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Case Number

Matter No. 1510 of 1981

Attorney(S)

Sri P.P Ginwala.
Sri Sibdas Banerjee and Sri N.K Karnail.

Judges

Sri P.C Borooah, J.

Acts

EMPLOYEES PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT 1952
S. 4 of the Visva Bharati Act,
Sub-section (e) of S. 6

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Smart Summary

Judgment Summary: Visva Bharati University (Writ Petition)

Factual and Procedural Background

The petitioner is Visva Bharati University, incorporated under the Visva Bharati Act, 1951, a unitary, teaching and residential university at Santiniketan, West Bengal. The university runs multiple functional units relevant to this petition: an agricultural college and an agricultural farm maintained for experimental research and practical training (with some produce sold to university employees); Silpa Sadan, a woodcraft wing under the Institute of Rural Education for training villagers in woodcraft and carpentry whose products are used by the university; and the Pearson Memorial Hospital, a hospital for the residential university (not available to outsiders).

Provident fund authorities sought to apply the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (the EPF Act) to the university or its departments. On 17 July 1979 the university requested the Ministry of Education and Social Welfare to clarify whether the EPF Act applied to the university or any of its departments and to consider exemption under S.16(2) of the EPF Act.

The university received a communication (dated 31 May/3 June 1980) relaying the Central Provident Fund Commissioner's view that the university itself was not covered by the EPF Act but that Silpa Sadan, the Pearson Memorial Hospital and the agricultural farm were covered from specified dates; the communication also stated that exemptions under S.16(2) were given on financial grounds. Following inspections, the university received notices of demand: one dated 24 June 1981 claiming Rs. 76,479.96 for the agricultural farm (for January 1975 to June 1981), which the university paid under protest on 14 July 1981 after verbal direction to pay; and another notice dated 6 August, 19???1 claiming Rs. 51,914.75 for the Pearson Memorial Hospital (for September 1973 to January 1981).

The university filed this writ petition seeking quashing of the notices of demand and a direction to the provident fund authorities to exempt the university under S.16(2) of the EPF Act.

Legal Issues Presented

Whether the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 are applicable to Visva Bharati University as an establishment, or whether they apply only to particular departments/units (Silpa Sadan, the agricultural farm, and the Pearson Memorial Hospital) treated as separate establishments.
Whether the notices of demand issued by the provident fund authorities in respect of the agricultural farm and the hospital are legally maintainable.
Whether the university (or any of its departments) is entitled to exemption under S.16(2) of the EPF Act.

Arguments of the Parties

Petitioner's Arguments (Sri P. P. Ginwalla)

The Visva Bharati University was incorporated under the Visva Bharati Act, 1951 as a body corporate that is a unitary teaching and residential university (S.4 of the Act); therefore the university as a whole must be considered when determining whether the EPF Act applies.
The university is the relevant "establishment" and not its constituent departments or units; consequently, if the university is exempt or not covered, individual departments (the agricultural farm, Silpa Sadan, and the Pearson Memorial Hospital) cannot be separately brought within the purview of the EPF Act.
Relied on the decision of the Madras High Court in Vittaldas Jagannathdas v. Regional Provident Fund Commissioner [A.I.R. 1965 Mad. 508] concerning the meaning of "establishment."

Respondents' Arguments (Sri Sibdas Banerjee)

