Regional Provident Fund Commissioner vs B. Rukmini K. Shetty

Mohan, C.J.—The facts leading to the writ appeal are shortly as follows :

Premises known as ''Hotel Shivaprasad,'' situated at Kundapur Town belongs to a partnership firm consisting of the following partners : (1) V. K. Shetty

(2) B. Arunkumar Shetty

(3) Arithkala S. Shetty

(4) Vasanthamala S. Shetty and

(5) Amrithkala S. Shetty

One P. N. Krishna Murthy Bhat was a Lessee of this premises who was running a restaurant. O.S. No. 28/1978 was filed before the Learned Civil Judge, Udipi for his eviction. That ended in a decree in favour of the landlord. In execution of that decree in E.C. No. 14/1983 ultimately, possession was delivered to the landlord on April 22, 1983.

Thereafter the premises was leased in favour of Smt. B. Rukmini K. Shetty (respondent herein) under lease deed dated July 30, 1983. She started a restaurant under the same name and style of Hotel Shivaprasad afresh. She obtained loan form the Bank for starting this restaurant with new furniture and utensils. She also obtained a fresh licence from the Municipality which is required under the Karnataka Municipalities Act for running restaurant. She recruited new employees. It may also be added that no one of the employees of the previous establishment was continued.

The Regional Provident Fund Commissioner held an enquiry u/s 7-A of the Employees Provident Fund and Miscellaneous Provisions Act 1952 (for short the Act), to determine whether the restaurant run by the respondent (Smt. B. Rukmani) would been entitled to infancy protection u/s 16(1)(b) of the Act. He came to the conclusion that this was only continuation of the old establishment which head been covered by the provisions of the Act with effect from April 1,1985. Merely because there is reduction of the number of employees which had fallen below, 50, it cannot go out of the purview of the Act in view of Section 1(5) of the Act. Therefore, he concluded that the establishment run by respondent continued to be covered under the scheme. This order was passed on July 6, 1985. The validity of the order was challenged by the respondent before our learned brother Justice Doddakalegowda in W.P. No. 5511/1986.

It was contended on behalf of the first appellant Commissioner that, merely because there had been periodical lease of the same premises in favour of different persons, that does not mean that at every time a fresh lease commences and the lessee could claim infancy protection. Further, this is a case in which delivery of possession has taken place in favour of Smt. Rukmani K. Shetty even earlier Lastly, the goods will has also come to be purchased. Therefore, relying on a decision in Sayaji Mills Ltd. Vs. Regional Provident Fund Commissioner, it was urged that the claim for infancy protection must be rejected. The learned Single, Judge, on a consideration of the entire matter, was of the view that the ruling in Sayaji Mills Ltd. Vs. Regional Provident Fund Commissioner, has no bearing. He was loss of the view merely because there respondent has taken over possessive even prior to the execution of the lease deed on July 30, 1983, it would be of no consequence where a fresh commencement of business has taken place by a new lessee by purchasing new utensils etc. Accordingly he quashed the order July 6, 1985 and made rule absolute. Thus the writ appeal.

Mr. Shylendra Kumar, learned Counsel for the appellants, would rule that in this case that old lease came to an end on April 22, 1983 and hardly within three months the wife of one or the partners becomes a Lessee; in her favour possession is delivered even before execution of the decree, the said business is continued under the same name and style of old establishment and in this case Section 15 of the Act would squarely apply. The reliance placed by the appellants on Sayaji Mills Ltd. Vs. Regional Provident Fund Commissioner, was fully justified.

Mr. P. V. Shetty, appearing for the respondent, would counter these submissions contending that with reference to claim for infancy protection u/s 16(1)(b) of the Act, the facts in each case will have to be gone into. The whole object of the Act is to prevent every person claiming infancy protection, but it cannot be contended that every time a new lease takes place that claim for infancy protection is well founded. On the contrary, it has to be seen whether it is a new establishment or merely a continuation of the old establishment. The facts here undisputedly prove that the establishment run by Smt. Rukmini K. Shetty is a new establishment. May be the old name as Hotel Shivprasad came to be continued. But the previous Lessee was evicted by process of law by filing a suit. After getting an order and decree for eviction and in execution of that decree the fruits came to be obtained, namely, possession came to be obtained. Thereafter, the partnership firm being the owner leased out the property in favour of Rukmini K. Shetty. Thus, there is absolutely no connection between the previous Lessee and the present Lessee. It cannot be made much of it that she is wife of one of the partners. That could be no bar to decided whether establishment run by her is new establishment or not. Then again, not one of the pervious employees came to be employed. Only a few employees came to be recruited newly for purpose of running the restaurant.

