M/S L.N. GADODIA & SONS & ANR.versusREGIONAL PROVIDENT FUND COMMISSIONER

                       [2011] 11 S.C.R. 508


A              MIS L.N. GADODIA & SONS & ANR.
                                 v.
        REGIONAL PROVIDENT FUND COMMISSIONER
        (Special Leave Petition (Civil) No. 11230 of 2008)
                      SEPTEMBER 26, 2011
B
           [J.M. PANCHAL AND H.L. GOKHALE, JJ.]

       EMPLOYEES     PROVIDENT      FUND                   AND
    MISCELLANEOUS PROVISIONS ACT, 1952:
c
         s. 7-A of Provident Fund Act read with s. 2(9) of Delhi
    Shops and Establishments Act - Clubbing of two companies
    for the purposes of the Provident Fund Act - Two sister
    concerns with common directors of the same family, common
D Managing Director, Commercial Manager and Technical
    Manager, same registered address and common telephone
    numbers and a common gram number, employees of the two
    concerns being swapped - Held: The Provident Fund
    Commissioner was justified in drawing the inference of
E integrity of finance, management and workforce in the two
    concerns and taking a view that the said companies had to
    be clubbed together for the purposes of their coverage under
    the Act - The authority concerned will proceed for
    determination and recovery of the provident fund dues from
    the said companies - Delhi Shops and Establishments Act,
F · 1954 -ss. 2(5) and 2(9).                                ·

        DELHI SHOPS AND ESTABLISHMENTS ACT, 1954:

       s. 2(9) read with s. 2(5) - 'Establishment' and
G 'commercial establishment' - Held: In the instant case, the two
  companies carrying on trade or business for private gain fall
  within the definition of 'commercial establishment' and
  consequently, under the definition of 'establishment' as
  defined in sub-ss. (5) and (9) of s. 2 respectively- Employees
H                               508
 L.N. GADODIA & SONS v. REGIONAL PROVIDENT 509
             FUND COMMISSIONER
Provident Fund and Miscellaneous Provisions Act, 1952 - s.       A
7-A.
       EVIDENCE ACT, 1872:

       s. 106 - Burden of proof - HELD: When any fact is
especially within the knowledge of any person, the burden of     8
proving that fact lies on him - This rule expects such a party
to produce fhe best evidence before the authority concerned,
failing which the authority cannot be faulted (or drawing the
necessary inference.
                                                                 c
       INTERPRETATION OF STATUTES:

     Purposive construction - Provident Funds Act - HELD:
Is a welfare enactment and should be construed so as to
advance the object with which it is passed and any
construction which would facilitate evasion of the provisions    D'
of the Act should as far as possible be avoided.

    The two petitioner-companies, being sister concerns,
were issued letter dated 11.6.1990 calling upon them to
comply with the provisions of the Employees Provident            E
Fund and Miscellaneous Provisions Act, 1952. They filed
an application and disputed clubbing of the two concerns
for the purposes of their coverage under the Act. The
Regional Provident Fund Commissioner (Enforcement
and Recovery) held that both the units belonged to one           F
establishment and they would be clubbed together for
the purposes of application of the Act. He, therefore,
passed an order to proceed to determine the dues from
the petitioners and directed that further proceedings in
the enquiry be taken up by the Presiding Officer                 G
concerned. The petitioners' appeal was allowed by the
Employees Provident Fund Appellate Tribunal. However,
the Single Judge of the High Court set aside the order of
the Appellate Tribunal and the Division Bench of the High
Court dismissed the appeal of the petitioners.
                                                                 H
    510    SUPREME COURT REPORTS            [2011] 11 S.C.R.


