue of security staff, since

the  building  was  one,  once  again,  logically  common  directions  were

possible.   However,  what  is  also  emphasised  is  that  the  executive  of

TPHL was using the letterpad of BCCL, Mumbai.

23. The  important  aspect,  in  our  view,  which  was  emphasised  by

learned counsel for the respondent was the nature of the agreement which

provided for both the space and the staff to be made available by TPHL

for the benefit of BCCL, Mumbai.  The expenses of the establishment,

for example, electricity bill, maintenance costs, etc., were to be borne by

TPHL.

24. If we analyse the aforesaid facts on the touchstone of functional

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integrality or general unity of purpose, it is difficult, if not impossible, to

disagree  with  the  reasoning  of  four  forums,  which  are  sought  to  be

assailed before us.

25. Learned counsel for the appellant sought to rely upon the judgment

in the Management of Pratap Press case9 to contend that in the case of

similar facts, it was held to the contrary, and the units were held to be

distinct  establishments.   An  examination  of  the  said  judgment  would

show  that  though  they  were  all  in  the  same  nature  of  business,  the

functions of the press and the newspaper were held not so interdependent

that one could not exist without the other.  The activities of the press unit

were found to be independent of the activities of the paper unit, and the

view of the Tribunal, that they are two distinct and separate industrial

units was not found worthy of interference.

26. The aforesaid judgment had emphasized the most important test to

be that of functional integrality and opined that unity of ownership exists

ex hypothesi.

9 (supra)

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27. We are, however, not able to persuade ourselves to agree with the

submission of the learned senior counsel for the appellant for the reason

that  what  has  effectively  been  done  in  the  present  case,  under  the

agreement in question,  is that TPHL has handed over its office space,

employees and control to BCCL, Mumbai, for all practical purposes, to

the extent that the letter pads are also being used without any due regard

as to which entity the instructions are being issued from.  This is not a

case of a singular document being issued, but a number of documents

where this practice has been followed.  Just to make an endeavour on

paper  to  somehow keep  these  two  segregated  for  various  labour  law

ramifications would not be an appropriate principle to accept, more so

taking into consideration the very purpose for which the said Act was

enacted.

28. We have, thus, no doubt in rejecting even the case of TPHL.

29. Now turning to Civil Appeal No. 4474/2010 of SVPL, Mr. Dhruv

Mehta,  learned  senior  counsel,  while  adopting  the  arguments  of  Mr.

Joydeep Gupta, learned senior counsel,  sought to emphasise the same,

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possibly in a different perspective.

30. Learned senior  counsel  contended that  since  an  “establishment”

was not defined under the provisions of the said Act, as noticed above,

the provisions of the ID Act were resorted to for the said purpose.  In the

context of the approach adopted both, by the learned single Judge, and

the Division Bench of the High Court, it was contended that they ought

not to have merely rejected the petitions on a broad principle of non-

requirement of the relevant facts being looked into, the same having been

dealt with by the RPFC and the appellate authority.  It is in this context

that he invited our attention to the judgment in the case of  Associated

Cement Company10, more specifically to paras 9 and 11.  The issue of the

Industrial Tribunal under the ID Act, being a final court of facts,  was

debated in the context of Section 25-E(iii) of the ID Act while referring

to the expression “in another part of the establishment.”  In that context it

was opined that this question could not be treated as a pure question of

fact as it involved consideration of the tests which should be applied in

determining whether a particular unit is part of a bigger establishment.  It

was, thus, said that “indeed, it is true that for the application of the tests

10 (supra)

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certain preliminary facts must be found; but the final conclusion to be

drawn therefrom is not a mere question of fact.”

31. Elucidating the matter further, qua the problem of not having really

specific tests,  it  was observed in para 11 that  there were several  tests

which were required to be resorted to especially where the establishments

were in different locations.  This paragraph has already been extracted by

us before.

32. On the facts of the case, it was stated that SVPL was incorporated

on 20.6.1984 and entered into the agreement in question on 1.10.1985.  It

claimed exemption on 31.12.1986 and has been making provident fund

contributions from 24.2.1988. Though it was not disputed that the said

Company,  for  the relevant  period of  time,  was carrying out  exclusive

work  only  for  BCCL,  Mumbai,  it  was  pleaded  that  there  was  no

commonality  of  directors  and shareholders  of  the two companies,  nor

was there a  cross shareholding,  an aspect  for  which charts  have been

filed.  The subsequent fact was also that, at some stage, it got merged

with another company, i.e., M/s. Raghuvar India Limited.

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33. Now  examining  the  agreement  with  BCCL,  Mumbai,  dated

1.10.1985, BCCL, Mumbai, having commenced publication of the Jaipur

edition of the two newspapers is stated to have approached SVPL for

printing the said newspapers on a contract basis.  SVPL was to employ

the necessary personnel for carrying out various tasks and had to print the

newspapers.  The remuneration was payable by BCCL, Mumbai to SVPL

at Rs.24,000/- per day, for the two daily newspapers.  The printing press

was elsewhere, but the business office of SVPL was also located in the

same building as BCCL, Jaipur, albeit stated to be at a different floor.

One of the clauses, which has been referred to, which shows that there

was no exclusivity of dealing, is clause 28, which reads as under:

“28. “SHREE VISHAL” will  be at full  liberty to undertake any other  contract  for  printing  newspaper/journals  from  any  other party/s provided it ensures timely printing of the daily newspapers of “Bennett” and complies with Clause 32 of this agreement.”

