Torino Laboratories Pvt. Ltd. Vs Union of India & Ors. (Supreme Court of India)
Two different juristic entities functioning from same premises, can be clubbed for the applicability of PF Act: SC
This judgement will be relevant for all entities who are resorting to avoid PF liability by resorting to different entities concept.
The Supreme Court in this case was dealing with a situation where two units which were owned by same management were functioning from a premises manufacturing different pharmaceutical products and the PF authorities levied PF liability on one of the unit which was not registered under the PF law claiming no of employees being less than the required minimum. The Supreme Court while interpreting Section 2A of the EPF Act which provides for establishment to include all department and branches held that the PF law is a beneficial legislation and simply because there are two separate juristic entities, it cannot be contended that the theory of clubbing cannot be invoked. It was common knowledge that artificial devices , subterfuges and facades are commonly resorted to, to create a smokescreen of separate entities for variety of purposes.
The real purpose of the test is to find out the true relation between the Parts, Branches and Units. If in their true relation they constitute one integrated whole, it could be said that establishment is one and if not, they are to be treated as separate units. Each case has to be decided on its own peculiar facts, regard being had to the scheme and object of the statute under consideration and in the context of the claim. In a given case, unity of ownership, management and control may be the important test, while in certain other cases Functional Integrality or general unity may be the determinative consideration. In some instances, unity of employment could be the most vital test. Several tests may fall for consideration at the same time since the mandate of the law is that the facts will have to be viewed as a whole. While each aspect may not by itself be conclusive, what is important is to consider cumulatively the facts while applying the different tests. The employer/management’s own conduct in mixing up or not mixing up the capital, staff and management could in a given case be a significant pointer. Mere separate registration under the different statutes cannot be a basis to claim that the units are separate. Similarly, maintenance of separate accounts and independent financial statement is also not conclusive.
