Assistant Provident Fund Commissioner, Employees Provident Fund Organisation v. K.M. Eapen and Others

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN & THE HONOURABLE MR. JUSTICE DEVAN RAMACHANDRAN THURSDAY, THE 9TH DAY OF NOVEMBER 2017/18TH KARTHIKA, 1939 WA.No. 2149 of 2017 () IN WP(C).9475/2014 ------------------------------------------- AGAINST THE ORDER/JUDGMENT IN WP(C) 9475/2014 of HIGH COURT OF KERALA DATED 07-12-2016 APPELLANT(S)/1ST RESPONDEN: -------------------------- THE ASSISTANT PROVIDENT FUND COMMISSIONER EMPLOYEES PROVIDENT FUND ORGANIZATION, SUB REGIONAL OFFICE, KOTTAYAM-686001. BY ADV. SRI.JOY THATTIL ITOOP, SC, EPF ORGANISA RESPONDENT(S)/PETITIONERS 1 TO 9 & 2ND RESPONDENT: -------------------------------------------------- 1. K.M.EAPEN PROPRIETOR, M/S.KANJIRAPPALLY ESTATE, VANDIPERIYAR, IDUKKI DISTRICT. 2. JACOB MATHEW - NELLIKAMATTOM BUNGALOW, CHITTADY POST, EDAKKUNNAM VILLAGE, KANJIRAPPALLY. 3. DR.GEORGE MATHEW NELLIKAMATTOM BUNGALOW, CHITTADY POST, EDAKKUNNAM VILLAGE, KANJIRAPPALLY. 4. K.E.MATHEW NELLIKAMATTOM BUNGALOW, CHITTADY POST, EDAKKUNNAM VILLAGE, KANJIRAPPALLY. 5. K.K.MATHEW NELLIKAMATTOM BUNGALOW, CHITTADY POST, EDAKKUNNAM VILLAGE, KANJIRAPPALLY. 6. LIZA JOSE NELLIKAMATTOM BUNGALOW, CHITTADY POST, EDAKKUNNAM VILLAGE, KANJIRAPPALLY. 7. DR.MATHEW GEORGE NELLIKAMATTOM BUNGALOW, CHITTADY POST, EDAKKUNNAM VILLAGE, KANJIRAPPALLY. 8. MARY JOHN - NELLIKAMATTOM BUNGALOW, CHITTADY POST, EDAKKUNNAM VILLAGE, KANJIRAPPALLY. 9. MEMMY KURIAN - W/O.KURIAN MATHEW, NELLIKAMATTOM BUNGALOW, CHITTADY POST, EDAKKUNNAM VILLAGE, KANJIRAPPALLY. 10. THE EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL NEW DELHI, REPRESENTED BY ITS REGISTRAR, NEW DELHI-110001. R BY SRI.MATHEW JOHN (K) THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 09-11-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **“C.R.”** ## **P.N. Ravindran & Devan Ramachandran, JJ.** **- - - - - - - - - - - - - - - - - - - - - -- - - W.A.No.2149 of 2017 - - - - -- - - - - - - - - - - - - - - - - - - - - Dated this the 9[th] November, 2017** ## **JUDGMENT** ## **Devan Ramachandran, J.** Labour Welfare legislations in India are actuated by the express constitutional imperatives contained in the various Articles of Parts III and IV of the Constitution of India. The Employees Provident Fund and Miscellaneous Provisions Act, 1952 (which will hereafter be referred to as “the Act” for brevity) has its parturition primarily in Article 41 which obligates the State, within the limits of its economic capacity, to make provisions for securing among other things, effective public assistance to employees suffering on account of unemployment, old age, sickness and disablement. Being an important legislation for labour welfare, attempts by establishments to find exemption from its applicability is met with certain resistance from the Competent Authority vested with various powers and supervisory jurisdiction under it. The case before us is no different. 2. This appeal has been filed by the Assistant Provident Fund Commissioner against the judgment of the learned single judge in W.P. (C) No.9475 of 2011, dated 7.12.2016, quashing an order of WA 2149/2017 2 determination issued by him in proceedings initiated under section 7A of the Act, whereunder he had assessed the estates owned by the writ petitioners/respondents in this appeal as a single unit, thus bringing it under the sweep of the Act. The contention of the writ petitioners, which has found approval of the learned Single Judge, is that their estates are separate ones, which cannot be clubbed as one and that since each of them employ less than 20 employees, thus taking their establishments out of the rigour of the Act. 3. The genesis of the proceedings under Section 7A of the Act, as mentioned above, is that an estate comprised of 198 Acres called “The Kanjirappally Estate” situated at Vandiperiyar, which was originally owned by a certain Sri.K.E.Mathew, was registered as an establishment under the provisions of the Act and that after the death of Sri. K.E.Mathew, the said establishment was inherited by his heirs, thirteen in number, who then held the establishment as joint owners. The Provident Fund department continued to assess the establishment as a single Unit even after the death of Sri.K.E.Mathew on the assertion that the establishment was being held by his heirs as a single unit. 4. It appears that some effort was made by the writ petitioners at that time to have the establishment shown as thirteen different ones, but such attempts were disallowed by the respondents holding WA 2149/2017 3 that the establishment continued to be one with thirteen co-owners and therefore, that its integrity had not been lost merely on account of the death of its erstwhile sole owner Sri.K.E.Mathew. 5. The position of the estate continued so till the year 2001, when the writ petitioners/legal heirs of Sri.K.E.Mathew entered into a partition deed, which has been appended to the writ petition as Ext.P1, on 20.7.2001. They say that after the partition the entire property comprised of the estate was divided by metes and bounds, with each of the thirteen legal heirs being allotted separate parcels of land and that each of them thereafter continued the business of cardamom and rubber plantation in their respective area, engaging separate sets of employees for each such estate establishments. The Provident Fund department, however, refused to accept this and embarked upon enquiry under section 7A of the Act which led to the orders impugned in the writ petition, wherein again the entire 198 acres of estate was determined as one unit and assessed as such. The legal heirs of Sri K.E.Mathew, who are the writ petitioners, filed the writ petition challenging the said orders. 