A      Dismissing the special leave petition filed by the
    companies, the Court

        HELD: 1.1 The Provident Funds Act is a welfare
   enactment with provisions for the employees in the
8 factories and the establishments after their retirement,
   and for the benefit of their dependents in case of early
   death of the employees. In the case of Sayaji Mills Ltd.*,
   this Court has held that the Act should be construed so
   as to advance the object with which it is passed and any
C. construction which would facilitate evasion of the
   provisions of the Act should as far as possible be
   avoided. [para 9-10] [518-C; 519-A-D-E]

     *Sayaji Mills Ltd. Vs. Regional Provident Fund
  Commissioner 1985 SCR 516 = AIR 1985 SC 323 - relied
D on

       1.2 On the question as to whether two units should
  be considered as one establishment or otherwise, there
  is no hard and fast rule. However, guidelines have been
E laid down in the judgments of this Court rendered way
  back in the years 1959-60 and they are followed from time
  to time. [para 11] [519-G-H]

        The Associated Cement ·Companies Ltd., Chaibasa
  Cement Works, Jhinkpani Vs. Their Workmen 1960 SCR
F 703 =AIR 1960 SC 56; Management of Pratap Press, New
  Delhi Vs. Secretary, Delhi Press Workers' Union Delhi AIR
  1960 SC 1213; Rajasthan Prem Krishan Goods Transport
  Co. Vs. Regional Provident Fund Commissioner, New Delhi
  1996 ( 3 ) Suppl. SCR 1 =1996 (9) sec 454; and Regional
G Provident Fund Commissioner, Jaipur Vs. Naraini Udyog and
  ottJ.ers 1996 ( 3 ) Suppl. SCR 202 =1996 (5) sec 522 -
  relied on.
     Regional Provident Fund Commissioner Vs. Dharamsi
H Morarji Chemical Co. Ltd. 1998 (2) SCC 446; Regional
 L.N. GADODIA & SONS v. REGIONAL PROVIDENT               511
             FUND COMMISSIONER
Provident Fund Commissioner Vs. Raj's Continental Export       A
(P) Ltd. 2007 (3 ) SCR 636 = 2007 (4) SCC 239 - referred
to.                                           · ·

     1.3 In the instant case, the Directors of the two
petitioner companies belong to the same family. The
                                                                8
Managing Director is common. The two senior officers i.e
Commercial Manager and Technical Manager are
common. At the time of inspection, the Enforcement
Officer noticed that the employees of the two companies
were being swapped. Both of them have same registered C
address and common telephone numbers and a common
gram number. The audited accounts revealed that
petitioner no. 2 company had given a loan of Rs. 5 lakhs
to petitioner no. 1 in the year 1988. The two companies
are family concerns of the same family. Therefore, in the
facts of the case, it has to be held that there is an integrity D
of management, finance and the workforce in the two
private limited companies. The two companies have seen
to it that on record each of them engage less than twenty
employees, although the number of employees engaged
by them is more than twenty when taken together. The E
entire attempt of the petitioners is to show that they are
separate units so that the Provident Funds Act does not
get attracted. The material on record however, leads to
only one pointer that the two entities are parts of the same
establishment and in which case they get covered under · F
the Provident Funds Act. [para 14] [522-E-H; 523-A-B]

     2.1 As the preamble of the Provident Funds Act
states, 'it is an act to provide for the institution of
provident funds, pension fund and deposit~linked G
insurance fund for employees in factories and other
establishments'. The term. factory is defined u/s 2 (g) of
the Act, however, there is no definition of an
establishment or a commercial establishment in the
statute. lnasmucl"J, as the petitioners are entities situated .
                                                                H
    512    SUPREME COURT REPORTS             (2011] 11 S.C.R


A in Delhi, the definition of 'establishment' and 'commercial
  establishment' under the Delhi Shops and
  Establishments Act, 1954 can be applied. It cannot be
  denied that the two petitioners carry on a trade or
  business for private gain from the premises wherein the
B two companies are situated. They would, therefore, fall
  within the definition of 'commercial establishment' and
  consequently, under the definition of 'establishment'.
  [para 15] [523-B-D; 524-D]

       2.2 The two petitioners may not be different
C departments of one establishment in the strict sense.
  However, when it is noticed 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
D purposes of Provident Funds Act. The issue is with
  respect to the. application of a welfare enactment and the
  approach has to be as indicated by this Court in Sayaji
  Mills Ltd. The test has to be the one as laid down in
  Associated Cement Company as explained in
E Management of Pratap Press. [para 16] [524-G-H; 525-A-
  B]

