Madras High Court
M/S.Kanyakumari Medical Mission vs The Employees Provident Fund on 30 September, 2022
Author: G.R.Swaminathan
Bench: G.R.Swaminathan
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 30.09.2022
PRESENT
THE HON'BLE MR.JUSTICE G.R.SWAMINATHAN
WP(MD) No.22547 of 2022
and
WMP(MD)Nos.16724, 16725 & 16726 of 2022
M/s.Kanyakumari Medical Mission,
Rep.by its Medical Superintendent,
Dr.Rajesh Sathiya
Neyoor, Kanyakumari District. ... Petitioner
vs.
1.The Employees Provident Fund
Organization,
Rep.by its Assistant Provident Fund
Commissioner,
Sub-regional Office,
65-A, Water Tank Road, Nagercoil,
Kanyakumari District – 629 001.
2.The Branch Manager,
Canara Bank, College Road,
Nagercoil, Kanyakumari District.
3.The Branch Manager,
Indian Bank, Neyoor, Kanyakumari District.
4.The Branch Manager,
State Bank of India,
Thingal Nagar, Kanyakumari District.
5.The Branch Manager,
Indian Overseas Bank,
Eraniel, Kanyakumari District.
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6.The Branch Manager,
Canara Bank,
Neyoor, Kanyakumari District.
7.M/s.CSI Institute of Technology,
Thovalai Post, Kanyakumari District. ... Respondents
(R7 suo motu impleaded vide
order dated 26.09.2022)
Prayer : Writ Petition filed under Article 226 of the Constitution of
India, to issue a Writ ofCertiorarified Mandamus, to call for the
records on the file of the 1st respondent in TRN/NGL/
ENF/C32/33089/8F/2022 dated 11.08.2022 issued to the 2nd
respondent and quash the same and consequently forbear the 1st
respondent from taking recovery proceedings against the petitioner by
collecting money from the bank accounts of the petitioner with the
respondents 2 to 6 by issuing proceedings under section 8F of the EPF
and MP Act to recover any money due from the third party EPF
account holders, other than the money legally due from the petitioner
to the 1st respondent in EPF Code No.MDNKL 000768500.
For Petitioner : Mr.M.Azeem
For Respondents : Mr.Mahaboob Athif for R1
Mr.C.Karthik for R2 to R4 & R6
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ORDER
The petitioner is running a number of hospitals as well as para
medical educational institutions. The petitioner and its constituent
institutions come under the purview of The Employees' Provident
Fund and Miscellaneous Provisions Act, 1952. A separate code has
been allotted for them. The petitioner is paying the contributions for
their employees regularly. While so, for the provident fund dues of
the seventh respondent, recovery was effected from the petitioner's
bank account. The stand of the petitioner is that it was illegal and
action is proposed to be initiated for obtaining refund. While so, the
impugned order dated 11.08.2022 came to be passed under Section
8F of the Act and communicated to the Branch Manager, Canara
Bank, Nagercoil Branch directing the bank to transfer a sum of Rs.
90,99,917 lying in the account of the petitioner to satisfy the
provident fund dues of the seventh respondent. A copy of the said
communication was given to the petitioner by their banker.
Challenging the same, this writ petition has been filed.
2.The learned counsel for the petitioner reiterated all the
contentions set out in the affidavit filed in support of the writ petition.
He assailed the impugned order on several grounds. He contended
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that even without giving an advance intimation, the petitioner's bank
account has been frozen. This according to him is a grave violation of
principles of natural justice. His major contention is that the
authority erred in clubbing two independent establishments. The
petitioner is a medical institution. The seventh respondent is an
institution imparting education in engineering. There is no functional
integrality between them. The learned counsel for the petitioner relied
on the following case laws in support of his arguments :
“1.1998 (1) LLJ 1060 (SC) (Regional
P.F.Commissioner v. Dharmsi Morarji Chemical
Co.Ltd).
2.CDJ (2007) SC 292 (Regional P.F.Commissioner
v. M/s.Raj's Continental Exports Pvt., Ltd).
3.CDJ (2011) MHC 2681 (Bhucoalka Steel
Industries Ltd. vs. The Registrar, EPFAT, New Delhi)
and
4.2012(3) LLJ 736 (Kerala) (Attukal Bhagavathy
Temple Trust, Thiruvananthapuram).”
He pointed out that if the impugned order is not interfered with, the
functioning of the hospitals run by the petitioner would be totally
paralysed and that would endanger public interest. He called upon
this Court to quash the impugned communication.
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3.Per contra, the learned standing counsel appearing for the first
respondent submitted that the impugned communication does not call
for any interference.
4.I carefully considered the rival contentions and went through
the materials on record. There is no dispute that the petitioner is
functioning under the Kanyakumari Diocese of Church of South India.