6. The learned single judge, after considering the materials on record and the contentions raised in the writ petition, held that since Ext.P1 partition deed had led to the physical division of estate into thirteen separate parcels and since each of the thirteen legal heirs of WA 2149/2017 4 Sri K.E.Mathew has been undertaking operations as independent establishments, the order of the Assistant Provident Fund Commissioner impugned in the writ petition, namely Ext.P11, finding that the establishment continued to be a single unit, cannot be sustained. On such conclusion the learned single judge set aside the order impugned as well as the order passed by the Statutory Appellate Tribunal, which had earlier affirmed Ext.P11, as unconstitutional and incompetent. 7. The Assistant Provident Fund Commissioner has thus filed this appeal calling into question the judgment of the learned single judge primarily on the ground that the findings in the judgment are erroneous because the entire 198 acres of land functionally continues as a single estate and that it is still being operated by the thirteen legal heirs of Sri K.E.Mathew as one single establishment. 8. We have heard the learned standing counsel for the appellant Sri Joy Thattil Ittoop and learned counsel appearing for the respondents Sri Mathew John. 9. It is without doubt that the estate had been operated as a single establishment by Sri K.E.Mathew prior to his death. It was only consequent to his death that the question of division of the estate had arisen. Even though initially the thirteen legal heirs of Sri K.E.Mathew had been running the estate as one unit, by Ext.P1 partition deed they WA 2149/2017 5 partitioned the property by metes and bounds into thirteen different parcels. The question thus is whether, by the effect of such a partition deed, the so divided extents of estates would obtain the qualification and character of separate establishments. The Assistant Provident Fund Commissioner, in Ext.P11 order which was passed consequent to a determination under section 7A, held that even after partition of the property the functional character and integrity of the establishment had not been altered and that all the thirteen writ petitioners should be construed to be still running it as a single unit. According to the learned standing counsel for the appellant the mere factum of partition of the property or estate would not automatically lead to an inference that they have become separate establishments and what is to be born in mind is the factual scenario with respect to the property and with respect to the employees employed by such establishment. 10. Before we analyse the submissions of the learned counsel, we deem it appropriate that we look into the judgment of a Full Bench of this court reported in **Zainulabdeen v. Regional Provident Fund Commissioner** (1974 KLT 708 FB). This is because the Full Bench had considered this issue quite in extenso and the observations of the Full Bench in the said decision will illuminate our path completely. Paragraphs 4 and 9 of the said judgment are pertinent and we, therefore, we deem it idoneous to extract it for a full reading as under: WA 2149/2017 6 “4. The decision recognises the position that an establishment need not in all circumstances continue to be the same establishment; a disruption of that establishment is possible on a real and bonafide partition of the estate. The Supreme Court had to deal with a similar question and it had no hesitation in holding that when an establishment had been closed down, the services of the workmen attached to it terminated, the running of the establishment suspended for some time and restarted after an interval employing only some of the workmen whose services had been terminated, the in fancy period for the purpose of S.16 of the Act, must be reckoned from the date of birth of the new establishment and not from the date on which the original establishment had come into being The Supreme Court thus clearly recognised the position that for the purpose of the Act it cannot be said once an establishment always the same establishment. “9 The only question therefore is whether there has been a real and bonafide division which disrupted the original establishment and gave birth to new and separate and distinct establishments. This question had not been adverted to or considered in the order Ext. P5. The only reasoning contained in the order in Para.2 thereof which we have read proceeded on the basis that even if the partition was real it only involved a change of ownership and the integrity of the original establishment was not affected. This is a wrong approach. In the counter affidavit there are elaborate averments and reference is made to statements said to have been taken from persons who were allegedly in management of parts of the estate. These were not referred to at all in the order Ext. P5 WA 2149/2017 7 and there is no averment that these statements have been made available to the petitioner. The order Ext. P5 cannot be sought to be sustained by statements made before this court in an affidavit. We must be satisfied that the respondent had considered those aspects and had those aspects in mind before he passed the order Ext. P5. There is nothing in the order to indicate that this has been done. Moreover if information had been collected by the 1st respondent he should have made it available to the petitioner before relying on it and the petitioner should have been given an opportunity to rebut what is contained in those statements. 