Hotel Devalokam, Koottanad, Palakkad vs Employees' Provident Fund Appellate Tribunal and Regional Provident Fund Commissioner, Calicut

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT :** **THE HONOURABLE MR. JUSTICE P.N.RAVINDRAN** **TUESDAY, THE 26TH FEBRUARY 2008 / 7TH PHALGUNA 1929** **OP.No. 11361 of 1999(C)** **---------------------------------** **PETITIONER:** - **-------------------** **HOTEL DAVALOKAM, KOOTTANAD, PALAKKAD, PIN 679 533, REP.BY ITS MANAGING PARTNER.** **BY ADV. SRI.P.RAMAKRISHNAN** **RESPONDENTS:** **----------------------** **1. EMPLOYEES PROVIDENT FUND APPELLATED TRIBUNAL, 7TH ELOOR, 60, SKY LARK BUILDING, NEHRU PLACE, NEW DELHI 110 019.** **2. REGIONAL PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANISATION, SUB REGIONAL OFFICE, CALICUT.** **BY ADV. SRI.P.S.SREEDHARAN PILLAI, SCGSC SRI.MATHEWS J.NEDUMPARA, SC,P.F.ORGSN. SRI.JOHN VARGHESE, ASSISTANT SG SRI.THOMAS MATHEW NELLIMOOTTIL,SC, P.F.** **THIS ORIGINAL PETITION HAVING COME UP FOR ADMISSION ON 05/02/2008, THE COURT ON 26/02/2008 DELIVERED THE FOLLOWING:** ## **OP. NO.11361/1999** ## **ORDER ON CMP. NO.18405/19099 IN OP. NO.11361/1999** ## **DISMISSED** ## **26.02.2008 SD/- KURIAN JOSEPH, JUDGE** **EXT.P1:- COPY OF THE ENQUIRY REPORT DT. 29.2.1996. EXT.P2:- COPY OF THE ORDER OF THE 2ND RESPONDENT DT. 31.12.97 DT. 6.1.98. EXT.P3:- COPY OF THE ORDER OF IST RESPONDENT DT. 11.3.99. EXT.P3:- COPY OF THE CERTIFICATE ISSUED BY THE EXCISE COMMISSIONER.** _**/**_ **TRUE COPY/** ## **P.A. TO JUDGE** **tss** ## **P.N.Ravindran, J. ================ O.P.No.11361 of 1999** ## **==================** ## **Dated this the 26th day of February, 2008.** ## **JUDGMENT** The petitioner, a partnership firm, has in this original petition, challenged Ext.P2 order dated 31.12.97/6.1.1998 passed by the second respondent, the Regional Provident Fund Commissioner, Calicut and Ext.P3 order dated 11.3.1999 passed by the first respondent, the Employees' Provident Fund Appellate Tribunal rejecting the petitioner's appeal against Ext.P2. The petitioner has also prayed for a declaration that Hotel Devalokam was established on 27.7.1991 and that the number of employees employed during the infancy period, will not count for the purpose of coverage under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, hereinafter referred to as the "Act" for short. 2. According to the petitioner, Hotel Develokam started its business only on 27.7.1991 and it completed its infancy period of three years in terms of Section 16 (1)(d) of the Act, on OP 11361/99 -: 2 :- 26.7.1994. Section 16 (1)(d) of the Act stipulated that the provisions of the Act shall not apply to any 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. Section 16 (1)(d) was deleted from the Act with effect from 22.9.1997. 3. The petitioner has averred in the original petition that the Enforcement Officer of the Employees' Provident Fund Organisation, hereinafter referred to as the "Organisation" for short, had after inspection recommended that the establishment in question, namely, Hotel Devalokam, Koottanad started functioning on 22.4.1991 and that it is to be clubbed along with its branch at Edappal and brought under the Act with effect from 22.4.1994, ie., after its infancy period. Ext.P1 produced along with the original petition is a copy of the enquiry report submitted by the Enforcement Officer of the Organisation to the Regional Provident Fund Commissioner, Kozhikode, after the inspection held on 28.2.1996. 4. The petitioner objected to the coverage proposal on two grounds. The first ground raised by the petitioner was that Hotel Devalokam at Koottanad and Hotel Devalokam at Edappal are OP 11361/99 -: 3 :- independent units under separate managements. The second ground raised was that Hotel Devalokam at Koottanad commenced its business only on 27.7.1991 and not on 22.4.1991 as stated by the Enforcement Officer. The petitioner further contended that Hotel Devalokam had not employed 20 or more persons as on 22.4.1994. There is a further contention that on or after 27.7.1991 when Hotel Devalokam commenced its business it had not employed 20 or more persons and therefore, it is not covered by the Act. The proposal for coverage of the Hotel with effect from 22.4.1994 was opposed by Sri.C.K.Gopalan, Licencee and Partner of Hotel Devalokam in his letters dated 12.4.1996 and 14.6.1996. 5. Since the petitioner disputed the applicability of the Act with regard to Hotel Devalokam, Koottanad the Regional Provident Fund Commissioner, Kozhikode held an enquiry in terms of Section 7A of the Act. During the enquiry, on behalf of the petitioner two points were raised. The first point was that Hotel Devalokam at Kootanad and Hotel Devalokam at Edappal are independent units under separate managements and there is no unity of ownership, management and control. The second OP 11361/99 -: 4 :- contention was that Hotel Devalokam, Koottanad commenced its business only on 27.7.1991 pursuant to the Board of Revenue's order dated 8.7.1991 and not 22.4.1991 as stated by the Enforcement Officer. The petitioner further contended that on 27.7.1991 and at no point of time thereafter including after the expiry of the infancy period of three years, the Hotel had employed 20 or more persons. 