       3.1 The Provident Fund Department had issued
  notice to the petitioners on 11.6.1990 on the basis of their
F inspection. It had relied upon the 1988 Audit Report of the
  petitioners. The petitioners had full opportunity to explain
  their position in the inquiry before the Provident Fund
  Commissioner conducted u/s 7A of the Act. The
  petitioners, however, confined themselves only to a facile
G explanation. If according to them, the management,
  workforce and financial affairs of the two companies were
  genuinely independent, they ought to have led the
  necessary evidence, since they would be in the best
  know of it. When any fact is especially within the
  knowledge of any person, the burden of proving that fact
H
 L.N. GADODIA & SONS v. REGIONAL PROVIDENT 513
             FUND COMMISSIONER
lies on him. This rule (which is also embodied in s. 106    A
of the Evidence Act) expects such a party to produce the
best evidence before the authority concerned, failing
which the authority cannot be faulted for drawing the
necessary inference. [para 17) (525-C-E]
                                                             B
     3.2 In the facts and circumstances of the case, the
Provident Fund Commissioner was justified in drawing
the inference of integrity of finance, management and
workforce in the two petitioners on the basis of the
material on record. He was, therefore, entirely justified in C
taking the view that on the facts and law, the two
petitioners had to be clubbed together for the purposes
of their coverage under the Act. The respondent will
proceed for determination and recovery of the provident
fund dues from the petitioners in accordance with law.
[para 17-19) (525-E-G; 526-B]                                D

                    Case Law Reference:
    1985 SCR 516            relied on           para 10
    1960 SCR 703            relied on           para.11     E
    AIR 1960 SC 1213        relied on           para 11.
    1998 (2) sec 446        referred to         para 12
    2007 (3 ) SCR 636       referred to         para 12
                                                            F
    1996 ( 3 ) Suppl. SCR 1       relied on     para 13
    1996 ( 3 ) Suppl. SCR 202     relied on     para 13
    CIVIL APPELLATE JURISDICTION : Petition for Special
Leave (Civil) No. 11239 of 2008.                            G

   . From the Judgment and Order dated 20.12.2007 of the
High Court of Delhi at New Delhi in LPA No. 399 of 2007.

                                                            H
    514      SUPREME COURT REPORTS               [2011] 11 S.C.R


A       S.K. Dholakia, S.K. Chachra and Dr. Kailash Chand for
    the Petitioners.

        Shrabani Chakrabarty and Avijit Battacharjee for the
    Respondent.
B         The Judgment of the Court was delivered by

          H.L. GOKHALE J. 1. This Special Leave Petition raises
  the question as to whether the respondent herein had erred in
  clubbing the two appellant concerns for the purposes of
C applying the provisions of the Employees Provident Funds and
  Miscellaneous Provisions Act, 1952 (hereinafter referred to as
  the Provident Funds Act).

    Facts leading to this Special Leave Petition -

D         2. The facts leading to this petition are this wise. The
    petitioner no.1 herein and petitioner no.2 (M/s Delhi Farming
    and Construction Pvt. Ltd.) are sister concerns. The office of
    the respondent wrote to them vide ti :eir letter dated 11.6.1990
    calling upon them to comply with the provisions of the Provident
E   Funds Act, failing which legal action would be initiated against
    them. The petitioner filed an application, and disputed clubbing
    of the two concerns for the purposes of their coverage under
    the provisions of the said Act. The application was accordingly
    heard by the Regional Provident Fund Commissioner
F   (Enforcement and Recovery) Delhi, under the provisions of
    section 7A of the Provident Funds Act. He heard the legal
    advisor of the petitioners as well as the enforcement officer
    representing the provident fund department. It was submitted
    on behalf of the petitioners that the second petitioner was
G   incorporated in 1930 as the Delhi Cattle Farming Private
    Limited, and in the year 1983 it's name was changed to the
    present name i.e. Delhi Farming and Construction Private
    Limited ('Delhi Company' for short). The first petitioner was ·\
    incorporated as another Private Limited Company in the year
H   1941, and there was no connection between the activities or
 L.N. GADODIA & SONS v. REGIONAL PROVIDENT                      515
     FUND COMMISSIONER [H.L. GOKHALE, J.]
business of the two companies. They were different and                  A
separate legal entities, and should not be clubbed into one
establishment. It was pointed out that the main business of the
second petitioner i.e. the Delhi Company was to acquire lands
and farms for the purpose of cultivation and to engage in other
agricultural activities. After its land was acquired by Delhi           B
Administration in 1959 and after receiving compensation, the
second petitioner shifted its business to purchase of gas
cylinders and giving them on hire, supplying security equipments
to the Government of India, and supply of gray/processed
fabrics to readymade garments exports though this was only a            c
side business. It was pointed out that as far as the first petitioner
is concerned, their business was only as a selling agent of
Calico Mills and Tata Mills, Ahmadabad. It was also trading in
whole-sale cloth business. It was not disputed that both the
companies have their registered office at 1112, Kucha Natwan,           D
Chandni Chowk, Delhi-6 but it was stated that the Delhi
Company carries its business and commercial activities at 116,
Hans Bhawan, Bahadur Shah Zafar Marg, New Delhi-110002.
Shri R.G. Gadodia and Shri T.P. Gadodia were no longer the
Directors in either of the two companies, and only Smt. S.udha          E
Gadodia was Director in both the companies.