11. A reading of the above extracted portions of the decision would make it indubitable that the facts pleaded herein are more or less the same as the facts pleaded in that case. The Full Bench have declared the law that disruption of an establishment is possible by a real and bonafide partition of the said establishment. The question whether there is a real and bonafide partition is an essential question of fact which will depend upon the facts and circumstances of each case. There cannot be a generalised rule or principle to be applied _quad hoc_ disputes regarding partitions as being “real and bonafide” or otherwise and it would depend upon the particular factual circumstances of each case. 12. The questions that beg answers in such a scenario are: WA 2149/2017 8 (a) Is the partition real and bonafide? (b) Did it disrupt the integrity of the establishment and create thirteen different establishments? and (c) Does the separated establishments employ less than twenty persons? If the answers to these three questions are in the affirmative, then the orders impugned here are certainly liable to be interdicted. 13. A thorough enquiry into these criterion, to ascertain the integrity of the establishment, is essential before orders of the kind impugned in these proceedings are issued by the competent authority because, Section 1(5) of the Act makes it inescapable that so long as the integrity of an establishment is not broken, the Act will continue to apply, in spite of the fact that the number of employees may have fallen below twenty. The only exception to this was provided in the proviso to the said section which has, however, been omitted subsequently by Act 16 of 1971. 14. In the confines of the facts of this case, what is asserted by the writ petitioners is not a change in ownership of the erstwhile establishment but the cessation of the said establishment by disruption into thirteen different and separate establishments by the partition effected between them. We notice that the first respondent herein, who is of the legal heirs of deceased Sri.K.E.Mathew, had presented an WA 2149/2017 9 affidavit before the appellant Commissioner which has been appended to the writ petition as Ext.P2, wherein the averments are very specific. Since the fate of this case would hinge upon the averments made in the said affidavit, we deem it appropriate that it be read and for this we extract it below: - “1. That I am the owner of Kanjirappally Estate, the management herein. 2. Kanjirappallly Estate was originally owned by me together with my brothers, sister and my brother-in-law. The said estate is situated in Periyar Village, Peermade Taluk, and we got title and possession over the same by virtue of sale deed No.407 of 1960 and Relinquishment Deed No.635 of 1965. The total area of the said property was 198 Acres 57 cents. The property was partitioned between the co-owners in furtherance of a family arrangement and it was enjoyed separately by each sharer. Every sharer has separate coffee and cardamom Registrations, Agriculture income tax assessment etc. 3. Being the eldest member of the family I was only supervising and managing the agricultural operations or and on behalf of all the sharers as, I was residing in the above said estate. 4. That in 1982, when the Provident Fund authorities directed me to file returns under the Provident Fund Act, I have informed the authorities in specific terms that the property is not one unit and that the property is owned by different persons and they are enjoying it separately and there are only WA 2149/2017 10 less than 20 employees under each ownership. However authorities assessed the 7 sharers as a single unit on the basis of the fact that it was not partitioned as per official records and as I was supervising and managing the agricultural operations of all the sharers. 5. Two out of the 7 owners died and a partition deed was executed by all the parties who have right over the estate partitioning the entire property to 12 shares, vide Partition Deed No.2616 of 2001, dated 20.7.2001. All the employees, who were members of the Provident Fund Scheme have either retired or left service already and none of the present sharers employed 20 or more workers in their unit. 6. That at present only 22 Acres 55 cents of property in Survey No.117 of Periyar Village, more particularly described as 'A' schedule in the Partition deed No.2616 of 2001 is owned by me. It is planted with coffee only and I have employed only 4 workers (2 permanent and 2 temporary) in my establishment at present. 7. That after the partition, the authorities continue to require the management herein to pay contribution to the Provident Fund for the workers and on the bonafide belief that the establishment continues to come under the coverage of the Act, 2 employees took membership under the scheme also. As the entire property was partitioned among thirteen sharers by virtue of Partition Deed No.2616 of 2001 the unit in the establishment cease to exist and the integrity of the establishment covered by the Act is disrupted on account of real and bonafide partition, creating 12 separate establishments. Now each share is a separate establishment WA 2149/2017 11 and it is managed separately. As the number employees working under my establishment is less than 20, the establishment owned by me will not come under the coverage of the Provident Fund and I am not liable to pay any Provident Fund contributions. But as directed in your notice dated 15.5.2002 and without prejudice to my above contentions, I am filing a new ownership return in Form 5A.” We are told that similar affidavits have been filed by all the other writ petitioners also, who are now holding separate parcels of lands. 