Debi Dayal Sukhani vs Regional Provident Fund Commissioner

Hazra, J.—This petition under Article 226 of the Constitution of India has been filed in this Court by one Debi Dayal Sukhani carrying on business under the name and style of M/s Jetmull Bhojraj at Darjeeling for issue of appropriate writs against the notices dated January 29, 1973 and May 2, 1973, by the Regional Provident Fund Commissioner. The Respondents to this petition are (i) Regional Provident Fund Commissioner, West Bengal and Andamans, (ii) Provident Fund Inspector and (iii) Union of India. In the petition the Petitioner has, inter alia, prayed for:

(a) A writ of or in the nature of a certiorari commanding the Respondents and each one of them to transmit to this Hon''ble Court the records of the case in which the said purported notices dated January 29, 1973 and May 2, 1973, so that conscionable justice be done by the quashing of the said notices given to the Petitioner.

(b) A writ of or in the nature of prohibition commanding the Respondents not to give effect to or to act in pursuance of the said purported notices.

(c) A writ of or in the nature of a mandamus commanding the Respondents to act according to law and not to proceed any further or to take any action in respect of the said purported notices.

(d) Injunction restraining the Respondents, their servants and agents from acting upon or giving effect to or taking any steps whatsoever in pursuance of or on the basis of the said purported notices to show cause served on the Petitioner or from taking any action under the Employees'' Provident Funds Act against the Petitioner.

The material facts are as follows:

Messrs Jetmull Bhojraj was originally a partnership firm under the Indian Partnership Act. The firm was constituted by a deed of partnership dated June 15, 1956. At that time there were five partners including the Petitioner D.D. Sukhani and one P.C. Sukhani. The said firm was dissolved and a new partnership was reconstituted with the said two partners and one L.N. Sukhani. The said L.N. Sukhani died and the firm was again reconstituted with the Petitioner and P.C. Sukhani and one K.K. Sukhani. The said K.K. Sukhani ceased to be a partner from September 25, 1956 and the firm was reconstituted by an indenture of partnership dated April 14, 1967, with the Petitioner D.D. Sukhani and the said P.C. Sukhani as members.

The said partnership firm M/s Jetmull Bhojraj was an establishment to which the Employees'' Provident Funds and Family Pension Act, 1952 (XIX of 1952), (hereinafter called the Act) applied and the firm duly paid its contribution as employer to the fund. The case of the Petitioner is that by an indenture dated April 18, 1970, the firm Jetmull Bhojraj was dissolved on and from April 14, 1970 and the assets thereof were partitioned and divided between the existing partners, namely, the Petitioner D.D. Sukhani and P.C. Sukhani. Upon such dissolution the firm Jetmull Bhojraj became proprietorship concern with the Petitioner D.D. Sukhani as karta and manager of the joint family consisting of himself and his sons and grandsons. On June 13, 1970, the firm Jetmull Bhojraj informed the Regional Provident Fund Commissioner, West Bengal, that consequent upon the partition of the firm among the partners the branches at Siliguri Tista Bridge and Kalimpong in the district of Darjeeling have been allotted to Sri P.C. Sukhani, one of the partners, with effect from April 14, 1970, sent a copy of the indenture dated April 18, 1970, to the Regional Provident Fund Commissioner. In the said letter it was pointed out that certain members (covering Code No. W.B. 8174) mentioned in the said letter ceased to be the employees of the firm Jetmull Bhojraj, Darjeeling and the firm was no longer responsible for deduction and payment of their provident fund contribution. It is also stated in that letter that any further correspondence on the subject should be addressed to the Petitioner P.C. Sukhani, c/o. M/s Jetmull Bhojraj, Kalimpong, Darjeeling. Thereafter, on July 1, 1970, a final notice of cessation and discontinuance of the membership was given to the Regional Provident Fund Commissioner by the said firm. In the said letter it was pointed out that on and from April 15, 1970, the firm M/s Jetmull Bhojraj which was registered under the Employees'' Provident Funds Act, 1952, ceased to exist upon partition and dissolution of the firm and the provisions of the said Act were not applicable to the said dissolved firm. The Provident Fund Commissioner was requested by the said letter to refund to certain employees named in the said letter the funds which accumulated in their respective names. It was also stated in the said letter that the business of Jetmull Bhojraj was not going to deduct any provident fund contribution from the month of July 1970 nor was it liable to pay their share of contribution. On July 31, 1970, the firm addressed another letter to the Regional Provident Fund Commissioner stating that, in view of the clear legal position in the matter, individual accounts of certain members should be settled. On December 15, 1970, another reminder was given by the firm to the Regional Provident Fund Commissioner. Thereafter, on February 23, 1971, the said firm submitted 13 duly completed signed and attested forms in the name of certain members calling upon the Regional Provident Fund Commissioner to settle the claims as early as possible. On April 16, 1971, the Regional Provident Fund Commissioner requested certain members of the firm to send stamped receipts. Thereafter, 9 stamped receipts were sent and certain payments were made to some of the members. Thereafter, by a letter dated January 29, 1973, the Regional Provident Fund Commissioner informed the firm M/s Jetmull Bhojraj that the firm had actually stopped payment of provident fund dues with effect from July 1970 without informing the office of the Regional Provident Fund Commissioner which was highly irregular. It was stated in the said letter that the establishment of M/s Jetmull Bhojraj was covered with effect from April 30, 1962, as trading and commercial establishment and cannot go out of the scope of the said Act by mere partition of the firm among the partners. It is also stated that it has been ascertained on enquiry that all the employees who have received the refund are still the employees of the establishment. The membership of the employees who have received a payment of provident fund accumulation, are not in any case be deemed to have terminated and they are required to contribute as usual along with other members with effect from July 7, 1970 and the firm was requested to effect full compliance in respect of those employees as well as the other employees of the establishment. On February 17, 1973, the Provident Fund Inspector, West Bengal, requested the firm to comply immediately with the provisions of the Act and the scheme framed thereunder. On March 4, 1970, there was the inspection of the firm M/s Jetmull Bhojraj, Darjeeling and the Inspector''s inspection report was submitted on March 14, 1973. The inspection report was followed by a letter dated April 10, 1973, from the Regional Provident Fund Commissioner, West Bengal, calling upon the firm to rectify the defects within 7 days from the date of receipt of the letter. On July 12, 1973, Mr. P.C. Chatterjee, Solicitor for Debi Dayal Sukhani as karta of the Hindu joint family carrying on joint family business under the name and style of Jetmull Bhojraj at Darjeeling, made a demand for justice stating, inter alia, that the notice dated January 29, 1973, followed by the report of the Inspector held on March 14, 1973 and the final letter dated April 10, 1973, from the Regional Provident Fund Commissioner are absolutely void, unconstitutional not maintainable and beyond jurisdiction and the said notices are liable to be revoked and/or cancelled. Thereafter, this petition was filed on July 23, 1973.

