IN THE HIGH COURT OF KARNATAKA AT BENGALURU ON THE 22ND DAY OF OCTOBER 2019 BEFORE THE HON'BLE MR. JUSTICE RAVI MALIMATH AND THE HON'BLE MR. JUSTICE ASHOK S. KINAGI WRIT APPEAL NO.788 OF 2012 (L-PF) BETWEEN:
THE ASSISTANT PROVIDENT FUND COMMISSIONER BHAVISHYANIDHI BHAVAN 13 RAJA RAM MOHAN ROY ROAD BENGALURU-560 025.
(BY SRI. B V VIDYULATHA, ADVOCATE) AND 1. M/S RAJ RESTAURANT NO.1 CUBBONPET BENGALURU-560 001 REPRESENTED BY ITS PROPRIETRIX SMT. SHALINI PREMNATH 2. M/S HOTEL RAJ LODGING NO.1 CUBBONPET BENGALURU-560 001 REPRESENTED BY ITS PARTNER SRI. K S PREMNATH ….APPELLANT …..RESPONDENTS (BY SRI. M V SESHACHALA, SR. COUNSEL FOR SRI. K.V. ARAVIND, ADVOCATE FOR R-1 SRI. K. SUNDARAM, ADVOCATE FOR R-2) THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER PASSED IN THE WRIT PETITION NO 39405 OF 2011 DATED 12.12.2011 THIS WRIT APPEAL COMING ON FOR HEARING THIS DAY, ASHOK S. KINAGI J., DELIVERED THE FOLLOWING:
JUDGMENT The respondent No.2, Establishment is a partnership firm consisting of family members. The object of the said firm is to carry on business by running hotel, restaurant, boarding, lodging and all other business as will be decided upon by the partners, from time to time. The appellant issued show-cause notice No.KN/PF/EO/BD/I & II/376/98 dated 09.11.1998, seeking information as required under Section 13 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter called as ‘the Act of 1952’). That in pursuance to the said show-cause notice, respondent No.2 gave a reply on 15.11.1998, furnishing the information sought by the officials of the appellant and produced documents along with the reply.
2. That on 25.6.1999, the appellant visited the premises and one Sri.K.K.Shaji, a relative of K.S.Premnath, the owner of the hotel, was present and he stated that the attendance register of the employees maintained is with the owner and he was not present at the time of inspection. Sri. Shaji has furnished the names of the employees working in the hotel. Mahazar was drawn by the Enforcement Officer, Employees’ Provident Fund. The said officer directed the respondents to produce relevant books of accounts on 25.06.1999, as per Annexure-C. As per the direction of the officer of the Provident Fund, the respondents furnished the employees statement from October 1998 to June 1999 on 28.07.1999, as per Annexure-D. The Enforcement Officer vide letter dated 09.08.1999 addressed to the Regional Provident Fund Commissioner (E&R), submitted a report regarding applicability of the Act of 1952 for the Establishment of the respondent, as per Annexure-E. The Employee’s Provident Fund Organisation, vide letter dated 03.11.1999, Annexure-F, addressed to K.S.Premnath, Partner of M/s. Hotel Raj, Veg & Non-Veg Restaurant and Lodging, allotted Code No.KN/24301 to the respondent’s establishment for the purpose of making compliance with various provisions of the Act of 1952. That after the receipt of Annexure-F, the respondent No.2 gave a reply dated 10.12.1999, as per Annexure-G, stating that the actual number of persons employed by him is only eight and the strength of eight workmen does not qualify for covering under the Act of 1952 and further contended that in regard to the inspection carried out by the Enforcement Officer, he has wrongly clubbed the lodge as well as restaurant for calculating the total strength of the workmen. The restaurant situated in the premises is not run by the partnership firm. The restaurant was let out to third party who has been carrying out the business. There is no functional integrity between the lodge and the restaurant and requested to afford a personal hearing. The respondent No.1 has produced a certificate of registration issued by the Commercial Taxes Department as per Annexure-H, showing that Smt. Shalini Premnath is the owner of Hotel Raj and the said establishment is separate and not clubbed with lodging. The Corporation of the City of Bengaluru issued a license in the name of Sri. K. S. Premnath for running boarding and lodging vide license No.1991/92-93 as per Annexure-J. Sri Premnath had let out the said property for running a restaurant to Sri.K.K.Shaji and thereafter to Smt. Shalini. Copy of the lease agreement was produced before the Authority. The Assistant Provident Fund Commissioner, Enforcement, passed an order dated 26/28.02.2001, as per Annexure-M, enclosed to the writ petition holding that the Act of 1952 is applicable to the respondents’ establishment from 25.06.1999, and further directed to make the remittance and file the returns, forthwith and to produce proof of remittance within 10 days of the receipt of the said order. The respondent No.2 being aggrieved by the order dated 26/28.02.2001 preferred Writ Petition No.24692 of 2001 before this court. This court, by order dated 03.10.2001, disposed off the said writ petition reserving the liberty to the petitioner/ respondent No.2 herein to file an appeal within four weeks before the Appellate Authority. The respondent No.1 filed Writ Petition No.27371 of 2005 seeking a direction to the respondent therein to issue certified copy of the order passed in the proceedings No.KN/PF/ENF-CIR-I/BD- II/673/1126/ 2001 dated 28.02.2001. The said writ petition was disposed off on 17.01.2006, as per Annexure-P.