I wanted to know the legal character of the petitioner – is
Kanyakumari Medical Mission a registered trust or a registered society
or an incorporated company ?. The answer is in the negative. The
petitioner is neither a trust nor an incorporated company. It is not
even a registered society. In other words, it is not an independent
legal entity or a juristic personality. It is run by Kanyakumari
Diocese of Church of South India. In the typed set of papers filed by
the petitioner, the extracts from the Constitution of the CSI,
Kanyakumari Diocese have been enclosed. Chapter XI of the said
Constitution deals with the Board of CSI Institute of Technology, the
seventh respondent herein. The membership of the Board governing
the seventh respondent is as follows :
“43.1.Membership
A.The Bishop-Ex-officio Chairman
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B.The Correspondent/Secretary appointed by the
Executive Committee-Ex-officio.
C.The Principal of the Institute – Ex-officio
D.The Bursar of the Institute appointed by the
Executive Committee – Ex-officio.
E.Eight persons elected by the Diocesan Council
from among its own members of whom one shall be a
woman, one shall be a Presbyter and one shall be from
unrepresented section.
F.Government representatives, if any.”
Chapter-XVI deals with the Board of Health, Medical Care, Nursing
and Paramedical Education. Its is membership is as follows :
“A.The Bishop – Ex-officio Chairman
B.The Three officers of the diocese – Ex-officio
C.The Medical Superintendent – Ex-officio Secretary
D.The Hony. Treasurer of the Kanyakumari Medical
Mission – Ex-officio.
F.The Nursing Superintendent of the Kanyakumari
Medical Mission – Ex-officio.
G.Eight members elected by the Diocesan Council of
whom one shall be a woman, one shall be a Presbyter
and one shall be from unrepresented section.
All the Medical Officers in charge of branch Hospitals
will be invitees.”
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From the above, one can easily come to the conclusion that both the
petitioner as well as the seventh respondent form part of the
Kanyakumari Diocese of Church of South India. Of course, there is
no functional integrality between the petitioner and the seventh
respondent. One is in the medical sector while the other is in the
engineering sector. But both come under the Kanyakumari Diocese of
Church of South India.
5.Now, the question is whether the dues of the seventh
respondent can be recovered from the bank account of the petitioner.
The diocese is running a number of institutions and their dues have
been recovered from the petitioner's bank account. In the affidavit
filed in support of the writ petition, it has been stated that the PF
authorities had recovered from the petitioner's bank account a sum of
Rs.11,38,931/- towards the dues of CSI Kanyakumari Diocese
(Pastors and Church workers). Likewise, the dues of RTMLMS Hr.Sec
School to the tune of Rs.1,92,184/- was also recovered last year. The
dues of the seventh respondent themselves to the tune of
Rs.36,90,396/- was recovered from the petitioner's bank account on
16.07.2021. Thus, what is being done now is not being done for the
first time. Of course, if the impugned recovery action is without
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jurisdiction or illegal, then the fact that such recoveries were made in
the past cannot be a defense.
6.The learned counsel for the petitioner emphasized that the
petitioner and the seventh respondent are independent
establishments and there is no commonality between them and that
they cannot be clubbed. It is necessary to note here that the PF
authority is not clubbing two establishments for the purpose of
assessment. The petitioner and the seventh respondent are assessed
separately under separate codes. Here, the question is something
else. It pertains to the validity of the recovery action. To answer this
question, it is necessary to have a look at some of the provisions of
the Act.
7.The expression “employer” has been defined in Section 2(e) of
the Act as follows :
“[(e)“employer” means— (i) in relation to an
establishment which is a factory, the owner or occupier
of the factory, including the agent of such owner or
occupier, the legal representative of a deceased owner or
occupier and, where a person has been named as a
manager of the factory under clause (f) of sub-section (1)
of section 7 of the Factories Act, 1948 (63 of 1948), the
person so named; and
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(ii) in relation to any other establishment, the
person who, or the authority which, has the ultimate
control over the affairs of the establishment, and where
the said affairs are entrusted to a manager, managing
director or managing agent, such manager, managing
director or managing agent.”
Section 2A of the Act as follows :
“2A. Establishment to include all departments
and branches.—For the removal of doubts, it is hereby
declared that where an establishment consists of
different departments or has branches, whether situate
in the same place or in different places, all such
departments or branches shall be treated as parts of the
same establishment.”
Section 8B of the Act is as follows :
“8B.Issue of certificate to the Recovery Officer.—(1)
Where any amount is in arrear under section 8, the
authorised officer may issue, to the Recovery Officer, a
certificate under his signature specifying the amount of
arrears and the Recovery Officer, on receipt of such
certificate, shall proceed to recover the amount specified
therein from the establishment or, as the case may be,
the employer by one or more of the modes mentioned
below:—
(a) attachment and sale of the movable or
immovable property of the establishment or, as the case
may be, the employer;
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(b) arrest of the employer and his detention in
prison;
(c) appointing a receiver for the management of the
movable or immovable properties of the establishment
or, as the case may be, the employer:
Provided that the attachment and sale of any property
under this section shall first be effected against the
proportion of the establishment and where such
attachment and sale is insufficient for recovering the
whole of the amount of arrears specified in the
certificate, the Recovery Officer may take such
proceedings against the property of the employer for
recovery of the whole or any part of such arrears.
