Holding that interdependence between them could not be a ground for clubbing under the EPF Act, Justice S N Dhingra said: "Two independent establishments cannot be clubbed together to show a unity of functions only because they are interdependent on each other at a particular time."
Taking into account that outsourcing was one of the mode of doing business where several ancillary units would be exclusively doing work for big companies, the court said such small units perform independent business for big automobiles companies and engineering companies.
"These ancillary units (outsourcing units) are independent business entities despite the fact that they are dependent on automobile company or engineering firms. These units cannot be clubbed with each other or with the main company for the purpose of EPF Act on the ground of interdependence," the court said.
While outlining the condition in which the two companies could be clubbed together for getting benefits under the EPF Act, the bench said this could be done under the circumstance when an establishment was bifurcated to deprive the workmen of the benefits of labour law.
"Where two establishments are in fact one, but they have been artificially bifurcated only to deprive the workmen of the benefits of labour laws, only then can the two establishments be clubbed together and their joint employees strength be counted for the purpose of Section 7A of the Act."
The verdict was delivered on a petition filed by Regional Provident Fund Commissioner (Commissioner) challenging the order of the EPF Appellate Tribunal treating two companies as separate entities.
The Commissioner had covered Golden Masala Company under EPF Act by clubbing six employees of the firm, Molu Ram Suraj Mal, on the ground that both were interdependent on each other and in the absence of one, the other will not exist. Molu Ram Suraj Mal was doing grinding of spices exclusively for Golden Masala Company.
The Commissioner held that Molu Ram Suraj Mal was nothing but a contractor of Golden Masala Company and hence employees of Molu Ram must be treated as employees of the latter.
The Appellate Tribunal, however, held both companies as two different identities, which was also upheld by the high court.
The High Court, in its order, said the Commissioner had covered both the companies on the ground of interdependency but failed to provide the basis for the conclusion.
The Court said there were several other grinding mills in the market. If Molu Ram would not grind for Golden Company, it can get spices grinded from any other grinding mill and vice-versa.