     3. On the other hand, the enforcement officer pointed out
that apart from the fact that the two companies had common
registered office, Shri R.G. Gadodia and Shri T.P. Gadodia
were the common Directors in both the units at the time of              F
inspection and clubbing. Apart from Smt. Sudha Gadodia being
admittedly a Director in both the units, Shri T.P. Gadodia was
the Managing Director in both the units. It was further pointed
out that as per the Audited Report of the Delhi Company dated
24.4.1988, it had given a loan of Rs.5 lakh to the first petitioner.    G
Two officers viz. Shri G. Ventakeshwaran and Shri S.K. Shame
were employed by both the units as Technical Manager and
Commercial Manager respectively. The two companies had the
same telephone nos. i.e. 2512890 and 2513009. Both the units
were using the same gram number which was 'GadodiaSon'.                 H
    516      SUPREME COURT REPORTS                 [2011] 11 S.C.R.


A        4. In rebuttal, the petitioners pointed out that the Delhi
    Company had its own separate staff. The above referred two
    telephone nos. were in the name of the first petitioner and the
    second petitioner had another telephone no. i.e. 3318668. As
    far as the loan aspect is concerned, it was pointed out that the
B   loan of Rs.5 lakh was just one loan to the first petitioner, and
    the Delhi Company had given loans to the tune of about Rs.
    27 lakhs to different entities. The enforcement officer however
    pointed out that at the time of inspection it was noticed that the
    employees were being swapped between the two companies.
c   Although the first petitioner had its branches at Bombay,
    Amritsar, Ahmedabad and Kanpur, the number of employees
    in the Delhi office of this company and the second petitioner
    were kept below 20 to avoid coverage under the Provident
    Funds Act. Having considered all these facts and the
    submissions by both the parties, the Provident Fund
D   Commissioner came to the conclusion that there was an
    integrity in the management, finance and the workforce of the
    two companies, and the entire business was being run by one
    family. The management and the supervision was in the hands
    of the same Managing Director, and the finances of one
E   company were being used by the other. In view of this, he held
    that both the units belonged to one establishment, and they have
    to be clubbed together for the purposes of application of the
    Provident Funds Act. He therefore, passed an order to proceed
    to determine the dues from the petitioners, and directed that
F   further proceedings in the enquiry be taken up by the concerned
    Presiding Officer.

        5. This order was challenged by the petitioners before the
   Employees Provident Fund Appellate Tribunal by filing an
G appeal No.ATA-167(4)/2000 under Section 7D of the Provident
   Funds Act. The Tribunal accepted the submission of the
   petitioners that the two units were separate private limited
 , companies, and since a company is a juristic person, merely
   because there is a common Managing Director, the two units
H cannot be considered to be one establishment. One company
 L.N. GADODIA & SONS v. REGIONAL PROVIDENT 517
     FUND COMMISSIONER [H.L. GOKHALE, J.]
taking a loan of Rs.5 lakh from another, does not make them           A
financially integrated. He also observed that there was no
evidence to show that the two officers were mentioned as
employed at the same time in the two companies. He relied
upon section 2A of the Act, and submitted that considering
different departments or branches of an establishment as one          B
establishment was one thing, and considering different
establis.hments as one establishment was another. Merely
because the departments or branches of an establishment are
to be treated as·a part of the establishment. two establishments
cannot be taken to be one. He, therefore, allowed the appeal          c
and held that clubbing was not possible in the facts of the case,
and set-aside the order of the first respondent.