Sections and notifications under S.1(3)(b) of the EPF Act render the Act applicable to specific classes of establishments (wood workshops, hospitals, agricultural farms) from specified dates; accordingly Silpa Sadan, the Pearson Memorial Hospital and the agricultural farm fall within those covered categories and are automatically covered by the EPF Act.
Relied upon precedents including Regional Provident Fund Commissioner, Andhra Pradesh v. Osmania University [1973 L. & I.C. 912] and Delhi Cloth and General Mills Company Ltd. v. Regional Provident Fund Commissioner, U.P. [A.I.R. 1961 All. 309] to support the application of the Act to particular units/operations.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Vittaldas Jagannathdas v. Regional Provident Fund Commissioner, Madras [A.I.R. 1965 Mad. 508]	Explanation of the meaning of "establishment" in the context of the EPF Act; cited the Oxford Dictionary definition as "organized body of men maintained for a purpose" and discussed the concept of an establishment as the legal entity to which the Act applies.	The Court relied on this exposition to support the view that an "establishment" is a legal entity and to consider whether the university, as the corporate entity constituted by statute, should be treated as the establishment rather than its internal departments being separately assessed.
Regional Provident Fund Commissioner, Andhra Pradesh v. Osmania University [1973 L. & I.C. 912]	Application of the EPF Act to a university-maintained printing press held to be a factory engaged in an industry specified in Schedule I, bringing it within S.1(3)(a) of the Act.	The Court noted this decision to distinguish the present case: Osmania applied where a unit fell within S.1(3)(a) (factory/industry), whereas the instant dispute concerned coverage under S.1(3)(b) notifications and whether university departments can be separately assessed when the university itself is not covered.
Delhi Cloth and General Mills Co. Ltd. v. Regional Provident Fund Commissioner, U.P. [A.I.R. 1961 All. 309]	Considered whether distinct units maintained by a company came within the definition of a "factory" and thus were covered under S.1(3)(a) of the EPF Act.	The Court cited this decision as another instance where particular units were assessed under S.1(3)(a); it was used to contrast situations where separate units are factory-type industries versus the present matter concerning departments of a statutory university.

Court's Reasoning and Analysis

The court began from the statutory constitution of Visva Bharati University under the Visva Bharati Act, 1951. Section 4 established the university as a body corporate "as a unitary, teaching and residential university," and Section 6(e) authorized activities including promotion of rural reconstruction, development of cottage industries and other works of public benefit — powers under which the university set up Silpa Sadan and the agricultural farm and maintained the Pearson Memorial Hospital as necessary adjuncts for its residential and educational functions.

The court considered the statutory scheme of the EPF Act, particularly S.1(3)(b), which makes the Act applicable "to any other establishment ... or class of such establishments which the Central Government may, by notification ... specify in this behalf." The court observed that the Act contemplates that an establishment can have departments or branches (citing the definition of "appropriate Government" in S.2(a)(i) which treats an establishment with departments or branches in more than one State as falling under the Central Government).

Because the Central Provident Fund Commissioner (in an internal communication relayed to the university) had admitted that the university itself was not covered by the EPF Act while asserting that Silpa Sadan, the hospital and the agricultural farm were covered and were not entitled to exemptions under S.16(2) (on the view that exemptions were only on financial grounds), the court examined two issues:

Whether departments or branches of the university could be assessed as separate establishments when the statutory corporate entity (the university) was not covered; and
Whether exemption under S.16(2) is confined to financial considerations.

On the first issue the court reasoned that the Visva Bharati University was constituted as a unitary corporate establishment and that the Silpa Sadan, the agricultural farm and the Pearson Memorial Hospital were merely departments or branches maintained under the powers conferred by the Visva Bharati Act (not separate independent establishments). The court concluded that the provident fund authorities were not entitled to assess these departments or branches as separate establishments under the EPF Act when the university itself was not covered.

On the second issue the court examined S.16(2) of the EPF Act, which permits the Central Government to exempt a "class of establishments" from the operation of the Act "having regard to the financial position of any class of establishments or other circumstances of the case." The court held that the exemption was not confined to financial grounds alone; other circumstances may also justify exemption. Thus the provident fund authorities were incorrect to assert that S.16(2) exemptions were only on financial grounds and that the Central Government could not consider the particular circumstances under which Visva Bharati and its departments were set up and run.

Relying on the statutory character of the university and the authorities discussed, and distinguishing the cited cases where particular units were treated as factories under S.1(3)(a), the court found that the relevant departments were part of the statutory corporate university and could not be separately assessed by the provident fund authorities as distinct establishments for purposes of the EPF Act.

Holding and Implications

Core Holding: The court held that the Visva Bharati University Agricultural Farm, the Visva Bharati Silpa Sadan and the Pearson Memorial Hospital are departments or branches of Visva Bharati University and are not separable establishments for the purposes of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952; consequently the impugned notices of demand are quashed.