6. The Regional Provident Fund Commissioner on a consideration of the evidence on record, held that Hotel Devalokam, Kootanad and Hotel Devalokam, Edappal are two separate establishments and cannot be clubbed together for coverage under the Act. As regards the second contention raised by the petitioner, the Regional Provident Fund Commissioner held that the Hotel commenced its business on 22.4.1991 and as there were 20 employees on the muster roll as on that date, the Hotel is covered by the Act. In arriving at the said conclusion, the Regional Provident Fund Commissioner relied on two material documents, namely, the licence issued by the local authority to run the Hotel with effect from 22.4.1991 and the attendance register of the establishment which disclosed that 20 persons OP 11361/99 -: 5 :- were in employment on 22.4.1991. The Regional Provident Fund Commissioner overruled the petitioner's contentions and held that the Hotel commenced its business on 22.4.1991 and not on 27.7.1991 when the Bar licence was issued. The Regional Provident Fund Commissioner also rejected the petitioner's contention that as 20 or more persons were not employed in the Hotel either on 27.7.1991 or thereafter, the establishment cannot be brought under the Act after the expiry of the infancy period of three years. 7. Aggrieved by Ext.P2, the petitioner filed an appeal under Section 7(I) of the Act before the Employees Provident Fund Appellate Tribunal. Before the Appellate Tribunal, the petitioner reiterated the contentions regarding the date of commencement of the business and the number of employees. By Ext.P3 order passed on 11.3.1999, the Appellate Tribunal overruled the petitioner's contentions and held that the Hotel commenced its business from 22.4.1991, the date on which the licence was issued to run the Hotel. The Appellate Tribunal also rejected the petitioner's contention based on the Bar licence and held that the Bar licence would not prove that the Hotel started functioning OP 11361/99 -: 6 :- only from 27.7.1991. The Appellate Tribunal also took note of the failure of the petitioner to produce the wage register, the attendance register and other documents in support of the contention that at no point of time 20 or more persons were employed in the Hotel. 8. Sri. T.C.Krishna, the learned counsel appearing for the petitioner contended that without a Bar licence, the Hotel could not have commenced its business and that the reliance placed by the respondents on the licence issued by the local authority to hold that the Hotel commenced its business from 22.4.1991 is misconceived. The learned counsel submitted that the reasoning in Exts.P2 and P3 is perverse and that the findings therein are also not supported by the materials on record. The learned counsel submitted that there is no material to prove that as on 27.7.1991 or thereafter, the Hotel had 20 employees on its rolls and hence, during the infancy period of three years and even thereafter, the Hotel would not be covered by the Act. The learned counsel for the petitioner also placed reliance on the decision of the Calcutta High Court in **Jamnadas Agarwalla and another** v. **Regional Provident Fund Commissioner and** OP 11361/99 -: 7 :- **others** - 1963 (1) L.L.J. 96, the decision of a Division Bench of this Court in **Ramakrishna Rao** v. **Provident Fund Inspector, Trichur** - 1965(1) L.L.J. 647, the decision of the Apex Court in **Ramakrishna Rao** v. **State of Kerala** - 1969(2) L.L.J. 682 and the decision of the Madhya Pradesh High Court in **Khaitan Chemicals and Fertilizers Ltd.** v. **Regional Provident Fund Commissioner** - 2001 (1) L.L.J. 1157. 9. Sri. Thomas Mathew Nellimoottil, the learned Standing Counsel appearing for the respondents on the other hand contended that the reliance placed by the petitioner on Ext.P4 Bar licence is misconceived as it is not the date on which the Bar licence was issued, but the date on which the Hotel commenced its business that is crucial and relevant. The learned Counsel for the respondents submitted that even without a Bar licence a Hotel can function, though the Bar in a Hotel can function only after the Bar licence is issued. The learned Counsel further submitted that in the case on hand, the Hotel commenced its business under a valid licence issued by the local authority on 22.4.1991 and that as on that date, the Hotel had 20 employees on its rolls. The learned Counsel submitted that once the Hotel OP 11361/99 -: 8 :- had 20 employees on its rolls, it would automatically be covered under the Act on the expiry of the infancy period of three years stipulated in Section 16(1)(d) of the Act. 10. I have considered the rival contentions. It is significant to note that the petitioner's establishment is governed by the provisions of the Minimum Wages Act 1951 and the Kerala Shops and Commercial Establishments Act, 1960 and the petitioner is bound to maintain the muster roll, wage register, attendance register,etc. None of those documents had been produced in these proceedings or before the Appellate Tribunal. The Enforcement Officer of the Organisation,had