      6. Being aggrieved by that order, the respondent filed a
petition bearing No. W.P.(C) 5669/2001 in the High Court of
Delhi. A Single Judge of Delhi High Court who heard the matter        D
examined the material on record, and considered the
authorities cited by both the parties governing the legal position.
Having considered all these aspects, he held that the Tribunal
was swayed by the fact that the two companies are separate
legal entities. He noted that the law laid down by this Court on      E
this aspect was clear. What is to be seen is the proximity of
the two units and common management. There was no error
in the order passed by the Provident Fund Commissioner. The
Appellate Tribunal had no reason to interfere therein. In his
view, the order of the Tribunal was perverse and contrary to law.     F
He, therefore, set-aside the same and allowed the petition.

     7. The petitioners filed an appeal against the decision of
the Single Judge being LPA No.399/2007. After examining the
submissions of both the parties, the Division Bench came to           G
the same conclusion as the single Judge and dismissed the
appeal by passing a detailed judgment and order dated
20.12.2007.

     8. The present Special Leave Petition has been filed to
                                                                      H
    518     SUPREME COURT REPORTS                 [2011] 11 S.C.R.


A   challenge this judgment and order dated 20.12.2007. We have
    heard Mr. S.K. Dholakia, Sr. Advocate for petitioners, and Ms.
    Shrabani Chakrabarty for the respondent. We have noted the
    submissions made by· both the counsel, as well as the
    authorities relied upon by them.
B
    Consideration of the rival submissions -

          9. As noted earlier, the main question in this appeal is
    whether the two units are to be regarded as one establishment
    for the purposes of the Provident Funds Act. Welfare
C   economics, enlightened self interest and pressure of trade
    unions led the larger factories and establishments to introduce
    the schemes of provident fund for the benefit of their employees.
    But the employees of small factories and establishments
    remained away from these benefits. With the increase in the
D   number of smaller factories and establishments, there was a
    need of a beneficial enactment for the employees engaged
    therein. The Provident Funds Act, is a welfare enactment
    brought into force for that purpose. The Parliament was
    concerned with the issue of making an appropriate provision
E   for the employees in the factories and the establishments after
    their retirement, and for the benefit of their dependents in case
    of early death of the employees. That is how the Provident
    Funds Act came to be enacted in the year 1952, which requires
    a compulsory contribution to the fund and which is
F   independently managed by the Provident Fund Commissioner.
    The employer and employees covered thereunder, both
    contribute towards this fund. As per the present provision of
    section 6 of the Provident Funds Act, both of them have to
    contribute to the fund an amount equivalent to 10% of the basic
G   wage and dearness allowance (and retaining allowance, if any)
    per month. The Central Government has the power to raise this
    contribution to 12% after making an appropriate enquiry. The
    contribution to fund earns an appropriate interest thereon. As
    stated above, after the retirement of the employee or in the
H   event of need of finance for specified reasons, or in the event
    of his death prior thereto, the amount becomes available.
 L.N. GADODIA & SONS v. REGIONAL PROVIDENT                    519
     FUND COMMISSIONER [H.L. GOKHALE, J.]
    10. In para 5 of Sayaji Mills Ltd. Vs. Regional Provident         A
Fund Commissioner reported in [AIR 1985 SC 323] this Court
has explained as to what should be the approach towards this
legislation in the following words :-

