M.V. Gopalan vs State of Madras

Jagadisan, J.—The petitioner prays for the issue of a writ of certiorari or other appropriate writ, or order under Article 226 of the

Constitution to quash the order of the Regional Provident Fund Commissioner, Madras dated 2-3-1957 in exercise of his powers and jurisdiction

under the Employees Provident Funds Act, XIX of 1952.

The relevant facts are these : The petitioner is the sole proprietor of a business concern called ""The Modern Agencies"". He is running a factory

registered under the Factories Act. In this factory he is manufacturing various items and products such as wooden toys, pedalling cars,

perambulators, tricycles, scooters, merry-go-rounds garden swing cradles etc. The Provident Fund Inspector, Madras inspected the factory on

28-2-1957 and found more than 50 workers employed in the factory. The records of the factory disclosed that on 31-10-1952 there were

actually 81 employees. In March 1957, the petitioner obtained aid from the State Government under the scheme of State aid to small industries in

a sum of Rs. 19000. He started producing ""merry-go-rounds"" only thereafter. The Regional Provident Fund Commissioner by his communication

dated 2-3-1957 initimated the petitioner that his factory was engaged in the manufacture of ""general engineering products"" and that therefore it was

under the purview of the Employees Provident Fund Act. The petitioner was called upon to submit returns with particulars of employees in the

factory and to make remittance of arrears of contribution for provident fund for the period of 1-11-1952 to 28-2-1956. The petitioner failed to

comply with that requisition of the Commissioner. The Central Government by its communication dated 13-1-1958 gave the ruling, presumably u/s

19-A of the Act that the petitioner''s factory is within the Act. The petitioner''s contention is that his factory is only manufacturing toys, that it is not

within Schedule 1 of the Act, and that there is no notification by the Central Government bringing toy industry within that schedule that the Act is

therefore wholly inapplicable and that the demand of the Commissioner is illegal being in excess of his jurisdiction. The writ petition has therefore

been filed against the State of Madras, represented by the Regional Provident Fund Commissioner to quash the proceedings of the Commissioner

referred to above.

The only question is whether the petitioner''s factory is within the ambit of the Employees'' Provident Fund Act. The petitioner manufactures

wooden toys, like rocking horses and other varieties of toys papier-mache toys, clay toys etc. Admittedly he also manufactures merry-go-rounds,

but the petitioner states that he commenced such manufacture only from 1957, and that this part of his factory, namely, the section manufacturing

merry- go-rounds employs only five persons. I must however refer to the averment in the counter affidavit that the records of the factory show

production of pedalling cars, perambulators, scooters and tricycles which can be used by children of ages ranging from 5 to 12. This averment has

not been denied by the petitioner. The factory is a single unit manufacturing all the above-said articles from wooden toys to perambulators and

scooters and the petitioner does not give any details regarding the number of persons employed in the manufacture and production of each and

everyone of these articles. He has merely said that only five persons are employed in the section of the factory where ""merry-go rounds"" are

manufactured. On these facts the question that has to be considered is whether the Act can be applied to the factory of the petitioner.

Section 1, Sub-section (3) makes the Act applicable to

every establishment which is a factory engaged in any industry specified in Schedule I and in which 50 or more persons are employed and to any

other establishment employing 50 or more persons or class of such establishments

which the Central Government may by notification in the official Gazette specify in this behalf. Schedule I enumerates several industries. One such

industry is the industry engaged in the manufacture of ""electrical, mechanical or general engineering products."" The contention of the State is that the

petitioner is engaged in this industry. Surely, the petitioner is not engaged in the manufacture of electrical or general engineering products. Quite

obviously the petitioner is engaged in the manufacture of mechanical products as he manufactures perambulators, tricycles, scooters, merry-go-

rounds and garden swing cradles etc. Mere manufacture of wooden toys like rocking horses will not amount to manufacture of mechanical

products. It seems to me that the petitioner is partly engaged in the manufacture of mechanical products and partly engaged in the manufacture of

other articles and commodities not comprised in Schedule I.