after verifying the attendance register reported that there were 20 employees in the Hotel as on 22.4.1991. The petitioner does not dispute the said fact in these proceedings and it is not seen from Exts.P2 and P3 that the said fact was disputed before respondents 2 and 3. The contention of the petitioner as can be seen from Exts.P2 and P3 and from the pleadings in this original petition is that, the Hotel commenced its business only on 27.7.1991 and as it did not employ 20 or more persons on that date or at any point of time thereafter, after the expiry of the infancy period of three OP 11361/99 -: 9 :- years, the Hotel cannot be brought under the Act. The petitioner did not however produce the attendance register/wage register/muster roll before the authorities in support of its contention that establishment did not employ 20 or more persons at any given point of time. 11. In 1963 (1) L.L.J. 96 (supra), a contention was raised by the purchasers of a factory that the infancy period of three years in terms of Section 16(1)(d) of the Act has to be reckoned from the date on which the factory that was remaining closed resumed its business after they purchased it. Repelling the said contention, the Calcutta High Court held that the fact that a new company or concern subsequently takes over or acquires the factory does not shift the date of establishment of the factory to the date of its taking over or acquisition. It is also held that the words "date on which the establishment is or has been set up" meant the date on which the factory started its manufacturing process. The said decision has no application to the case on hand. In 1965(1) L.L.J. 647 (supra), a Division Bench of this Court held that the infancy period commences from the date on which the establishment was set up. The Division Bench of this OP 11361/99 -: 10 :- court further held as follows: "It may be that the establishment when it is first set up may have a smaller number of employees, but if at any time within the first five years the number of employees reaches twenty, the Act becomes applicable to it subject to the provisions of S.16 that the liabilities of the employer under the Act will start only when five years from the commencement are completed." 12. In 1969 (2) L.L.J. 682 (supra), the Apex Court while upholding the decision of this Court in 1965 (1) L.L.J. 647 (supra) held that the words "from the date on which the establishment is or has been set up" would govern an establishment newly set up and also an existing establishment. In 2001(1)L.L.J. 1157 (supra), the Madhya Pradesh High Court held with reference to a factory engaged in the manufacture of sulphuric acid that the date of establishment has to be reckoned from the date of trial production and not from the date of regular or commercial production. These decisions do not lend support to the petitioner's contention that the Hotel can be said to have commenced its business only on 27.7.1991 after Ext.P4 Bar OP 11361/99 -: 11 :- licence was issued. 13. The contention of the learned counsel for the petitioner is that the Hotel commenced its business on 27.7.1991 and hence, as there was no evidence to show that there were 20 or more employees in the establishment on that date and also during the infancy period of three years commencing from that date, the establishment would not be covered by the Act even after the infancy period. The learned counsel also contended that even thereafter the Hotel has not employed 20 or more persons. I am afraid, there is no merit in the said contentions. Ext.P1 discloses that 20 employees were in the rolls of the petitioner's establishment in April/May, 1994. The Hotel had 20 employees on its rolls during April 1991 and this is attempted to be got over by taking the plea that the Hotel commenced its business only in July, 1991. It is settled law that once an establishment employs 20 employees, the Act would continue to apply even if later, the number of employees, falls below 20. Section 16(1)(d) of the Act which was deleted with effect from 22.9.1997 no doubt provided that during the infancy period of three years from the date of commencement of the business, the Act would not apply OP 11361/99 -: 12 :- to a new establishment. But once the infancy period is over, the Act would apply with all force to the petitioner's establishment for the reason that it had in its employment 20 persons during April, 1991. The petitioner has not produced the attendance register or muster roll or the wage register to show that the Hotel did not have 20 or more persons in its employment at any point of time commencing from April, 1991. On the other hand, it is seen from Exts.P1, P2 and P3 that the Hotel had 20 persons in its employment on 22.4.1991 and also in April/May, 1994. That being the position, the finding in Exts.P2 and P3 that the Act and the scheme framed thereunder would apply to the petitioner's Hotel is in no way infirm or illegal and does not merit interference. For the reasons stated above I hold that there is no merit in the in the challenge to Exts.P2 and P3. The Original Petition accordingly fails and it is dismissed. No costs. ess 12/2 P.N.Ravindran, Judge.