           "5. At the outset it has to be stated that the Act has
                                                                      8
    been brought into force in order to provide for the
    institution of provident funds for the benefit of the
    employees in factories and establishments. Article 43 of
    the Constitution requires the State to endeavour to secure
    by suitable legislation or economic organisation or in any        C
    other way to all workers, agricultural, industrial or otherwise
    among others conditions of work ensuring a decent
    standard of life and full enjoyment of leisure. The provision
    of the provident fund scheme is intended to encourage the
    habit of thrift amongst the employees and to make
    available to them either at the time of their retirement or       D
    earlier, if necessary, substantial amounts for their use from
    out of the provident fund amount standing to their credit
    which is made up of the contributions made by the
    employers as well as the employees concerned.
    Therefore, the Act should be construed so as to advance           E
    the object with which it is passed. Any construction which
    would facilitate evasion of the provisions of the Act should
    as far as possible be avoided ....... "

                                            (emphasis supplied)       F

    The present controversy with respect to the applicability of
the Provident Funds Act has to be approached with this
perspective.

     11. Now, on the question as to whether such two units            G
should be considered as one establishment or otherwise, there
is no hard and fast rule. However, guidelines have been laid
down in two judgments of this Court rendered way back in the
years 1959-60 and they are followed from time to time. Thus,
in The Associated Cement Companies Ltd., Chaibasa                     H
     520       SUPREME COURT REPORTS                  [2011] 11 S.C.R.


A     Cement Works, Jhinkpani Vs. Their Workmen reported in (AIR
      1960 SC 56], a bench of three judges was considering the
      question as to whether the factory and the limestone quarry
      belonging to the appellant company should be considered as
    · one establishment for the purpose of Industrial Disputes Act,
      1947. This Court observed therein as follows:-
8
           "11 ......... What then is 'one establishment' in the ordinary
           industrial or business sense? ....... It is, perhaps,
           impossible to lay down any one test as an absolute and
           invariable test for all cases. The real purpose of these tests
c          is to find out the true relation between the parts, branches,
           units etc. If in their true relation they constitute one
           integrated whole, the establishment is one; if on the
           contrary they do not constitute one integrated whole, each
           unit is then a separate unit. How the relation between the
D          units will be judged must depend on the facts proved,
           having regard to the scheme and object of the statute which
           gives the right of unemploymenL compensation and also
           prescribes a disqualification therefor. Thus, in one case
           the unity of ownership, management and control may be
E          the important test; in another case functional integrality or
           general unity may be the important test; and in still another
           case, the important test may be the unity of employment.
           Indeed, in a large number of cases several tests may fall
           for consideration at the same. The difficulty of applying
F          these tests arises because of the complexities of modern
           industrial organization; many enterprises may have
           functional integrality between factories which are
           separately owned; some may be integrated in part with
           units or factories having the same ownership and in part
           with factories or plants which are independently owned."
G
       Later in paragraph 5 of Management of Pratap Press, New
  Delhi Vs. Secretary, Delhi Press Workers' Union Delhi
  reported in [AIR 1960 SC 1213], another bench of three judges
  explained the above proposition in Associated Cement
H Company (supra) in the following words:-
 l.N. GADODIA & SONS v. REGIONAL PROVIDENT 521
     FUND COMMISSIONER [H.L. GOKHALE, J.]
    " ...... While pointing out that it was impossible to lay down   A
    any one test as an absolute and invariable test for all
    cases it observed that the real purpose of these tests
    would be to find out the true relation between the parts,
    branches, units etc. This court however mentioned certain
    tests which might be useful in deciding whether two units        B
    form part of the same establishment. Unity of ownership,
    unity of management and control, unity of finance and unity
    of labour, unity of employment and unity of functional
    "integrality" were the tests which the Court applied in that
    case ...... .                                                    c
      12. Accordingly, depending upon the facts of the particular
case, in some cases the concerned units were held to the part
of one establishment whereas, in some other cases they were
held not to be so. Regional Provident Fund Commissioner Vs.
Dharamsi Morarji Chemical Co. Ltd. reported in [1998 (2) D
SCC 446] and Regional Provident Fund Commissioner Vs.
Raj's Continental Export (P) Ltd. reported in [2007 (4) SCC
239] are cases where the two units were held to be
independent. In Dharamsi Morarji (supra), the appellant
company was running a factory manufacturing fertilizers at E
Ambarnath in Distt. Thane, Maharashtra since 1921. The
appellant established another factory at Roha in the adjoining
district in the year 1977 to manufacture organic chemicals with
separate set of workers, separate profit and loss account,
separate works manager, plant superintendents and separate F
registration under the Factories Act. The two were held to be
separate for the purposes of coverage under the Provident
Funds Act. In Raj's Continental Export (supra), Dharamsi
Morarji was followed since the two entities had separate.
registration under the Factories Act, Central Sales Tax Act, G
1956, Income Tax Act, 1961, Employee State Insurance Act,
separate balance sheets and audited statements and separate
employees working under them.

