Holding

A workshop used solely for repairing the employer's own equipment is not a separate establishment; the employer remains exclusively engaged in the building and construction industry and the Act does not apply to the workshop.

Summary

Cemindia Co. Ltd., an engineering contractor engaged in the building and construction industry, operated a workshop solely for repairing its own equipment. Under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, and Notification No. GSR 1398, the Regional Provident Fund Commissioner directed the company to make PF contributions for the workshop workers, holding that the workshop constituted a separate establishment and thus the company was not "exclusively engaged" in building and construction. The Bombay High Court upheld the notice, treating the workshop as an independent establishment. The Supreme Court, however, held that a workshop used exclusively for the company's own equipment is part of the same business and does not create a separate establishment; consequently, the company remains exclusively engaged in building and construction and the Act does not apply to the workshop. The Court set aside the High Court judgment and quashed the notice.

Issues considered

Whether a workshop set up by an engineering contractor for maintenance of its own equipment constitutes a separate establishment for the purposes of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.
Whether the existence of such a workshop means the contractor is not "exclusively engaged" in the building and construction industry, thereby bringing it within the scope of Notification No. GSR 1398.

Legislation cited

Employees' Provident Funds and Miscellaneous Provisions Act, 1952s. 1(3)(b)

Subjects

Employees' Provident Fundbuilding and construction industryexclusive engagementestablishmentworkshopNotification GSR 1398civil appeal

Judgment

CEMINDIA CO. LTD.
v.
BACHUBHAIN. RAVAL

AUGUST 4, 1987

[E.S. VENKATARAMIAH AND K.N. SINGH JJ.]

Employees' Provident Funds and Miscellaneous Provisions Act,
1952: Section J(J)(b)-Notification No. GSR 1398--Company
engaged in 'building and construction industry' Whether Act applies
to workshop set up by such company for maintenance and repairs
C of its equipment-Whether all business operations to be taken in
-
totality to determine if company is engaged in such activitiy ex-
clusively.

Words & Phrases: 'Building and construction industry'-
D Meaningof

By a Notification dated 26-9-1964 issued under Section 1(3)(b) or
the Employees' Provident Funds Miscellaneous Provisions Act, 1952,
the Act was made applicable to the establishments of engineers and
engineering contractors not beiog exclusively engaged in buildiog and
E constrnction Industry. The Regional Provident Fund Commissioner cal·
led upon the appellant company carrying on busioess as "engioeers and
engineering contractors" and engaged in building and construction io- ~-
dustry, to show cause why it should not be directed to comply with the
Act io respect of the workmen employed at its workshop io Bombay.
The appellant contended that the Act was not applicable sioce it was
F exclusively engaged io building and construction iodustry and that the
workshop had been set up only for the purpose or carryiog out its work,
ancillary to the building and construction industry, and not any work
for others. The respondent negatived the contention and directed the
appellant to make contributions with effect from 1st December, 1963 in
respect of the workmen employed at its workshop.
G
The appellant assailed the validity of this notice in the Bombay
High Court, which declined to follow the decision of the Calcutta High
Court quashiog a similar notice issued by the department in respect of
the appellant's workshop in Calcutta, dismissed the petition and upheld
the demand of the department. It held that the Act applied as the
H appellant was not only engaged io buildiog and construction industry
784
CEMINDIA v. B.N. RAVAL 785

but was also engaged in running workshops for maintaining and repair- A
ing equipment such as piling machines, drills, etc., and hence it was an
establishment of engineers and engineering contractors which was not
"exclusively engaged in building and construction industry."