15. The asseverations in Ext.P2 affidavit are definitive that the partition of the erstwhile Kanjirappally estate has been completed; that each of the parties to the said deed are holding separate parcels of land independently and that each of them are engaged in independent agricultural operations separate from each other. It is also ineluctable from the statements in the affidavit that the management of each of the parcels of land are now in separate hands and that there is absolutely no integrity, functional or otherwise, between the managements of the separate parcels with that of the erstwhile Kanjirappally Estate which was under a common management until the partition was effected. Of course, if the partition deed had not been executed, the appellant Commissioner would be justified in holding that there is functional and character integrity in the estate, because WA 2149/2017 12 the first respondent in his affidavit concedes that until the partition, he was managing and supervising the estate on behalf of all the other joint owners, because he was residing therein. However, once the partition deed was executed and each of the sharers allotted separate parcels of land, its functional integrity would cease and the ratio in **Zainulabdeen** (supra) would squarely apply. This is more so because it is stated in the writ petition that each of the petitioners, who are now independent owners of their respective parcels of land has separate coffee and cardamom registrations, agricultural income tax assessment, etc., leading to an inference, at least prima facie, that the thirteen separate parcels are now being managed and run as separate establishments. 16. Once the respondents had thus discharged their initial burden of showing that the thirteen parcels of land had become independent establishments, it was certainly incumbent on the appellant, while making an enquiry, to obtain sufficient materials and evidence on record, so as to establish and hold otherwise, which unfortunately is deficient in this case. We say this because in the order impugned, namely Ext.P11, all that the appellant Assistant Commissioner says with respect to the integrity of the establishment is as under: “In the case of this particular estate, the estate was WA 2149/2017 13 partitioned vide partition deed No.2616 of 2001 dated 20.7.01 due to the death of the two owners and the partition was made between the co-owners in furtherance of a family arrangement. By the above partition, the integrity of the establishment has not been broken since all the partitioned units are carrying on the same business which was carried out by them before partition and the Estate are managed and supervised by one of the share holders of the partitioned unit. The partitioned units of the estate was taken over by the share holders as a line and functioning one. The argument that each partitioned units are paying property tax, building tax and agricultural Income Tax etc. separately has no relevance in view of the fact that payment of taxes separately are not make the integrity of the establishment broken. In view of the above, I hereby decide the provisions of the EPF & MP Act and the Schemes framed thereunder will continue to apply to all the partitioned units of the establishment since by the partition, the integrity of the establishment was not broken. Accordingly I hereby direct all the partitioned units to comply under the provisions under EPF & MP Act, 1952 w.e.f. the date of partition ie. With effect from 20.7.01 in respect of all the employees employed by them and render relevant returns. For compliance purpose separate code No. can be allowed to them if they desired so.” 17. The learned single judge has rightly held that in the absence of any evidence being gathered by the appellant Commissioner and the WA 2149/2017 14 fact that he had not even caused an enquiry with the employees of the establishments, to ascertain if the thirteen parcels of units are still under one management, there was no justification to determine amounts from the respondents under Section 7A of the Act, to be amounts payable by the erstwhile Kanjirappally Estate as a single unit. 18. It is also relevant that the records and materials available in this case do not even indicate that the appellant Assistant Commissioner had made an attempt to call for the records from the respective establishments or that there was an enquiry as to whether such records are maintained showing the various parcels of lands as separate establishments or otherwise. Even without that, the appellant Assistant Commissioner entered into a conclusion that the separate estates continued to be a single unit and that the similarity in their business would lead to an inference of functional integrity within it. 19. Sri Mathew John, learned counsel for the respondents at this time points out that, in fact, the respondents had voluntarily produced all the documents in support of their case before the appellantAssistant Commissioner but that they were not considered by him in its proper perspective. 20. Whatever be the nature of the dialectical submissions, we are certain that Ext.P11 order does not do justice to the jurisdiction WA 2149/2017 15 vested in the Commissioner while acting under section 7A of the Act and would, therefore, obtain no forensic support or legal sustenance. We, therefore, cannot find anything that would persuade us to interfere with the findings and conclusions arrived at by the learned single judge. We are thus left with no other option but to dismiss this appeal, which we do hereby. On account of the peculiar facts and circumstances of this case, we however make no order as to costs and direct the respective parties to suffer their costs. ## **(P.N. Ravindran, Judge)** **(Devan Ramachandran, Judge)** ## **kav/**