     13. As against that in Rajasthan Prem Krishan Goods             H
fran_sp~rt _Co. Vs. Regional Provident Fund Commissioner,
    522     SUPREME COURT REPORTS                 [2011] 11 S.C.R


A New Delhi reported in [1996 (9) SCC 454] and Regional
  Provident Fund Commissioner, Jaipur Vs. Naraini Udyog and
  others reported in [1996 (5) sec 522] the concerned units
  were held to be the units of the same establishment. In
  Rajasthan Prem Kishan Goods Transport Co. (supra) the trucks
B piled by the two entities were owned by their partners, ten out
  of thirteen partners were common, the place of business was
  common, the management was common, the letter-heads bore
  the same telephone numbers. In Naraini Udyog (supra) the two
  entities were located within a distance of three kilometers as
c separate small-scale industries but were represented by the
  members of the same Hindu undivided family. They had a
  common head office at New Delhi, common branch at Bombay
  and common telephone at Kota. The accounts of the two entities
  were maintained by the same set of clerks. Separate
D registration under the Factories Act, The Sales Tax Act and The
  ESIC Act were held to be of no relevance and the two units were
  held to be one establishment for the purpose of Provident
  Funds Act.

          14. In the present case the Directors of the two petitioner
E companies belong to the same family. The Managing Director
    is common. The two senior officers i.e Commercial Manager
    and Technical Manager are common. At the time of inspection,
    the Enforcement Officer noticed that the employees of the two
    companies were being swapped. Both of them have same
F registered address and common telephone numbers and a
    common gram number. The audited accounts revealed that the
    second petitioner company had given a loan of Rs. 5 lakhs to
    the first petitioner in the year 1988. The two companies are
    family concerns of the Gadodia family. Hence, in the facts of
G the present case we have to hold that there is an integrity of
    management, finance and the workforce in the two private
    limited companies. The two companies have seen to it that on
    record each of the two entities engage less than twenty
    employees, although the number of employees engaged by
H · them is more than twenty when taken together. The entire
 L.N. GADODIA & SONS v. REGIONAL PROVIDENT                      523
     FUND COMMISSIONER [H.L. GOKHALE, J.]
attempt of the petitioners is to show that the two entities are         A
separate units so that the Provident Funds Act does not get
attracted. The material on record however, leads to only one
pointer that the two entities are parts of the same establishment
and in which case they get covered under the Provident Funds
~-                                                                      B
     15. As the preamble of the Provident Funds Act states, 'it
is an act to provide for the institution of provident fund,s, pension
fund and deposit-linked insurance fund for employees in
factories and other establishments'. The term factory is defined        C
under section 2 (g) of the Act, however, there is no definition
of an establishment or a commercial establishment in the
statute. Inasmuch as the petitioners are entities situated in
Delhi, we may profitably rely upon the definition of
'establishment' and 'commercial establishment' under the Delhi
Shops and Establishments Act, 1954. The definition of                   D
establishment is available in section 2 (9) and that of
commercial establishment in section 2 (5) thereof. These two
definitions read as follows:-

           "Section 2(9) Establishment-                                 E
           "establishment" means a shop, a commercial
     establishment, residential hotel, restaurant, eating house,
     theatre or other places of public amusement or
     entertainment to which this Act applies and includes such
                                                                        F
     other establishments as Government may, by notification
     in the Official Gazette, declare to be an establishment for
     the purposes of this Act;

           Section 2(5) Commercial establishment
                                                                        G
           2(5) "comrnercial establishment" means any
     premises wherein any trade, business or profession or any
     work in connection with, or incidental or ancillary thereto,
     is carried on and includes a society registered under the
     Societies Registration Act 1860 (XXI of 1860) and
                                                                        H
    524       SUPREME COURT REPORTS                    [2011] 11 S.C.R.