Direct consequences and orders given in the judgment:

The notices of demand impugned in the writ petition are quashed.
Amounts already paid by the university pursuant to the notices, together with interest accrued up to date, are to be refunded to the university, if possible, within eight weeks from the date of the judgment.
Because of this order, no separate order was considered necessary on the question of exemption under S.16(2) of the EPF Act.
The rule is made absolute to the extent indicated in the judgment.
There will be no order as to costs.
The oral prayer by the provident fund authorities for a stay of operation of the order was refused.

The court observed that S.16(2) exemptions are not limited to financial grounds and that other circumstances may be considered by the Central Government; however, the court did not make a substantive exemption order under S.16(2) because the primary orders rendered the question unnecessary to decide further in this case.

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Visva Bharati v. Regional Provident Fund Commissioner, West Bengal, Andaman And Nicobar Islands, And Others

JUDGMENT

1. The petitioner, Visva Bharati, is a university incorporated by an Act of Parliament being the Visva Bharati Act, 1951 (herinafter referred to as the Act), and is situated at Santiniketan in the District of Birbhum in West Bengal. The university imparts education in the humanities and science streams and also gives practical training in various faculties, such as agriculture, carpentry, etc. For the purpose of imparting education in agriculture the university has an agricultural college which prepares students for the degrees of B.Sc and M.Sc in Agriculture. For experimental purposes and practical training of the students the university maintains an agricultural farm, the basic purpose of which is to carry on experimental research and impart practical training to the students of agriculture. There is also experimental sowing of fodder and crops, such as paddy and wheat, and some of the products of the said farm are sold to the employees of the university.

2. As a part of its activities, the university also trains villagers in woodcraft and for this purpose it has a woodcraft wing constituted under the Institute of Rural Education known as Silpa Sadan. The basic purpose of this Silpa Sadan is to train villagers of the surrounding villages in woodcraft and carpentry. The products made by the trainees are used in the different departments of the university.

3. The university being a residential one has to maintain a hospital known as the Pearson Memorial Hospital. No outsider is entitled to any benefit from this hospital.

4. Since the provident fund authorities sought to apply the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Act), to the university, the latter wrote a letter on 17 July, 1979, to the Ministry of Education and Social Welfare, Department of Education, asking for clarification as to whether the provisions of the Act had any application to the university or any of its departments, and if so, praying for an exemption under S. 16(2) of the Act. A copy of this letter is annexure A to the petition.

5. The university received a reply, dated 31 May/3 June, 1980, enclosing a letter of the Central Provident Fund Commissioner to the Secretary, Ministry of Labour. It was contended in the said letter that whilst the university was not covered by the Act, the Silpa Sadan, the hospital and the agricultural farm were covered from the various dates as mentioned in the said letter. It was also stated that the exemption contemplated under S. 16(2) of the Act was only given on financial grounds. A copy of this letter is annexed to the petition and marked with the letter B.

6. Thereafter the provident fund authorities inspected the books of the university and a notice of demand, dated 24 June, 1981, was received claiming a total sum of Rs. 76,479.96 under various heads for the period from January 1975 to June 1981 in respect of the agricultural farm maintained by the university. A copy of this notice of demand is annexure C to the petition. On being verbally directed by respondent 1 that the same should be paid, the petitioner paid the said sum under protest on 14 July, 1981.

7. Thereafter the university received another notice of demand, dated 6 August, 19???1, claiming a total sum of Rs. 51,914.75 for period from September 1973 to January 1981, in respect of the Pearson Memorial Hospital. A copy of this notice of demand is annexure E to the petition.

8. In this writ petition the petitioner has prayed that the notices of demand referred to above be quashed and the provident fund authorities be directed to exempt the university from the application of the Act under the provisions of S. 16(2) of the Act.

9. Sri P.P Ginwalla, appearing on behalf of the petitioner, has submitted that the university which was incorporated under the Visva Bharati Act, 1951, was constituted as a body corporate as a unitary teaching and residential university as laid down in S. 4 of the said Act, and the university as a whole should be taken into account in considering the question whether it would come under the provisions of the Act. Sri Ginwalla has also submitted that the university is the establishment and not the agricultural farm, the Silpa Sadan or the Pearson Memorial Hospital, and the university being exempt from the provisions of the Act, the individual departments of the university cannot be brought in within the purview of the Act. Sri Ginwalla has referred to a decision of the Madras High Court in the case of Vittaldas Jagannathdas v. Regional Provident Fund Commissioner, Madras [A.I.R 1965 Mad. 508].