Loan had been obtained from the Bank and with the help of the loan new utensils and furniture had also come to be purchased. Lastly, new Municipal Licence had come to be obtained in her name. All these facts clearly establish that the establishment commenced by Smt. Rukmini k. Shetty is entirely a new one. Under identical circumstances in Rukha Fruits Products (Pvt.) Ltd. v. Regional Commissioner, Employees Provident Fund and Family Pension Funds, Madras 53. F.J.R. 56, the Court has come to be conclusion that the claim for infancy protection is well-founded. The same ratio will apply to the facts of this case.

In Sayaji Mills Ltd. Vs. Regional Provident Fund Commissioner, the position was entirely different. There was an interval of 11 months. Both the District Court as well as High Court, on an examination of the facts, found that its was a continuity of the old establishment and therefore rightly the learned Judge did not apply that ruling to the facts of this case.

Having regard to the above, the only question that arises for our determination is whether the rejection of the claim of respondent (Rukmini K. Shetty) for infancy protection u/s 16(1)(b) of the Act is correct.

With regard to the claim for infancy protection we are clear in our mind that the question has to approached in the light of whether the establishment is a new one or it is a continuation of the old. This question can be determined with reference to the facts available in case. Then again the object that has to be decided in each of the cases is whether there is any evasion of its liability under the Act to claim infancy protection or again whether the provisions of the Act are circumvented with a view to claim infancy protection.

In this background, we propose to analyse the facts. The undisputed facts are as under :

(i) Originally the Lessee was one P. N. Krishnamurthy Bha.

(ii) The owner of the property, namely a partnership consisting of V. K. Shetty, B. Arunkumar Shetty, Aruthkala S. Shetty, Vasanthama''s R. Shetty and Amrithkala S. Shetty, filed O.S. 28, 1978 on the file of the learned Civil Judge, Udipi for eviction of the Lessee. That suit came to be hotly contested and ultimately it ended in a decree in favour of the land-lord firm.

(iii) In execution of that decree in Ex.C. No. 14/1983, possession came to be obtained by the landlord-firm on April 22, 1983.

(iv) Thereafter the premises in questions was leased as per lease deed dated July 30, 1983, in favour of Rukmini K. Shetty, who is none other than the wife of V. K. Shetty.

(v) She obtained loan from the Bank for establishing a restaurant.

(vi) She purchased new furniture and utensils.

(vii) She obtained fresh licence form the Municipality.

(viii) She recruited new employees; and

(ix) Not one of the employees of the previous. establishment was even continued service.

The only point on which the respondent made a slip, it at all, was to continue under the name and style of Hotel Shivaprasad. Therefore, having regard to all these facts, can it be said it is a continuation of the old establishment or a new establishment. We have not the slightest hesitation in holding that it is a new establishment altogether. It is not denied before us by the appellants that there is no relationship between the previous Lessee - P. N. Krishnamurthy Bhat and V. K. Shetty. In other words, what we want to stress is, this is not with a view to circumvent an to gain an undue advantage of infancy protection that all these things have take place. We have referred to the legal proceedings which ended in eviction to show that it is only by recourse to Law, possession was obtained and not through any consent or connivance between the old Lessee and new Lessee.