A         charitable or other trust, whether registered or not, which
          carries on any business, trade or profession or work in
          connection with or incidental or ancillary thereto, journalistic
          and printing establishments, contractors and auditors
          establishments quarries, and mines not governed by the
B         Mines Act, 1952 (XXXV of 1952), educational or other
          institution run for private gain and premises in Which
          business of banking, insurance, stocks and shares,
          brokerage or produce exchange is carried on, but does
          not include a shop or a factory registered under the
c         Factories Act, 1948 (LXlll of 1948), or theatres, cinemas,
          restaurants, eating houses, residential hotels, clubs or
          other places of public amusement or entertainment;"

  It cannot be denied that the two petitioners carry on a trade or
  business for private gain from the premises wherein the two
D companies are situated. They would therefore, fall within the
  definition of 'commercial establishment' and consequently,
  under the definition of 'establishment'. The only question is
  whether they are to be treated as two separate establishments
  or one establishment for the purposes of this act.
E
        16. The petitioners have contended that the two entities
  are two separate establishments. They have tried to draw
  support from section 2(A) of the Act which declares that where
  an establishment consists of dif~erent departments or has
F branches whether situated in the same place or in different
  places, all such departments or branches shall be treated as
  parts of the same establishment. It was submitted that only
  different departments or branches of an establishment can be
  clubbed together, but not different establishments altogether.
G In this connection, 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
H
 L.N. GADODIA & SONS v. REGIONAL PROVIDENT 525
     FUND COMMISSIONER [H.L. GOKHALE, J.]
branches of one establishment for the purposes of Provident          A
Funds Act. The issue is with respect to the application of a
welfare enactment and the approach has to be as indicated by
this Court in Sayaji Mills Ltd. (supra). The test has to be the
one as laid down in Associated Cement Company (supra)
which has been explained in Management of Pratap Press               B
(supra).

      17. The Provident Fund Department had issued notice to
the petitioners on 11.6.1990 on the basis of their inspection. It
had relied upon the 1988 Audit Report of the petitioners. The        C
petitioners had full opportunity to explain their position in the
inquiry before the Provident Fund Commissioner conducted
under Section 7A of the Provident Funds Act. The petitioners,
however, confined themselves only to a facile explanation. If
according to them, the management, workforce and financial
affairs of the two companies were genuinely independent, they        D
ought to have led the necessary evidence, since they would be
in the best know of it. When any fact is especially within the
knowledge of any person, the burden of proving that fact lies
on him. This rule (which is also embodied in section 106 of the
Evidence Act) expects such a party to produce the best               E
evidence before the authority concerned, failing which the
authority cannot be faulted for drawing the necessary inference.
 In the facts and circumstances of the present case, the
Provident Fund Commissioner was therefore justified in
drawing the inference of integrity of finance, management and        F
workforce in the two petitioners on the basis of the material on
~ecord.

      18. The Regional Provident Funds Commissioner was
therefore, entirely justified in taking the view that on the facts   G
<md law, the two petitioners had to be clubbed together for the
~:urposes of their coverage under the Provident Funds Act. The
/l.ppellate Tribunal clearly erred in re-appreciating the facts on
r•acord and applying wrong propositions of law thereto. The
lnarned Single Judge was therefore required to set-aside the
                                                                     H
    526     SUPREME COURT REPORTS                 [2011] 11 S.C.R.


A order of the Appellate Tribunal in view of his conclusion that the
  order was contrary to the facts and the law, and was perverse.
  The Division Bench has rightly confirmed the order passed by
  the learned Single Judge.

          19. In the circumstances, this petition is dismissed. The
8
    concerned officer of respondent will now proceed for the
    determination and recovery of the provident fund dues from the
    petitioners in accordance with law. There will be no order as
    to the costs.

C RP.                          Special Leave Petition dismissed.