(2)The authorised officer may issue a certificate
under sub-section (1), notwithstanding that proceedings
for recovery of the arrears by any other mode have been
taken.”
As per Section 2(e) of the Act, the authority which has the ultimate
control over the affairs of the establishment would be the employer. As
per Section 8B, only after proceeding against the movable or
immovable property of the establishment, proceedings can be taken
against the property of the employer for recovery of the shortfall. If
the petitioner and the seventh respondent are juristic personalities or
legal entities, then, it would have been possible to accept the
contention of the petitioner's counsel that only after first proceeding
against the seventh respondent, the PF authority can think of the
other options. Since both are not having any legal character, they
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can be treated only as parts of the diocese. For the purpose of
assessment, they can be separate entities. But for the purpose of
recovery, they will be considered and treated only as constituent parts
of a single establishment, namely, Kanyakumari Diocese of CSI. The
monies lying in the bank account of the petitioner-institution also
belongs to CSI, Kanyakumari Diocese. Therefore, when the first
respondent has taken recovery action, it must be construed as taking
action only against the establishment concerned.
8.The expression “establishment” has not been defined in Act 19
of 1952. In L.N.Gadodia & Sons v. RPFC (2011) 13 SCC 517, it
was argued that only different departments or branches of an
establishment can be clubbed together, but not different
establishments altogether. The contention was repelled and it was
held as follows :
“23.....what is to be noted is that, this is an
enabling provision in a welfare enactment. The two
Petitioners may not be different departments of one
establishment in the strict sense. However, when we
notice that they are run by the same family under a
common management with common workforce and with
financial integrity, they are expected to be treated as
branches of one establishment for the purposes of
Provident Funds Act. The issue is with respect to the
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application of a welfare enactment and the approach
has to be as indicated by this Court in Sayaji Mills Ltd.
(1984 Supp SCC 610). The test has to be the one as laid
down in Associated Cement Company (AIR 1960 SC 56)
which has been explained in Management of Pratap
Press (AIR 1960 SC 1213).”
The aforesaid decision was followed in Shree Vishal Printers Ltd. vs.
Fund Commissioner, Jaipur and Ors (2019) 9 SCC 508. The ratio
is that it is impossible to lay down any one test as an absolute and
invariable test for all cases. The real purpose of the test would be to
find out the true relation between the parts, branches, unit etc., Unity
of ownership, unity of management and control, unity of finance, unity
of labour, unity of employment and unity of functional integrality are
the tests which courts apply. The Hon'ble Supreme Court in the
latest judgment stressed the fact that the Act being a beneficial
legislation, the approach of the court must be to ensure that liability
under the Act is not evaded. I therefore hold that while the petitioner
and the seventh respondent can be two separate entities for the
purpose of assessment, they are to be treated as constituent parts of
a single establishment for the purpose of recovery under Section 8 of
the Act. The first respondent rightly adopted such an approach and it
cannot be faulted. As already observed, the situation would have been
probably different if the writ petitioner is a legal entity. The case-laws
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relied on by the learned counsel for the petitioner relate to clubbing for
the purpose of assessment and that is why, they may not be useful to
decide the issue on hand. For the reasons mentioned above, it is not
possible to invoke Section 2(e) of the Act also so as to bring the
petitioner's case within the protection set out in the proviso to Section
8B(1) of the Act. CSI, Kanyakumari Diocese is an umbrella
organization whose limbs are the petitioner and the seventh
respondent. They would constitute a single establishment for the
purpose of recovery.
9.At the same time, the first respondent cannot act in a manner
so as to cripple the running of the petitioner-institution. The petitioner
is running a number of hospitals. It has to cater to the welfare of the
patients. It must pay salary to the doctors and other staff. Therefore,
the first respondent cannot sweep the petitioner's bank account dry.
The first respondent has the power to effect recovery of the dues. But
this power must be exercised in a reasonable manner. If a sledge
hammer approach is adopted, it will bring the day-to-day running of
the institution to halt. The authority must milk the cow not butcher it.
A bee or a butterfly gently draws the honey from the flower. It does not
pluck it. The authority must adopt a similar approach. The institutions
in question are having properties and it is always possible to effect full
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recovery of the PF dues. I therefore restrain the first respondent from
appropriating more than a sum of Rs.15.00 lakhs per month from the
petitioner's bank accounts. The impugned order is interfered with to
this limited extent. The first respondent is directed to issue revised
proceedings in consonance with the direction given in this writ
petition.
10.The writ petition is disposed of accordingly. No costs.
Connected miscellaneous petitions are closed.
30.09.2022
Index : Yes / No
Internet : Yes/ No
skm
To
1.The Employees Provident Fund
Organization,
Rep.by its Assistant Provident Fund
Commissioner, Sub-regional Office,
65-A, Water Tank Road, Nagercoil,
Kanyakumari District – 629 001.
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G.R.SWAMINATHAN, J.
SKM WP(MD) No.22547 of 2022 30.09.2022 https://www.mhc.tn.gov.in/judis 15/15