Learned counsel for the petitioner contends that the dominant industry of the petitioner is the wooden toy industry and that the manufacture of

perambulators, pedalling cars and merry-go-rounds is only a subsidiary industry, and that the applicability of the Act cannot therefore be attracted.

I must observe even at the outset that there is no foundation at all for this argument as no materials have been placed before the Regional Provident

Fund Commissioner, and of course not before me, to show that the manufacture of toys is the dominant industry of the petitioner. There is nothing

to show that the petitioner has devoted the major portion of his capital only for producing toys, that the majority of the employees attends only to

the production of toys, that a large portion of the factory premises is set apart for this activity, and that the out-turn of sales in respect of toys is

greater than in respect of the other articles, and that his commercial enterprise is concentrated only in the manufacture and sale of toys largely

though not exclusively, The factual foundation to rest the petitioner''s contention is wholly lacking even if it were to be held that the contention is

tenable.

I shall now refer to the decisions cited before me. In Oudh Sugar Mills v. Regional Provident Fund, Commissioner, Bombay, AIR 1957 Bom

148, a company carried on the business of manufacturing vegetable oil and its by-products. The oil was tinned in the containers fabricated by the

company in the precincts of the oil industry. The containers were used only for the purpose of packing the oil. They were not sold separately. Only

31 workers were engaged in the work of producing containers while 211 workers were working on the manufacture of oil and its by-products.

The Regional Provident Fund Commissioner claimed to apply the Act to the company. A Division Bench of the Bombay High Court, Mudholkar

and Tambe, JJ. held that the company was outside the Act. The two learned Judges reached the same conclusion but on different grounds. The

vegetable ''oil industry was not one of the items of the first schedule of the Act, at the time when that decision was rendered. The tin containers

were however one of the scheduled Items. Mudholkar, J. as he then was, was of the opinion that the company was not engaged in the manufacture

of drums and containers as the company was not trading in those articles. According to that learned Judge, the Act applies only where the final

product is within the schedule of the Act. Tambe, J. however was of the opinion that the determining factor is whether in any part of a factory any

manufacturing process is going on and whether the manufactured article is such as to take within the meaning of the first schedule. But he agreed

with Mudholkar, J. that the Act was not applicable to the company as the number of persons employed in the manufacture of drums and containers

was less than fifty. The observation of Mudholkar J. at page 151 is as follows :

If the industry, as here, is the production of edible oil, then all the intermediate products which are produced for carrying on that indu''stry cannot

be regarded as separate industries. Therefore, the mere fact that any of these products was included in the Schedule will not bring the Act into

operation.

Tambe J. observed as follows at the same page :

In my view, the determining factor is whether in any part of a factory any manufacturing process is going on and whether the manufactured article

is such which falls within the meaning of the First Schedule. But to attract the Act this alone is not sufficient. The number of persons employed in

the unit engaged in the manufacture of such articles must be fifty or more.

The same Division Bench of the Bombay High Court decided another case arising under the same Act and that is reported in Nagpur Glass Works

Ltd. Vs. Regional Provident Fund Commissioner, Bombay, . The principal business of the petitioner in the case was the manufacture of glass. The

petitioner was also engaged in the business of manufacture of burners and metat lamps (consisting of glass oil containers and globe of metal burners

and reflectors). The schedule to the Act does not include glass industry. It was found that the manufacture of burners, metal lamps etc, fall within

the expression ""electrical, mechanical or general engineering products"". The Division Bench held that the Act cannot apply to the whole factory

inasmuch as at the relevant date glass was not included in the schedule and that it applied only to the section producing burners and metal lamps, as

these products were final products manufactured for sale and as their production was an industry in itself. The petitioner''s factory employed 420

workers and it was held that the provident fund contribution cannot be demanded in respect of the 420 workers but that it can be demanded only

in respect of 187 workers engaged in the particular section manufacturing burners and metal lamps.

These two decisions of the Bombay High Court were considered by Balakrishna Aiyar J. in the decision in the The Madras Pencil Factory Vs.

