While the Centre is contemplating extending the Employees' Provident Fund scheme to companies having more than 10 employees on their rolls as against 20 employees currently, a spinning mill in Salem was lucky enough to get its writ petition on the issue partly allowed by the Madras High Court. In its petition, the mill had challenged the order of a PF authority rejecting its plea not to club their unit with another one, thereby denying them the benefit of infancy protection.

In its petition, Sona Rajendra Spinners (P) Ltd challenged the order dated 10-5-2005 of the Employees PF Appellate Tribunal, New Delhi, dismissing its appeal against the order of Regional PF Commissioner, Salem clubbing petitioner's mill with another company for applying the PF law.

The High Court on July 27, 2011 set aside the order of the Tribunal since it had concluded that there was a “functional integrality” between petitioner-mill and Sree Rajendra Mills Ltd for purpose of applicability of EPF & Miscellaneous Provisions Act, 1952.

The Petitioner-Company contended in its appeal to the Regional PF Commissioner, Salem (R-1) under section 7-1 of PF Act that the two companies engaged in production of cotton yarn and synthetic yarn textiles were separate entities and requested the authority to drop further action claiming PF dues for the infancy period to which they were eligible under PF law.

Grounds of appeal by petitioner, inter alia, included that R-1 had totally overlooked the fact that there were separate I-tax assessments, Central Excise & Central ST registrations, labour accords and that there was no inter-company transferability. These would show that the two companies were totally separate units and hence could not be clubbed together for the purpose of PF Act.

R-1 submitted that petitioner unit was set up with active support of Sree Rajendra Mills, technical or financial. Hence, petitioner mill could be clubbed with Sree Rajendra Mills, and infancy protection could be denied to them. It also submitted that they were engaged in the same kind of business, and there was common ownership of both units.

Aggrieved by the order of R-1, petitioner preferred appeal to R-2 who dismissed the appeal and ordered that petitioner-company could be clubbed with Sree Rajendra Mills and infancy protection could be denied to them.

Mr Justice K. Chandru, who heard the petition, ruled that R-2 did not even look into materials produced before R-1 whose order came under appeal. Order of R-2 was liable to be set aside, Judge held. Writ petition stood partly allowed, and order of R-2 set aside. Matter was remitted back to R-2 to decide afresh in accordance with law within 6 months.

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