Allowing the appeal by special leave, this Court,
B
HELD: 1.1 Where an establishment is engaged exclusively in
carrying on a particular type of business by setting up any place of work
with a view to carrying on the work of repairs etc. to the tools,
equipment, vehicles etc. used in its business or to carry on any other
activity which is essential for its business effectively and which is
not used to carry on the work for the benefit of any third party but c
utilised exclusively for the business of the establishment, such estab-
lishment does not cease to carry on exclnsively the business in which
it is engaged. It cannot also be said that the establishment had
commenced to carry on another industry by the setting up of such a
place of work. [790B-C]
D
1.2 Any such establishment which carries on an activity which
forms part of the building and construction industry should be exemp-
ted from the operation of the Act because the expression "building and
construction industry" refers coUectively to all activities which have to
be performed in connection with the building and construction
industry. [789F] E

~---- In order to discharge effectively its functions as engineers and en-
gineering contractors engaged In building and construction industry, an
·,,- establishment has to maintain a workshop or workshops where the
work of smithy, welding, cutting, carpentry etc. are carried on. With-
out these operations it is not possible for any person to carry on satis- F
factorily the work of building and construction industry. [789G I

1.4 Such a workshop in which works connected with the business
of building and construction industry were being carried on in connec-
tion with such business for the owner cannot be construed as a separate
-I, establishment for purposes of the Act. [790H] G

In the instant case, the work that is being carried on at the appel-
lant's workshop is work of maintaining and repairing of the equipment
belonging to the appellant only. The appellant is not earning any in-
come or profit by carrying on the work of any other establishment. It
cannot, therefore, he said that the workshop established by the appel- H
786 SUPREME COURT REPORTS [1987] 3 S.C.R.

A lant is an independent establishment of engineers and engineering con-
tractors which is not exclusively engaged in building and construction
Industry. [790D-E]

1.5 The High Court was In error in treating the workshop in
question as a separate unit of the business of the appellant forming a ,
B separate establishment for purposes of determining whether the Act is 4
applicable or not. It should have taken all the business operations car· '
ried on by the appellant in their totality into consideration in order fo .~
ascertain whether the appellant is engaged exclusively in building and
construction industry or not. By splitting up the several operations
carried on by the appellant in connection with the building and con-
C structlon Industry into separate units and thereby treating the work·
shop alone as a separate establishment, the High Court misled itself into
thinking that the workshop of the appellant was governed by the Act
and thus committed the error of declaring the said workshop as an
establishment governed by the Act. [790F·G]

D CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3029 '.,..-
of 1986.

From the Judgment and Order dated 8.7.1985 of the Bombay
High Court in Misc. Petition No. 488 of 1968.

E R.P. Bhatt, D.N. Mishra and Mrs. A.K. Verma for the
Appellant.

C.V. Sobba Rao for the Respondent.

The Judgment of the Court was delivered by
F
VENKATARAMIAH, J. This appeal by special leave is filed
against the Judgment dated 8. 7 .1985 in Miscellaneous Petition No. 488
of 1968 on the file of the High Court of Bombay holding that the
appellant was bound to comply with the provisions of the Employees'
Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter
G referred to as 'the Act") and the scheme thereunder and to make )..
contributions in respect of its employees working in its workshop at
Antop Hill, Wadala in Bombay.

The appellant is a company which is carrying on business as
"engineers and engineering contractors" and is engaged in building
H and constmction industry. By the Notification bearing No. GSR 1398
CEMINDIA v. B.N. RAVAL (VENKATARAMIAH, J.] 787