10. Sri Sibdas Banerjee, appearing on behalf of the respondents, has opposed this rule. His submission is that by virtue of appropriate notifications issued under S. 1(3)(b) of the Act the provisions of the Act have been made applicable to wood workshops with effect from 30 April, 1970, to hospitals run by any individuals or institutions with effect from 31 August, 1973, and to agricultural farms with effect from 31 December, 1974; the Silpa Sapan, the Pearson Memorial Hospital and the Visva Bharati University Agricultural Farm, falling under the aforesaid heads, are automatically covered under the provisions of the Act.

11. Sri Banerjee has drawn my attention to a decision of the Andhra Pradesh High Court in the case of Regional Provident Fund Commissioner, Andhra Pradesh, Hyderabad v. Osmania University [1973 L. & I.C 912]. Sri Banerjee has also referred to a decision of the Allahabad High Court in the case of Delhi Cloth and General Mills Company, Ltd. v. Regional Provident Fund Commissioner, Uttar Pradesh [A.I.R 1961 All. 309].

12. The Visva Bharati University was incorporated under the provisions of the Visva Bharati Act, 1951. Section 4 of the Act which deals with the incorporation of the university reads as follows:

“4. Incorporation.— The first Acharya (Chancellor) and Upacharya (Vice-Chancellor) of the university who shall be the persons appointed in this behalf by the Central Government by notification in the official gazette, and the first Members of the Samsad (Court) and all persons, who may hereafter become or be appointed as such officers or members, so long as they continue to hold such office or membership, are hereby constituted a body corporate as a unitary, teaching and residential university by the name of Visva Bharati, and shall have perpetual succession and a common seal, and shall sue and be sued by that name.”

Under S. 6 of the said Act the powers of the university were laid down. Sub-section (e) of S. 6 reads as follows:

“to provide for the promotion of rural reconstruction, social welfare, development of cottage industries, and all other nation building activities and works of public benefit;”

13. Under this sub-section the university was authorized to set up both the Siipa Sadan and the agricultural farm. Moreover, when the university was preparing students for both the Bachelor's and Master's Degrees in Agriculture, to impart practical training to the students an agricultural farm must be deemed to be essential. The Silpa Sadan was also set up by the university for the development of cottage industry and for imparting training to the rural people in carpentry and woodcraft. The Pearson Memorial Hospital was not meant for outsiders and was certainly necessary as the university was a residential one.

14. The provisions of the Act can be sought to be made applicable, if at all, to the agricultural farm, the Silpa Sadan and the Pearson Memorial Hospital by virtue of S. 1(3)(b) of the Act which reads as follows:

“Subject to the provisions contained in S. 16, it applies:

(b) to any other establishment employing twenty or more person sor class of such establishments which the Central Government may, by notification in the official gazette, specify in this behalf;”

15. From the aforesaid sub-section it is clear that the provisions of the Act could have been made applicable, if the Central Government so desired, to the university which clearly is an establishment. That the Act contemplates or takes into account that an establishment can have departments or branches is clear from the definition of “appropriate Government” in S. 2(a) (i) of the Act which lays down, inter alia, that the appropriate Government means in relation to an establishment having departments or branches in more than one State, the Central Government. Moreover, from S. 4 of the Visva Bharati Act, it is clear that the Visva Bharati University was constituted a body corporate as unitary teaching and residential university. Therefore, if the university as an establishment does not come under the provisions and/or the purview of the Act, the different branches or departments of the university which the university is empowered and or entitled to maintain under the provisions of toe Visva Bharati Act cannot be brought within the mischief of the Act.

