The Hindu Business Line : Bench sets aside PF tribunal order in hotels case

Chennai, Nov. 23 The Madurai Bench of Madras High Court set aside an order dated 19-5-2005 of Employees’ Provident Fund Appellate Tribunal, holding three separate partnership firms running hotels in Kanyakumari district of Tamil Nadu were formed by way of subterfuge to avoid applicability of the provident funds Act.

Citing precedents of Supreme Court [1998 (1) LLJ 1060] & interpretations by various High Courts, Mr. Justice K. Chandru held that neither the regional PF Commissioner, Madurai nor the Appellate Tribunal kept in mind crucial facts required to render a finding of unity of ownership of the three hotels, or that they could be treated as single unit for purpose of registration under PF law.

In their petitions challenging order of the Tribunal, the hotels – ‘Chitra’ in Marthandam, in Nagercoil & in Chettikulam (Kanyakumari) – contended that though all three had the same name, they were independent entities and had separate identity including separate accounts and registers. On inspection by PF Department’s team, a notice under Section 7A was said to have been issued by holding all three hotels as having common ownership, and therefore, they should be treated as single unit.

The Regional PF Commissioner contended it was apparent that one hotel could rely on other for financial problems. All hotels were one and same, and they were rightly clubbed as a single unit. Tribunal confirmed the order of the Commissioner dated 5-10-2005.

Petitioners submitted that the three hotels had been registered as separate units in year 1958, and records had been periodically inspected by inspectors under TN Catering Establishments Act, 1958. The statement of PF authorities that records were not available was contrary to fact. Officers had said that the department did not have opportunity of perusing registers for year 1982-93. It only showed that they had only one motive of covering all three units as one unit so as to make it that they had more than 20 workers and so PF Act applicable to them.

The judge said respondents had not considered various facts such as financial transaction and managerial and supervisory control to place any credible material in support of their contention. Hence, the impugned order was devoid of any factual basis. It stood set aside.

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