--{ published in the Gazette of India dated 26.9.1964 (Part II, Section A
3(i); page 1546) issued under section 1(3)(b) of the Act, the Act was
extended to establishments of engineers and engineering contractors
not being exclusively engaged in building and construction industry.
By the notice dated I Ith October, 1967 the Regional Provident Fund
Commissioner of Bombay called upon the appellant-company to show
+- cause why it should not be directed to comply with the Act in respect B
of the workmen employed at its workshop at Antop Hill, Wadala in
·"t" Bombay. The appellant submitted its representation on 13th October,
1967 claiming that the Act was not applicable to it since the appellant
was exclusively engaged in building and construction industry and the
workshop in question had been set up only for the purpose of carrying
out work ancillary to the building and construction industry in which it c
was engaged and that the appellant was not carrying on any work for
~ others at the said workshop. The Regional Provident Fund Commis-
sioner negatived the contention of the appellant and directed that the
appellant should make contributions with effect from !st December,
1963 in accordance with the scheme framed under the Act in respect of
the workmen employed at its workshop who were just 70 or 80 in D
~ number while the total working force of the appellant in its building
' and construction industry was in the order of 2,000. The appellant had
established another workshop for its own purpose at Calcutta. On
being served with a similar demand it had fild a writ petition in Writ
Petition No. 614 of 1967 in the Calcutta High Court contending that
the Act did not apply to such an establishment. In view of the above E
-._,r writ petition which was pending on the file of the Calcutta High Court,
the appellant represented to the Regional Provident Fund Commis·
sioner, Bombay to stay further action under the Act till the disposal of
'-' the writ petition filed in the Calcutta High Court. The Regional Provi-
dent Fund Commissioner rejei;ted the said request of the appellant and
directed it to comply with the demand already made in respect of the F
workshop at Bombay. After some correspondence, the appellant filed
Miscellaneous Petition No. 488 of 1968 on the file of the High Court of
Bombay, out of which this appeal by special leave arises, questioning
the validity of the notice issued to it calling upon it to comply with the
provisions of the Act and the scheme made thereunder in respect of its
~workshop at Bombay. G

It should be stated at this stage that the writ petition filed before
the Calcutta High Court was allowed and the notice issued to the
appellant to comply with the Act and the scheme made thereunder in
respect of the workshop at Calcutta was quashed by the judgment of
the High Court dated January 6, 1970 and that judgment has become H
788 SUPREME COURT REPORTS [1987] 3 S.C.R.

A final. When the writ petition, out of which this appeal arises was taken
up for hearing by the High Court of Bombay, it was brought to the
notice of the High Court of Bombay that a similar notice issued in
respect of the workshop at Calcutta had been quashed and a similar
order should be passed on the petition before the Bombay High Court
also. The High Court of Bombay declined to follow the decision of the
B Calcutta High Court and proceeded to pass the judgment upholding _f
the demand made by the Regional Provident Fund Commissioner.
Aggrieved by the decision of the High Court of Bombay, the appellant .-r;
has filed this appeal by special leave.

The following basic facts are not in dispute in tliis appeal:
c
(i} that the appellant is engaged in building and construction
industry and the appellant does not carry on any other busi-
ness or profession;

(ii) that the workshop in Bombay is established only for the
purpose of maintaining and repairing the equipment used
by the appellant in its building and construction industry;
and

(iii) that the workshop in question does not undertake any job
other than maintaining and repairing the equipment of the
E appellant.

The High Court in the course of its common judgment delivered
in two writ petitions, one filed by the appellant out of which this
appeal arises and another writ petition filed by a company called Patel
Engineering Co. Ltd., has observed thus:
F
"In our view, on their own showing, the petitioner-
companies are not only engaged in building and construc-
tion industry, but are also engaged in running workshops
for maintaining and repairing equipment such as piling
machines, drills, air compressor pumps, concrete miners
and allied tools. In each of these workshops twenty or more)-
persons are employed. The said workshops by themselves
are not ones engaged in building and construction industry.
Though it is true that these workshops do not undertake
any job other than maintaining and repairing the equip-
ment of the petitioner-companies, still these workshops are
H not engaged in building and construction industry. They
CEMJNDIA v. B.N. RAVAL (VENKATARAMIAH, J.] 789
' are only aiding and facilitating the petitioner-companies A
which are carrying on building and construction industry.
No doubt they do not undertake any job of maintaining and
repairing equipment which does not belong to the peti-
tioner-companies. Nonetheless these workshops them-
selves constitute establishment which employ more than
twenty persons to do jobs which do not constitute building B
and construction industry. The petitioner-companies are
thus engaged not only in building and construction industry
but also running either respective workshops. The said
workshops themselves thus constitute establishments of en-
gineers and engineering contractors. The workshops are
- not engaged in building and construction industry at all.
That is sufficient to hold that the petitioner-companies are
C

engineers and engineering contractors which are not 'exclu-
sively engaged in building and construction industry'. Once
it is shown that they are engineers and engineering
contractors not being exclusively engaged in building and
construction industry, by virtue of the notification of the D
Central Government under clause (b) of sub-section (3) of
section of the Act, the"Act applies to them."