The Commissioner for Provident Fund would rely on obtaining of delivery of possession prior to the execution of the lease deed on July 30, 1988. That will itself be no bar and rightly therefore the learned Judge rejected the same. Then the question is whether running that restaurant under the same name and style of Hotel Shivaprasad would show that is continuation of the old establishment. That by itself cannot in any manner be conclusive, nor the singular fact can be taken into consideration in isolation disregardful of all the facts we have set out above. Therefore, in the light of these facts, it is impossible for us to apply the ratio of the Ruling reported in Sayaji Mills Ltd. Vs. Regional Provident Fund Commissioner,

As rightly contended by Mr. P. V. Shetty, in that case, as seen from para-2 the trial court as well as High Court, on an examination of fact, came to the conclusion that it was a continuation of old establishment, and it was under these circumstances, in para 8 their Lordships observed as follows (p. 242) :

"This is not a case where the old factory was reduced into scrap and anew factory was erected in its place. Nor can it be said that there was total discontinuity brought about between the old factory which was restarted after the appellant purchased it. The stoppage of production was brought about temporarily as stated earlier by the winding-up order and the factory was restarted after it was sold to the appellant by the Official Liquidator. The finding of fact recorded by the trial Court in this case, which is affirmed by the High Court, clearly establishes that it was the same old factory which recommended production on November 12, 1955. What is of significance is that a substantial number of workmen and staff who were working under the former management had been employed by the appellant though it is claimed that they had entered into new contracts of employment. Mere investment of additional capital or effecting of repairs to the existing machinery before it was restarted, the diversification of the lines of production or change of ownership would not amount to the establishment of new factory attracting the exemption u/s 16(1)(b) of the Act for a fresh period of three years".

Clearly, therefore, this case is distinguishable.

Yet another ruling relied on by the learned Counsel for the appellant reported in R.L. Sahni and Co. Vs. Union of India and Another, In overruling the Judgment of Anantanarayanan, J., as he then was, reported in ( 1966 I LLJ 240), the Division Bench observed as follows R.L. Sahni and Co. Vs. Union of India and Another,

"Our conclusion gains support from a number of decided cases. In Nazeena Traders (Pvt.) Ltd., v. Regional Provident Fund Commissioner, Hyderabad (1966 I LLJ 334), one of the contentions raised was since the petitioner had taken on lease the cinema theatre on a particular date he was entitled to have a further protection u/s 16(b) from the date of his lease. This was repelled by a Division Bench of the Andhra Pradesh High Court in these words (at page 352) : "This section contemplates the postponement of the application of the Act only to establishments and not to the person connected with the management, the object of the provisions being to afford protection to the industries subject to the obligations imposed by the Act in their infancy. The Legislatures seem to have thought that the industries would establish themselves on a firm basics within 3 or 5 years as the case may be and that thereafter they will be in a position to meet the demands of the Act.

A change of management of an establishment does not attract this Section, since that does not amount to starting a new establishment and, consequently, it could not invoke the period of protection afresh, from the date of the lease,"

We are not for a moment holding that in every case where there is a fresh lease, the claim for infancy protection must follow. On the contrary, if the fact established, as in the present case, that there is a commencement of new business and it is not a continuation of the old, how should the infancy protection u/s 16(1)(b) of the Act be denied. Of course, if it had been a continuation of the old establishment by reduction of the number below 20, certainly the respondent cannot gain the benefit of Section 16. But once it is established that it is not continuation of the old establishment, were have no other option than to agree with the learned Judge that the order denying infancy protection is wrong.

The learned Counsel for the respondent relied on the decisions in Rubka Fruit Products Private Ltd. v. Regional Commissioner, Employees Provident Funds and Family Pension Fund, Madras (supra). The Headnote reads thus :

"If, in a particular case, it appears that the new establishment is not genuinely such, but is only an old one formally resuscitated in order to avoid a legal obligation it is always open to the Court to hold it is the old establishment which is substantially continuing, and that the legal liability must be affixed to the apparently new form also. But where in reality, the old establishments has come to an end, and there is a new establishment, this establishment is entitled to infancy protection u/s 16(1)(b) of the Employees'' Provident Funds and Miscellaneous Provisions Act 1952, in its own right, even if it happens by coincidence to have employed a large a part of the personnel of the previous establishment. Where, therefore, the machinery of a Company which went into liquidation were bought from the mortgagee by the petitioner company which commenced business in the same premises after an interval of six months, the petitioner company would be entitled to the infancy protection provided u/s 16(1)(b) of the Act : The Provident Fund Inspector, Trivandrum Vs. The Secretary, N.S.S. Co-operative Society, Changanacherry, applied."

For these reasons we agree with the learned Judge and dismiss the writ appeal with costs. Counsel''s fee Rs. 500/-.