Case Study When Family Ownership and Functional Integration Justify Unified Coverage under the EPF Act

Case:

M/s. Sabera Sanket Rajnandgaon, Chhattisgarh v. The Regional Provident Fund Commissioner, Raipur and Others
Writ Appeal No. 324 of 2021

Court and Date:

Chhattisgarh High Court
Before: Hon’ble Mr. Ramesh Sinha, Chief Justice, and Hon’ble Mr. Arvind Kumar Verma, J.
Judgment Date: 29th April 2025

Relevant Law:

Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 – Section 7A (Applicability of the Act and Coverage of Establishments)

Background:

The appellant, M/s. Sabera Sanket, was engaged in publishing a Hindi daily newspaper from Rajnandgaon, Chhattisgarh. The Employees’ Provident Fund Organization (EPFO) issued a notice under Section 7A asking why the establishment should not be covered under the EPF Act, 1952.

After inquiry, the Regional Provident Fund Commissioner (RPFC), Raipur, concluded that M/s. Sabera Sanket and M/s. Sabera Printers constituted one integrated establishment, citing shared ownership, management, and operations.

The appellant challenged this decision before the EPF Appellate Tribunal, which upheld the Commissioner’s order. The appellant’s writ petition before the Chhattisgarh High Court was also dismissed in 2021, leading to the present writ appeal.

Legal Issue:

Whether two business units – M/s. Sabera Sanket (newspaper publisher) and M/s. Sabera Printers (printing unit) – owned and operated by members of the same family, could be treated as a single establishment for the purpose of EPF Act coverage.

Key Legal Findings:

1. Unity of Ownership:
   Both establishments were initially owned by the same proprietor, Sharad Kothari, and later managed by his family members.
2. Functional Integrality and Interdependence:
   • Sabera Sanket relied entirely on Sabera Printers for its printing work.
   • Both operated from the same premises, indicating operational linkage.
3. Tests for Clubbing Establishments:
   The Court applied standard judicial tests, such as:
   • Geographical proximity
   • Unity of ownership, management, and control
   • Functional integrality
   • Unity of purpose, finances, and employment conditions
4. Precedent Cases Considered:
   • Associated Cement Companies Ltd. v. Their Workmen, AIR 1960 SC 56
   • Management of Wenger & Co. v. Their Workmen, AIR 1964 SC 864
   • Regional Provident Fund Commissioner v. Dharmasi Morarji Chemical Co. Ltd., (1998) 2 SCC 446
   • Noor Niwas Nursery Public School v. Regional Provident Fund Commissioner, (2001) 1 SCC 1 Clubbing of establishments is p…

These judgments collectively support that common ownership and functional unity can justify clubbing separate units under the same statutory framework.

Judgment:

The Division Bench of the Chhattisgarh High Court dismissed the appeal, affirming that the two establishments form one integrated whole.

The Court observed that:

• Both firms shared common ownership, financial unity, and operational dependency.
• The transition from a single business (Sabera Sanket) to a separate printing unit (Sabera Printers) did not create independent entities.
• The partnership formed later was merely an expansion of the same family business.

Thus, clubbing the two units for EPF coverage was justified and proper under Section 7A of the Act.

Conclusion:

The Court held that when establishments are:

• Owned by the same family,
• Operated from the same premises, and
• Exhibit functional interdependence,

they cannot be treated as distinct for the purposes of the Employees’ Provident Funds Act. The unity of business objectives and operations outweighs formal separations in ownership or accounting.

Key Learning:

This case reinforces that form should not override substance in compliance matters. Businesses that are functionally and financially integrated, even if structured as separate entities, may be treated as a single establishment under social welfare legislation like the EPF Act.

For employers, this judgment underscores the importance of ensuring clear operational independence if separate units are intended to remain distinct for legal compliance purposes.

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