The case of the Petitioner is that he is no longer liable to make contribution under the provisions of the said Act. The Petitioner states that originally the firm Jetmull Bhojraj had on March 1, 1963, 37 employees which was reduced to 23 and the present number of employees stands at 13 only. That is to say, now the number of employees is below the minimum number under the said Act. In the petition, the Petitioner has challenged the notices dated January 29, 1973 and May 2, 1973, on the following, inter alia, grounds:

(a) The notices are purported to be given on the alleged breach of compliance of the Employees'' Provident Funds Act which is not applicable to the Petitioner.

(b) There is no material or any ground whatsoever on which the Regional Provident Fund Commissioner and his officers can enforce any of the provisions of the Employees'' Provident Fund Act against the Petitioner.

(c) The Regional Provident Fund Commissioner and his officers acted mala fide and without any reasonable belief and as such, without taking into consideration the material fact that the number of employees is much below the minimum of 20 and their actions are wholly illegal.

(d) That the action on the part of the said Regional Provident Fund Commissioner amount to gross violation of the fundamental right of the Petitioner guaranteed by the Constitution.

A Rule nisi was issued by this Court on July 23, 1973.

On February 15, 1974, the Regional Provident Fund Commissioner, West Bengal, Prabhakar Sitaram Thotrekar, affirmed an affidavit-in-opposition to the application in which he states, inter alia, as follows:

The Banking unit trading unit of Jetmull Bhojraj was one and single unit and was and is a single trading and commercial establishment. The alleged dissolution of the firm of Jetmull Bhojraj has not disrupted the integrity of the establishment and does not create a new establishment. The business carried on under the name and style of Jetmull Bhojraj remains one and the same unit even after the alleged partition in 1970. The establishment of Jetmull Bhojraj complied with the provisions of the Employees'' Provident Funds Act by depositing the amounts payable under the said Act but have failed to deposit any sum after 1970 which the said establishment should have deposited on account of provident fund. The said establishment of Jetmull Bhojraj, which was already covered by the Employees'' Provident Funds and Family Pension Act, 1952, cannot go out of the preview of the Act by the alleged partition which is not real and bona fide.

The application has come before me for final hearing.