The Regional Provident Fund Commissioner, No. 111 Mount Road, Madras, . That was a case wherein, the petitioner, a firm running a pencil

factory, resisted the application of the Act. The pencil industry is not one of the scheduled industries of the Act. The factory in which the pencil was

manufactured utilised imported machinery and ran a workshop in which spare parts required for the use of the machinery were fabricated. The

number of persons employed in this workshop and foundry was only 23. The articles turned out by the work shop clearly fell within Schedule I of

the Act. The question was whether the Act was applicable to the factory which if viewed as a pencil factory was outside the first schedule of the

Act, and if viewed as a factory producing mechanical products also fell outside the Act, as the number of employees was less than fifty. One of the

contentions raised before the learned Judge was whether the requisite of employment of 50 or more persons referred to the industry or to the

factory. The learned Judge, quite rightly, if I may say so with respect, held that the words ""fifty or more persons"" can relate only to factory. At page

359, the learned Judge observed,

The word ''industry'' as used in the Act is inappropriate to indicate only a unit or department inside a factory.

The learned Judge was of the opinion that the fabrication of spare parts for the machinery and plant employed In the industry was only incidental to

the manufacture of pencils, and that the industry was one engaged in the manufacture of pencils, and that being not listed in Schedule I to the Act,

the Act was not applicable. The observation of the learned Judge emphasising the difference between primary purpose and incidental purpose has

got to be understood in the back ground of the peculiar facts of the case with which he was dealing. I do not think that the learned Judge intended

to lay down the proposition of law that in order to attract the Act to a particular industry the dominant purpose of that industry must relate to its

being engaged in the manufacture of the products listed in the first schedule to the Act. Indeed the following observation of the learned Judge at

page 238 is significant :

Of course, I agree that a factory may be engaged in producing more than one article. In such a case it would be perfectly correct to say that the

factory is engaged in producing all those articles.

This observation is followed by another observation upon which the learned counsel for the petitioner strongly relied :

I have no doubt whatever that the word ''engaged'' In Sub-section (3) of Section 1 refers to the primary activity of the factory.

There can be no difficulty in understanding that decision. The learned Judge held that where the primary or main activity is not covered by Schedule

I of the Act, incidental or ancillary activities, (to sustain the primary activity) which may fall within Schedule 1, cannot attract the applicability of the

Act. The learned Judge was not certainly dealing with a factory comprising multifarious industries, some within and some outside the Act. This

decision of Balakrishna Aiyar J. has been affirmed on letters, patent appeal by a Division Bench in the decision reported in Regional Provident

Fund Commr. v. Madras Pencil Factory, 74 Mad LW 779 : 1962 (2) Cri LJ 699.

There is one obvious distinction between the case of the Madras Pencil Factory referred to above and the present case. The trading activity of

the Madras Pencil Factory was confined only to the manufacture and sale of pencils. The fabrication of spare parts for the equipment of machinery

and plant though essential and necessary for the running of the pencil factory, was not the industry in which the company was engaged. It cannot be

said that where a person combines in one factory the manufacture and production of various articles some of them listed in Schedule 1 and some of

them not so listed, he can escape the applicability of the Act by reason only of the fact that his industry partly relates to items not found in the

schedule. Composite industries consisting of industries within the Act and industries outside the Act cannot be immune from the Act altogether

though, it might be possible to avoid the Act in relation to non-listed industries of the schedule by giving facts and figures to the authorities

concerned that the industries carried on in the same factory premises are distinct and separate, each independent of the other.

The petitioner is certainly carrying on an industry engaged in the manufacture of mechanical products and it cannot be said that the order of the

Regional Provident Fund Commissioner is in excess of his jurisdiction. It may yet be open to the petitioner to convince the authorities concerned

that the manufacture of wooden toys is separate and severable from the manufacture of mechanical products like perambulators, scooters, tricycles

etc. and that he can be called upon to pay contributions to the provident fund and fulfil the requirements of the Act only with regard to the

manufacture of articles which fall within the first schedule of the Act.

The petitioner cannot have the order of the Regional Provident Fund Commissioner quashed in these circumstances by the issue of a writ of

certiorari. The petition fails and is dismissed and the rule nisi is discharged. There will be no order as to costs.