The ruling of the Employees Provident Fund Appellate Tribunal, New Delhi, that if a unit having its registered office at a particular place set up a number of units in other locations, the provisions of Sec 2-A of the Employees PF & Miscellaneous Provisions Act, 1952 would be attracted has been set aside by the Madras High Court.

The Tribunal, while rejecting an appeal filed by the petitioner-Company (Bhuwalka Steel Industries Ltd, Kanchipuram) contending that the various factories set up by it were separately registered and were maintaining separate accounts and, therefore, the new units set up were entitled for ‘infancy' protection, had not considered the various grounds raised by them, according to the petitioner. There was no functional integrality between the unit located at Bangalore, where the company's registered office functioned, and the new Kanchipuran unit. The Kanchipuram unit was set up as an expansion of the business.

According to the petitioner, it was issued with a notice u/s 7-A of the Act asking them to comply with the provisions of the Act with reference to the Kanchipuram unit. It filed an appeal before the Tribunal (R-1) contending that the main company was a covered establishment. A new unit like the one at Kanchipuram was entitled to get infancy protection for a period of three years in terms of Sec 16(1)(d). The said provision was deleted from the Act with effect from September1, 1997. Since the Kanchipuram unit commenced activities from November 20, 1995, it claimed infancy protection for a period of 3 years.

According to the respondent (Regional PF Commissioner, Vellore - R-2), Sec 2-A stipulated that if any establishment consisted of different departments and had branches, even if they were situated in the same place or at different places, all of them should be treated as part of the same establishment. Since the company was functioning with a unit at Bangalore, the unit at Kanchipuram could not be considered as a separate unit.

However, R-1 merely went by the ground that Kanchipuram unit was started by way of work expansion, and so Sec 2-A was attracted.

Mr Justice K. Chandru, who heard the petition, ruled that as found from the decision of the Supreme Court in Regional PF Commissioner vs Dharamsi Morarji Chemical Co Ltd [reported in 1997 (1) LLJ 1060], the apex court had categorically held that even if 2 units were owned by the same company and the board of directors was common that by itself was not sufficient to attract Sec 2A. There must be interconnection between the two units in terms of common financial or managerial control. Since the Tribunal had not adverted to these aspects, this Court was obliged to interfere with the impugned order.

Accordingly, the order of the Tribunal stood set aside, and the matter was remitted to R-1 for fresh consideration in accordance with law.

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