16. In the decision of the Madras High Court referred to by Sri Ginwalla the said Court was explaining the meaning of the word “establishment” which appears in the Act and observed at page 511, in Para. 12 of the judgment as follows:

“I was also aware of the central difficulty stressed by Srinivasan, J., evident in all the decisions to which my attention has been drawn. After reference to several authorities and Words and Phrases Judicially Defined by Burrows, Vol. 2, I find that the most helpful definition of ‘establishment’, at least in the context of the usage of that word in the present Act 19 of 1952, is that available in Oxford Dictionary, namely, ‘organized body of men maintained for a purpose.’ Once we have this definition in perspective, and also keep in mind the principle that the Act really applies to the factory or establishment or industrial organization, whichever it might be termed, and not to changes in ownership, or to the history of the organization which might include temporary closures, it seems to me that the true way of looking at the liability becomes fairly clear. On the entire complex of facts of a given case, can we conclude that the legal entity, ‘the establishment’ came totally to an end, and was succeeded by a fresh legal entity? If that be the case, then that fresh entity is the entity to which the Act applies as a first impact and, if that entity is entitled to infancy protection that protection will have to be granted as matter of course.”

17. In the case of Regional Provident Fund Commissioner, Andhra Pradesh v. Osmania University [1973 L. & I.C 912] (vide supra), the provisions of the Act were made applicable to a printing press maintained by the university as it was held to be a factory engaged in an industry specified in Sch. I to the Act. Therefore, this case came within the purview of S. 1(3)(a) of the Act. Similar is the case of Delhi Cloth and General Mills Company, Ltd. [A, I.R 1961 All. 309] (vide supra), which also took into account the question whether or not three units maintained by a company came within the definition of a factory and as such were also covered by S. 1(3)(a) of the Act.

18. The concerned authorities in Para. 2 of the letter, dated 3 May, 1980, from Central Provident Fund Commissioner, New Delhi, addressed to the Secretary, Ministry of Labour, New Delhi, which was communicated to the Registrar of the petitioner by a covering letter, dated 31 May, 1930, and a copy whereof is annexure B to the petition, it has been admitted that the university is not covered by the Act but the Silpa Sadan, the Pearson Memorial Hospital and the agricultural farm are covered under the heads of coverage and from the dates as mentioned therein. Further on in Para. 3 of the said letter it has been mentioned as follows:

“The above establishments under the Visva Bharati University are also not entitled to exemptions under S. 16(2) because the exemption envisaged thereunder is the exemption to the class of establishments on financial grounds and not the exemption/exclusion in respect of the individual establishment from the operation of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.”

19. In considering the question of granting exemption under S. 16(2) of the Act the provident fund authorities also went wrong. Section 16(2) reads as follows:

“If the Central Government is of opinion that having regard to the financial position of any class of establishments or other circumstances of the case, it is necessary or expedient so to do, it may, by notification in the official gazette, and subject to such conditions as may be specified in the notification, exempt that class of establishments from the operation of this Act for such period as may be specified in the notification.”

20. Therefore, the financial position of an establishment is not the only criterion which will entitle an establishment to an exemption under S. 16(2) of the Act; other circumstances may also be considered. Therefore, in the instant case, the circumstances under which the Visva Bharati University was set up and the circumstances under which the aforesaid establishments were being run by the university might have been taken into consideration by the Central Government if it was not misled by the aforesaid letter of the Central Provident Fund Commissioner that only financial conditions entitle an establishment to an exemption under the aforesaid provision of the Act.

21. In view of what has been stated above I must hold that the Visva Bharati University Agricultural Farm, the Visva Bharati Silpa Sadan and the Pearson Memorial Hospital are merely departments or branches of the visva Bharati University and the provident fund authorities are not entitled to assess the said departments or branches as separate establishments under the provisions of the Act. 1, therefore, quash the notices of demand which have been impugned in this petition. The amounts which have already been paid, along with interest accrued thereon up-to-date, be refunded to the university, if possible, within a period of eight weeks from date.

22. In view of the order which I have passed no other order is necessary regarding the question of exempting the petitioner under S. 16(2) of the Act.

23. The rule is, therefore, made absolute to the extent indicated above. There will be no order as to costs.

24. Sri N.K Karnail, appearing on behalf of the provident fund authorities, orally prays for a stay of operation of this order. The stay asked for is refused.

Visva Bharati v. Regional Provident F...