The notification issued under section 1(3)(b) of the Act makes
the Act applicable to establishments of "engineers and engineering
contractors, not being exclusively engaged in building and construc- E
tion industry". It follows that any establishment carrying on the
business of engineers and engineering contractors which is exclusively
engaged in building and construction industry does not fall within the
scope of the notification and hence the Act would not be applicable to
such an establishment. Any such establishment which carried on an
activity which forms part of the building and construction industry F
should naturally be exempted from the operation of the Act because
the expression 'building and construction industry' refers collectively
to all activities which have to be performed in connection with the
building and construction industry. In order to discharge effectively its
functions as engineers and engineering contractors engaged in building
~ and construction industry, an establishment has to maintain a work-· G
shop or workshops where the work of smithy, welding, cutting,
carpentry etc. are carried on. Without these operations it is not possi-
ble for any person to carry on satisfactorily the work building and
construction industry. The reason for taking this view is obvious. An
establishment exclusively engaged in running a hospital does not cease
to be an establishme9t exclusively carrying on the said business merely H
790 SUPREME COURT REPORTS (1987] 3 S.C.R.

}-
..
A because it sets up a Pharmacy Section for preparing and compounding
medicines to be used exclusively by the patients at its hospital.
Similarly an estajJlishment which is exclusively engaged in providing
shipping transport facilities does not cease to be an establishment
exclusively carrying ·on the said business merely because it sets up an
on-shore workshop for effecting repairs exclusively to its own ships.
B Such illustrations may be multiplied. The point which is made out by j
these illustrations is that where an estabhshment is engaged exclusively
in carrying on a particular type of business by setting up any place of
'~
work with a view to carrying on the work of repairs etc. to the tools,
equipment, vehicles etc. used in its business or to carry on any other
activity which is essential for its business effectively and which is not
used to carry on the work for the benefit of any third party but utilised
c exclusively for the business of the establishment, such establishment
does not cease to carry on exd~sively the business in which it is
engaged. It cannot also be said that the establishment has commenced
to carry on another industry by the setting up of such a place of work.

D In the instant case there is no dispute that the work that is being
carried on at the appellant's workshop at Bombay is work of maintain- r-
ing and repairing of the equipment belonging to tile appellant only.
The appellant is not earning any income or profit by carrying on the
work of any other establishment at the said workshop. In the above
situation, we find it difficult to agree with the High Court that the
E workshop establishment by the appellant at Bombay is an independent
establishment of engineers and engineering contractors which is not
exclusively engaged in building and construction industry. The High ~-
Court was in error in treating the workshop in question as a separate
unit of the business of the appellant forming a separate establishment
'<'
for purposes of determining whether the Act is applicable to the appel-
F !ant or not. It should have taken all the business operations carried on
by the appellant in their totality into consideration in order to ascer-
tain whether the appellant is engaged exclusively in building and con-
struction industry or not. If the High Court had approached the case
from the above angle it would not have committed the error of declar-
ing the workshop at Bombay alone as an establishment governed by
G the Act. By splitting up the several operations carried on by the appel- )..
!ant in connection with the building and construction industry into
separate units and thereby treating the workshop alone as a separate
establishment, the High Court misled itself into thinking that the
workshop of the appellant at Bombay was governed by the Act. We
agree with the decision of the Calcutta High Court that such a work-
H shop in which works connected with the business of building and
CEMINDIA v. B.N. RAVAL [VENKATARAMIAH, J.) 791

-'1 construction industry were being carried on in connection with such A
business of the owner cannot be construed as a separate establishment
for purposes of the Act. We, therefore, set aside the judgment of the
High Court and quash the impugned notice issued by the Regional
Provident Fund Commissioner, Bombay, calling upon the appellant to
comply with the provisions of the Act and the scheme made there-
\- under in respect of the workmen employed at its workshop at Bombay. B

The appeal is accordingly allowed. There is no order as to costs.

N.P.V. Appeal allowed.

-