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The writ petition is filed by the Regional Provident Fund Commissioner, Tirunelveli, challenging the order of the second respondent - Employees' Provident Funds Appellate Tribunal, dated 27.8.1998, in setting aside the order passed by the petitioner, dated 09.3.1998 made under Section 7-A of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (for short, 'EPF Act').

2. The first respondent was a registered Company under the Companies Act, 1956 and they took up a franchise agreement with M/s.Parle (Exports) Private Limited for the purpose of manufacturing soft drinks, such as, Thumps up, Limca, Gold Spot etc. By the said franchise agreement, the first respondent took Essence from M/s.Parle (Exports) Private Limited and bottled the drinks and distributed the same with its own employees and expertise. All over India, there are 62 such establishments like the first respondent. The first respondent employed initially 37 employees. Subsequently, it was increased to 90 employees.

4. On such remand, the petitioner passed the impugned order holding that the franchise holders are contractors and they come within the meaning of Section 2A of the EPF Act. Therefore, the first respondent unit is not eligible for any infancy protection. In arriving at the conclusion, the petitioner held that the EPF Act is a beneficial Act and it should be construed liberally in favour of persons for whose benefit it was intended to. It was held that the franchise agreement between the petitioner and M/s.Parle Export Private Limited is a contract under the Indian Contract Act. The said Company was a 'Principal' and the first respondent was the 'Agent'. The terms of contract show that ultimate check and control over the manufactured product with reference to quality lay with M/s.Parle (Exports) Private Limited. The products were manufactured with the essence/syrup and formula and specification supplied to the first respondent. Therefore, it was an establishment covered by Section 2A of EPF Act. It was this order which was taken on appeal by the first respondent under Section 7-I of the EPF Act.

5. The appeal was taken on file by the second respondent Tribunal as Case No.13(54) of 1998 and was heard at its camp sitting at Hyderabad. The second respondent Tribunal held that the first respondent is not a contractor of M/s.Parle (Exports) Private Limited and they are independent manufacturers. After relying upon several other decisions of various counts even in respect of M/s.Parle (Exports) Company under the Excise Act, it was held that the first respondent cannot be an agent of Parle (Exports) Limited. It is this order which is under challenge by the Provident Fund Commissioner.

16. Whether a franchise agreement holder can be considered as a contractor of the principal came to be considered under the Excise Act in respect of the very same M/s.Parle (Exports) Company by the Bombay High Court in Parle Beverages (P) Ltd -vs- Union of India and others (1982 ELT 142 (Bombay)). After referring to the terms of franchise agreement, the Bombay High Court held as follows:-

'' 6. ..... As mentioned hereinabove, an identical question came up for consideration before the Division Bench of Delhi High Court and the judgment is reported in 1981 ELT 389 (supra). The Division Bench held on consideration of the terms of Franchise agreement that the imposition of various restrictions on the petitioner company under the Franchise agreement on buying the essence for the beverages, like maintenance of records, chemical tests, sale and distribution of beverages, types of bottles or crowns to be used, control over retail franchise, company's right of inspection, were merely to safeguard the trade interests and cannot lead to the conclusion that the bottling companies are manufacturing for or on behalf of the Parle (Exports) Pvt.Ltd. I am in agreement with the view taken by the Division Bench of Delhi High Court."