3. The respondent No.2 being aggrieved by the order vide Annexure-M enclosed to the writ petition, preferred an appeal in ATA No.1022(6)2005 before the Employees’ Provident Fund Appellate Tribunal. The Appellate Tribunal, after re-appreciation of records, held that the order of the Authority does not reveal the actual staff strength of the establishment nor any list of employees was furnished. So, there is no material on record to hold that two establishments are rightly clubbed and covered and hence allowed the appeal and set aside the order of the Authority. The appellant being aggrieved by the order of Appellate Tribunal passed in Appeal No.1022(6) 2005 preferred Writ Petition No.39405 of 2011. The said writ petition is rejected vide order dated 12.12.2011. The appellant being aggrieved by the order passed by the Appellate Authority and the learned Single Judge, has filed the present writ appeal.
4. Heard arguments of learned counsels.
5. The contention of the appellant is that lodging and restaurant are clubbed and the same is being run by the respondents and the employees working in the said establishments are more than 20 and the said establishment is covered under the Act of 1952. The contents of mahazar dated 25.06.1999, drawn by the Enforcement Officer, Employees’ Provident Fund, shows only 13 employees were working in the hotel as on the date of inspection. Section 1(3)(a) of the Act of 1952 reads as follows:
Subject to the provisions contained in section 16, it applies-
(a) to every establishment which is a factory engaged in any industry specified in Schedule I and in which twenty or more persons are employed, xxxx 6. From the perusal of the above said section, it is clear that the Act of 1952 is applicable to the establishment where 20 or more persons are employed. As pointed out above, as per the mahazar, only 13 employees are working in the said establishment, and not 20. Hence, as per the above said provision, if the employees are less than 20, the Act is not applicable to the said establishment.
7. The contention of the appellant is that both restaurant and lodge are clubbed. From the perusal of records enclosed to the writ petition, lodge is run by partnership firm since 1991 and the restaurant is a proprietary concern wherein Sri. Premnath is the proprietor. The said Premnath had let out the restaurant to Sri. Shaji as per the lease agreement dated 01.01.1998, and subsequently, to Smt. Shalini as per the lease agreement dated 01.06.1998. In order to prove the said fact, the respondents have produced the lease agreements before the Authority. The appellant did not deny the genuineness or validity of the lease agreements executed by Premnath in favour of Sri. Shaji and Smt. Shalini. When the said documents are not denied, the Authority should have taken into consideration that the restaurant was run by Shaji and subsequently by Shalini, but not by the respondent No.2. That, Annexure-M ie., the proceedings in the matter of enquiry under Section 7A of the Act of 1952, does not reveal the actual staff strength of establishment nor the list of employees. Even the figure indicated in the said proceeding does not exceed 20 employees, at any point of time. The Authority, without considering the materials placed on record like mahazar, employee statement, reply submitted by the respondents and lease agreements, passed an order under Section 7A of the Act of 1952. That merely because both the establishments are located at one place, is not sufficient to establish the test of functional integrity. The certificate of registration dated 10.06.1998 issued by the Commercial Taxes Department shows that Hotel Raj was registered in the name of Smt. Shalini, who has taken the premises on lease dated 01.06.1998. This goes to show that the restaurant and lodging are two separate establishments and the restaurant is being run by Smt. Shalini and the lodge is run by a partnerhsip firm .
8. The Appellate Authority, after considering the materials, has rightly set aside the order of the Authority relying upon the judgment of M/S. DEVESH SANDESH ASSOCIATE VS. REGIONAL PF COMMISSIONER reported in 1997, wherein it is held that “mere fact of common ownership of the two unities and mere location of the two unities in common premises by itself is not sufficient to establish the test of functional integrity”. It has further held that the order of the Authority does not reveal the actual staff strength of establishment nor any list of employees was furnished. There is no material on record to hold that two establishments are rightly clubbed and covered.
9. The learned Single Judge, concurred with the finding of fact recorded by the Appellate Tribunal, dismissed the writ petition.
10. The appellant has failed to establish the strength of the establishments and has failed to place any material to show that two establishments are clubbed and covered and the strength of the employees is more than 20. The Appellate Authority has rightly allowed the appeal filed by the respondent No.2, which is confirmed by the learned Single Judge. Hence, we do not find any grounds to entertain the order passed by the Appellate Authority, confirmed by the learned Single Judge. Accordingly, the writ appeal is dismissed without costs.
Sd/- Sd/-
JUDGE JUDGE RD