Mr. D.K. De, the learned Counsel appearing for the Petitioner, submitted that the firm Jetmull Bhojraj was dissolved with effect from April 14, 1970, by the indenture dated April 18, 1970. Both the partners agreed to do separate business but to use the same name Jetmull Bhojraj. One would carry on business at Darjeeling and another at Kalimpong. Since the dissolution of the firm the Petitioner Debi Dayal Sukhani has become the sole proprietor of the firm M/s Jetmull Bhojraj at Darjeeling. The employees of the said sole proprietory concern of the Petitioner is much below the statutory minimum and therefore, there is no question of contribution of provident fund under the said Act.

Mr. De relied on the case between Mohammed Kutti (K.M.) Vs. Regional Provident Fund Commissioner and Others, and submitted that there was partition and dissolution of the partnership firm by the indenture dated April 18, 1970 and the original establishment has ceased to exist.

Mr. H.M. Dhar, the learned Counsel appearing for the Respondents, submitted that the Petitioner had not disclosed the deeds of partnership. There are several partnership agreements mentioned in the petition but no one of them has been disclosed. The most important partnership deed is the deed or partnership agreement dated April 14, 1967. But the said partnership agreement has not been disclosed. He has submitted that the indenture dated April 18, 1970, is not a deed of dissolution of the said partnership firm but it is only a deed of partition between the members of the joint family. The partners individually are not the parties to this deed. In any event, the effect of the indenture dated April 18, 1970, is that a mutual arrangement or agreement was entered into between the members of a joint family to carry on the particular branches of the business of the firm separately. But the firm Jetmull Bhojraj as an establishment under the said Act continue. He has also submitted that this petition has not been made either by the firm or by all the partners of the firm but one of the partners has filed this petition as sole proprietor of a branch of the business. The firm Jetmull Bhojraj was an establishment which contributed to the provident fund as provided u/s 6 of the Act and it must continue to do so.

He referred to Section 1, Sub-section (5) of the Act and submitted that the Act continues to apply even if the number is less than 20. No notice under the proviso to Section 1, Sub-section (5) was given by the firm. In any event, by Act XVI of 1971, which came into force on February 3, 1971, the proviso to Section 1(5) of the Act has been omitted and the effect is that from 1971 the establishment shall continue to be an establishment, notwithstanding the number is below 20.

Mr. Dhar next submitted that in the instant case there was no change of ownership, but even if there was change of ownership that does not make any difference, as by change of ownership M/s Jetmull Bhojraj cannot be treated as ceased to exist. He relied on, in this connection, the decision of the Punjab High Court in the case of Robindra Textile Mills Vs. Secretary, Ministry of Labour, Govt. of India, New Delhi and Another, and also the decision of the Supreme Court in the case of Laxmi Ratan Engineering Works v. Regional Provident Fund Commissioner Punjab and Ors. and East India Cotton Manufacturing Co. Unreported decision of the Supreme Court dated October 6, 1965 and submitted that a mere change of ownership so long as the establishment is working all the time makes no difference to the date of establishment of the factory.

The partnership firm M/s Jetmull Bhojraj was admittedly an establishment to which the Act applied. The Act provides for the institution of provident fund and family pension fund for the employees in factories and other establishments. An establishment implies an organisation which employs persons between whom and the establishment the relationship of the employer and the employee comes to exist.

The said firm duly made its contribution as an establishment under the Act to provident fund but stopped payment of provident fund dues with effect from July 1970.

The question in this application is whether the integrality of the establishment to which the Act applied has been broken by the indenture dated April 18, 1970. If the integrality of the firm has not been broken by the indenture dated April 18, 1970, then the Act will continue to apply. This would be so even if the number of persons employed therein falls below twenty. Section 1, Sub-section (5) of the Act has been amended by the Act XVI of 1971. Before the amendment, Section 1, Sub-section (5) of the Act was as follows:

Section 1(5):

An establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty.

Provided that where for a continuous period of not less than one year the number of persons employed therein has been less 1 than fifteen, the employer in relation to such establishment may cease to give effect to the provisions of this Act and any scheme framed thereunder with effect from the beginning of the month following the expiry of the said period of one year, but he shall, within one month of the date of such cessation, intimate by a registered post the fact thereof to such authority as may be specified by the appropriate Government in this behalf.

No notice or intimation was given by the firm as required under the said proviso. The proviso to the Act has been omitted by the Act XVI of 1971, which came into force from January 1971. The effect is that from 1971 the establishment shall continue to be so notwithstanding the number of employees have fallen below twenty.

