The Supreme Court held that mere separate registration under different statutes cannot be a basis to claim that the units are separate.

The Court held thus in a Civil Appeal preferred by a company, challenging the Judgment of the Madhya Pradesh High Court, Indore Bench, which upheld the Order of the Employees’ Provident Fund Appellate Tribunal.

The two-Judge Bench comprising Justice K.V. Viswanathan and Justice Joymalya Bagchi observed, “The employer/management’s own conduct in mixing up or not mixing up the capital, staff and management could in a given case be a significant pointer. Mere separate registration under the different statutes cannot be a basis to claim that the units are separate. Similarly, maintenance of separate accounts and independent financial statement is also not conclusive. The onus lies on the employer/management to lead necessary evidence to bring home their contention.”

The Bench said that the contention that once there are two separate juristic entities, theory of clubbing cannot be invoked is completely untenable and is only to be rejected.

Senior Advocate Gagan Gupta appeared on behalf of the Appellant while Additional Solicitor General (ASG) Brijender Chahar and AOR Siddharth appeared on behalf of the Respondents.

Factual Background

In 1988, Vindas (Respondent company) was set up for manufacturing injections and capsules of certain specified drugs. It was incorporated with the Registrar of Companies (ROC), Madhya Pradesh (M.P.). Subsequently in 1990, the Appellant company (Torino) was incorporated with ROC, Maharashtra. However, the Appellant’s factory was set up and business of production of tablets and later liquid syrups was set up in M.P. Vindas was incorporated under the Employees Provident Fund & Miscellaneous Provisions Act, 1952 (EPF Act). Subsequently, inspections were carried out at the Appellant’s premises in 2005 and a communication was sent to deposit the provident fund contribution and administrative charges. The Appellant opposed the applicability of the EPF Act on the ground that the workers/employees did not exceed the prescribed number. The issue that was highlighted by the Department was about the number of employees exceeding 20.

Another inspection was carried out and thereafter, summons to appear in person was issued to the Appellant. The Appellant adverted to the proceedings at the hearing wherein they were informed that the authorities are evaluating the possibility of clubbing the unit of the Appellant with Vindas. The Assistant Provident Fund Commissioner (APFC) passed an Order rejecting the contentions of the Appellant. It found that there was Unity of Purpose and Functional Integrality as there was common factory, common administration/Head Office/Registered Office, common e-mail ID/website and common source of finance. It disregarded the aspect of separate registration with ROC and held that the two units are one and the same for the purpose of EPF Act. The Appellate Tribunal dismissed the Appellant’s Appeal and its Writ Petition before the High Court was also unsuccessful. Hence, the case was before the Apex Court.

Reasoning

The Supreme Court in the above context of the case, noted, “… it is very clear that while the test of functional integrality, namely, the test whether one unit can exist without the other may be important in some cases, it may not be stressed in every case without having regard to the relevant facts of the case and it is not the correct legal position that absent functional integrality the units have to be necessarily concluded as separate.”

The Court said that artificial devices, subterfuges and facades are commonly resorted to, to create a smokescreen of separate entities for a variety of purposes.

“The Court of law faced with such a scenario has a duty to lift the veil and see behind applying the well-established tests to determine whether the entities are really separate entities or are they really a single entity. Myriad fact situations may arise. Hence, the contention that Section 2A cannot be applied if ostensibly two separately registered entities under the Companies Act are involved, has only to be stated to be rejected. This is especially so when the Court is interpreting a beneficial legislation like in the present case, namely, the EPF Act”, it added.

The Court was of the view that it will be impossible to lay down any one test as an absolute and invariable test for all cases and that the real purpose of the test is to find out the true relation between the Parts, Branches, and Units.

“If in their true relation they constitute one integrated whole, it could be said that establishment is one and if not, they are to be treated as separate units. Each case has to be decided on its own peculiar facts, regard being had to the scheme and object of the statute under consideration and in the context of the claim”, it further explained.

The Court said that in this case, unity of ownership, management and control may be the important test, while in certain other cases, Functional Integrality or general unity may be the determinative consideration.

“In some instances, unity of employment could be the most vital test. Several tests may fall for consideration at the same time since the mandate of the law is that the facts will have to be viewed as a whole. While each aspect may not by itself be conclusive, what is important is to consider cumulatively the facts while applying the different tests”, it added.

Conclusion

The Court also remarked that if a common man were to be asked as to whether the two units are the same, the answer will be an emphatic yes.

“The claim for infancy protection under the erstwhile Section 16(1)(d) would also not arise in view of our finding of clubbing. Being an integrated unit of Vindas respondent no. 3 since 1995 no separate infancy protection will enure to the benefit of appellant”, it concluded.

Accordingly, the Apex Court dismissed the Appeal.

Cause Title- M/s Torino Laboratories Pvt. Ltd. v. Union of India & Ors. (Neutral Citation: 2025 INSC 849)

Appearance:

Appellant: Senior Advocate Gagan Gupta and AOR Ananta Prasad Mishra.

Respondents: ASG Brijender Chahar, AORs Siddharth, Amrish Kumar, Raj Bahadur Yadav, Ujjwal Singh, Advocates Vishnu Jain, Mani Munjal, Shantanu Sharma, Aaditya Dixit, Prateek Goyal, and Harshit Manwani.

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