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Synopsis

The Supreme Court recently held that two institutes, though established on two different dates but run by the same management and from the same premises could not claim themselves to be excluded from the ambit of employees provident funds law.

The Ideal Fine Arts Society ran two institutions, namely, the ‘Ideal Institute of Fine Arts’ and ‘Mathosri Manikbai Kothari College of Visual Arts’ from the same campus. The Ideal Institute was set up way back in the year 1965, offering Diploma Course in drawing and painting, whereas the Arts College was set up in the year 1985-86, offering Degree and PostGraduate Degree in drawing and painting. 

It was claimed that the Ideal Institute employed 8 persons, whereas the Arts College had 18 employees. The issue arose with reference to their coverage and application of the EPF Act. 

Based on the report of the Enforcement Officer of July 01, 2003, it was reported that there being a total of 26 employees working in both the Institutes, which were managed by the same Society and within the same premises, the establishment would be covered under the provisions of the EPF Act w.e.f. March 01, 1988. 

However, the institutions challenged the same. A statutory appeal, writ petition and writ appeal were all subsequently dismissed.

Before the top court, an appeal was filed by M/s Mathosri Manikbai Kothari College of Visual Arts against the Karnataka High Court's division bench order of 2011 upholding the single bench order which confirmed a decision by the Employees Provident Fund Appellate Tribunal on the applicability of EPF Act to the appellate institutions.

In their contention before the top court, the appellant contended since both the Institutes were independent of each other and were not employing 20 or more persons, their clubbing for coverage under the provisions of the EPF Act, was totally illegal and deserved to be set aside. It was also submitted that the Ideal Institute got 100% grant-in-aid, whereas the Arts College only got 70% grant-in-aid from the government of Karnataka. Both institutions were established on different years, the court was apprised. 

The top court, however, found that there was no error in the order passed by the Commissioner under Section 7-A of the EPF Act.

The Commissioner on September 23, 2005, under Section 7-A of the EPF Act, assessed the amount of contributions to be made by the appellant under various schemes of the EPF Act, after issuing notice and affording an opportunity of hearing.

A bench of Justices Hima Kohli and Rajesh Bindal said that from a perusal of the material available on record and the settled position of law, it could be safely opined that there was "financial integrity" between the Society of the appellant as well as the Ideal Institute as substantial funds had been advanced to the Institutes by the Society and further, both the Institutes were functioning from the same premises.

The top court relied upon the letters issued by the UGC and the National Assessment and Accreditation Council showing that the College was nothing but an extended arm of the Society. The bench also found evidence of financial integrity.

"The mere fact that two Institutes managed and controlled by the same management, offer different courses or were established at different times is not relevant for their clubbing under the EPF Act. The fact that one of the institutes receives 100% grant-in-aid from the government while the other is receiving to the extent of 70%, is also not relevant. After coverage of the establishments, the benefits, as determined for the purpose of assessing dues under the EPF Act, have already been assessed by the Commissioner," the bench said.

Accordingly, court dismissed the appeal.

Case Title: M/s Mathosri Manikbai Kothari College of Visual Arts Vs The Assistant Provident Fund Commissioner