Now, what is the effect of the indenture dated April 18, 1970?

I agree with the submission of Mr. Dhar that the indenture dated April 18, 1970, is a deed of partition of joint family properties between the members of a joint family. The parties to this indenture are D.D. Sukhani for self and as karta of a joint Hindu family and his wife and sons on the one part and on the other part P.C. Sukhani for self and natural guardian of his minor daughter and as karta of a joint Hindu family consisting of himself and his wife. In the deed of partnership dated April 14, 1967, (as mentioned in the petition) there are two partners, namely, Sri D.D. Sukhani and Sri P.C. Sukhani. The partnership deed dated April 14, 1967, has not been annexed to the petition or disclosed. The said firm did not cease to carry on business. The name, goodwill and assets of the firm remain. Again, the parties to indenture dated April 18, 1970, are the members of the family and not the partners of the firm individually. The employees of the firm M/s Jetmull Bhojraj before April 18, 1970, continue to be employees of the firm after April 18, 1970. There is nothing in the indenture dated April 18, 1970, to indicate otherwise. I agree with Mr. Dhar that all that has been done by the said indenture dated April 18, 1970, was to make some private arrangements to carry on the business of several branches of the firm separately by the partners. It is mentioned in the deed dated April 18, 1970, that the firm M/s Jetmull Bhojraj having its office at Darjeeling and branches in the district of Darjeeling, West Bengal and in the district of Hazaribagh, Bihar and in Sikkim, is and shall be deemed to have been dissolved; but it does not appear that a dissolution of the partnership firm has been effected in terms of the provisions of the Partnership Act and the deed of partnership dated April 14, 1967.

Mr. D.K. De has strongly relied on the decision of the Kerala High Court in Mohammed Kutti (K.M.) and the Regional Provident Fund Commissioner Trivandum and Ors. Supra (468). In that case, what happened was that a rubber estate called Vencheri Rubber Estate belonged to the Petitioner''s father. It came within the ambit of the Employees'' Provident Funds Act, 1952 and the scheme framed u/s 5 thereof. The rubber estate was partitioned on the death of the father among the Petitioner and his two sisters. According to the Petitioner, the portion of the estate allotted to him on partition should be treated as a separate establishment and when it was so treated it would not come within the ambit of the Employees'' Provident Funds Act, 1952. In that case the Petitioner''s contention was that the establishment had been split into three separate establishments by a process of partition. That means the original establishment ceased to exist and that Sub-section (5) of Section 1 did not apply. The learned Chief Justice of Kerala High Court observed as follows (1):

What we have before us, however, is not a change in the ownership of an establishment which continues to exist as before; but the cessation of an establishment by disruption into three separate establishments by the partition effected among the Petitioner and his two sisters. The question of such cases are:

(a) Is the partition real and bona fide?

(b) Did it disrupt the integrity of the establishment and create three separate establishments?

and

(c) Does the separated establishment with which we are concerned employ less than twenty persons?

In that case the learned Judges answered all the three questions in the affirmative.

But the facts of the instant case are not similar to the facts of the Kerala case. Here the question is whether the partnership firm has been dissolved. In the Kerala case, the question was whether

(1) Supra (468)

there there was partion of an immovable property. In my view, the deed dated April 18, 1970, cannot have the effect of dissolution of the firm. In any event, the said deed did not disrupt the integrality of the establishment and create separate establishments. Therefore, the principle laid down in the Kerala decision cannot apply under the facts of this case.

In view of the above matter the firm did not cease to be an establishment within the meaning and scope of the Act by the indenture dated April 18, 1970.

In my view, by the indenture dated April 18,1970, the Petitioner D.D. Sukhani did not become the sole proprietor of the firm Jetmull Bhojraj at Darjeeling and as such, the Petitioner cannot make this application carrying on business under the name and style of M/s Jetmull Bhojraj at Darjeeling. The partnership firm is not the Petitioner. Neither both the partners of the firm are the Petitioners but only one of the partners has made this application as sole proprietor of the business of the firm carried on at Darjeeling.

In the view of the matter which I have taken, it is not necessary to consider the principles of the decisions of the Punjab High Court in the case of Rabindra Textile Mills Amritsar v. Government of India and Anr. Supra and the case of Laxmi Ratan Engineering Works v. Regional Provident Fund Commissioner Punjab and Ors. and East India Cotton Manufacturing Co. Supra wherein Section 16(1)(b) of the Act has been considered.

For the above reasons the Rule is discharged and this application is dismissed. There will be no order as to costs. There will be a stay of operation of the order for four weeks from this date.