34. In the aforesaid context, it may be noted that clause 32 referred to

in this clause is only a ‘Confidentiality Clause’.

35. A great emphasis was laid by learned senior counsel appearing for

the said entity on the ‘Non-Exclusivity Clause’ in the agreement between

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the two parties, i.e., clause 28.  Once again, the emphasis was on the two

companies being separate legal entities, there being no commonality of

directors or shareholders, or direct financial control.  The balance sheet

and  profit  and  loss  accounts  were  also  separate.   Another  aspect

emphasised was that the printing press of SVPL was located at a different

premises from where the business was really being carried on, though

naturally, the control of the business would be from the office located in

the same premises as BCCL, Mumbai.  It is not, however, disputed that

SVPL had, at its own cost, given adequate covered area adjacent to the

printing press to BCCL, Mumbai for storing the newspaper/printing.  The

consideration, which was being paid to SVPL for printing included the

cost of making available the aforesaid space for packaging and storage

operations.

36. Learned  counsel  for  the  respondent,  once  again,  sought  to

emphasise the functional dependence between the companies. The aspect

of Mr. Sunil Gupta, Manager of BCCL signing papers relating to SVPL

was emphasised, including notices of closure, as discussed in the case of

TPHL.  The common factor, again, is of BCCL, Mumbai issuing orders

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on the letter pad of SVPL. In fact,  the nature of communications and

orders issued do suggest that all three were working towards the common

object of bringing out a newspaper.

37. The aforesaid would not have been sufficient by itself, but for the

application of the functional integrality test, which linked them to be part

of the same establishment.

38. We may add here that in the impugned orders it is not very clear as

to whether the reference is being made to BCCL, Mumbai or to BCCL,

Jaipur.  However, as noticed before, the same is not of much consequence

for the reason that BCCL, Jaipur is admittedly a branch office of BCCL,

Mumbai.

39. We have examined this case more closely because of the factual

pleas raised by learned senior counsel for SVPL.  We have also taken

note of the fact that as per the submissions of the learned senior counsel,

the said unit was subsequently merged into another company, an aspect

already noticed aforesaid.

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40. Despite the aforesaid,  in the complete conspectus of  facts,  after

divorcing different aspects of the three establishments, we are unable to

come to a conclusion different from the one which we have come to for

TPHL.  We believe that the very nature of the working of SVPL and the

other  two  entities  show the  functional  integrality  test  to  be  satisfied.

They  may  be  different  legal  entities,  an  arrangement  may  have  been

made  to  have  different  directors  and  shareholders,  but  the  nature  of

control and integrality of functionality, between the three entities is quite

apparent from the facts set out hereinabove.  Each one of the facts by

itself may not be conclusive, but taken as a whole, there can be no other

conclusion, than the one arrived at by the RPFC.  We are doing so, quite

conscious of the fact that there is undoubtedly some jumbling which has

arisen in the order of the RPFC, which has been affirmed throughout.

But then, the case of the appellants was built on the principle that all

these three entities have really no functional integrality vis-à-vis BCCL,

Mumbai.  As it emerged subsequently, and was conceded before us; there

is little doubt that BCCL, Jaipur is a unit of BCCL, Mumbai, and the

other two units have linkages and are controlled by BCCL, Jaipur in a

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manner which would satisfy the functional integrality test.

41. The said Act being a beneficial legislation, the object of excluding

the infancy period of five years (later reduced to three years) from the

rigours of the Act, was only to provide to new establishments, a period to

establish their business, and not to permit different kinds of routes to be

created to evade the liability under the said Act.

Conclusion:

42. We have, thus, no hesitation in coming to the conclusion that the

findings qua all the three appellants satisfy the functional integrality and

the general unity of purpose test, and the same are met in the facts of the

present case.

43. We may also notice another aspect before parting with the case.

On a  Court  query  as  to  what  would  be  the  liability  arising  from the

impugned orders, it was stated to be in the range of only about Rs.15 lakh

for which five judicial forums have now been troubled.  The other aspect

is that this matter has been prolonged over so many years and the only

avenue open for the RPFC is to impose damages under Section 14B of

the said Act, which, at the relevant time, limited the damages amount to

twice the original amount.  The net result is that the liability would only

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double during this long period, over the last more than thirty years.  It is

only  by  a  subsequent  legislative  amendment,  now  repealed,  by

introduction of Section 7Q, inserted w.e.f. 1.7.1997, that the provision

was made for interest to be payable at 12 per cent per annum, which

would  naturally  apply  prospectively.   Thus,  the  appellants  are  getting

away lightly on the issue of such liability, the exact amount of which is to

be determined.  The liability of each of these establishments would be co-

extensive with BCCL, Mumbai.

44. In view of the aforesaid facts, we are inclined to impose costs on

all the three appellants,  but of varying amounts. As there was no case

whatsoever of BCCL, Jaipur, appellant in Civil Appeal No. 4475/2010,

we, thus, dismiss that appeal with costs of Rs.50,000/-, while imposing

costs on the other two appellants of Rs.20,000/- each.

45. The appeals are accordingly dismissed.

...……………………………J. [Sanjay Kishan Kaul]

...……………………………J. [K.M. Joseph]

New Delhi. September 12, 2019.

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