A) ABSTRACT / HEADNOTE
The Supreme Court of India in M/s Torino Laboratories Pvt. Ltd. v. Union of India & Ors. decided the scope of Section 2A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act), particularly concerning whether two corporate entities—Torino Laboratories Pvt. Ltd. and Vindas Chemical Industries Pvt. Ltd.—could be treated as one unit for the purposes of coverage under the EPF Act. The appellant, Torino Laboratories, argued that it was a separate juristic entity, distinct in manufacturing and administrative aspects from Vindas. However, the EPF Authorities, and subsequently the Supreme Court, found strong commonalities: unity of ownership, finance, management, administration, shared premises, and personnel. The Apex Court emphasized that the theory of clubbing does not rely solely on separate registration under different statutes but instead on holistic examination of factual and functional integration. The judgment affirms the authority of enforcement bodies to pierce the corporate veil in welfare legislation contexts, especially where artificial structuring is used to evade compliance. The plea for infancy protection under Section 16(1)(d) was also denied, considering the units were integrally linked since 1995. The appeal was dismissed.
Keywords:
EPF Act, Section 2A, clubbing of establishments, functional integrality, unity of management, infancy protection, lifting corporate veil, welfare legislation, pharmaceutical industry, Supreme Court 2025.
B) CASE DETAILS
| Particulars | Details |
|---|---|
| i) Judgement Cause Title | M/s Torino Laboratories Pvt. Ltd. v. Union of India & Ors. |
| ii) Case Number | Civil Appeal No. 9540 of 2018 |
| iii) Judgement Date | 15 July 2025 |
| iv) Court | Supreme Court of India |
| v) Quorum | K.V. Viswanathan & Joymalya Bagchi, JJ. |
| vi) Author | K.V. Viswanathan, J. |
| vii) Citation | [2025] 8 S.C.R. 174 : 2025 INSC 849 |
| viii) Legal Provisions Involved | Section 2A, Section 7A, Section 16(1)(d) – EPF Act, 1952 |
| ix) Judgments overruled by the Case | None |
| x) Related Law Subjects | Labour Law, Industrial Law, Corporate Law, Constitutional Law |
C) INTRODUCTION AND BACKGROUND OF JUDGEMENT
The appeal originated from an order passed by the Madhya Pradesh High Court at Indore dismissing a writ petition under Article 227 of the Constitution. The core issue was the applicability of the EPF Act to Torino Laboratories by virtue of being allegedly part of Vindas Chemical Industries. This classification resulted in the demand for contribution dues dating back to 1995. The company disputed the findings, arguing its separate legal identity, distinct operations, and independence in management and financial control. However, EPF authorities and successive adjudicatory bodies (APFC, Appellate Tribunal, and High Court) applied the theory of clubbing, taking into account various factual integrations between the two companies.
The Supreme Court considered whether Section 2A could be invoked against two entities formally recognized as separate under the Companies Act. The judgment thoroughly discussed the object and design of the EPF Act as a beneficial legislation, obligating authorities to adopt a purposive interpretation. The case also revisited key judicial principles from earlier decisions such as Associated Cement Companies Ltd., Pratap Press, South India Millowners’ Association, and others to delineate when entities must be clubbed. The appeal was eventually dismissed for lack of merit, reinforcing the legislative objective of preventing evasions in social security obligations.
D) FACTS OF THE CASE
Torino Laboratories Pvt. Ltd. was incorporated in Maharashtra in 1990 by Vasudev Kataria and Rajni Kataria, while Vindas Chemical Industries Pvt. Ltd. was incorporated in 1988 in Madhya Pradesh by Dr. Darshan Kataria and Niranjan Kataria. Both units operated from contiguous plots in Pithampur, Madhya Pradesh. Torino manufactured tablets and syrups, whereas Vindas produced capsules and injections. Despite separate incorporations, the entities shared a registered office, administrative office, telephone and facsimile numbers, and even used the same email IDs and website. Both establishments were guarded by common security personnel and had financial backing from the same Hindu Undivided Family (HUF). Additionally, overlapping directorships existed within family members.
Initially, the EPF authorities issued a notice based on the employee count of Torino exceeding 20, triggering Section 1(3)(b) of the EPF Act. After inspections in 2005, further examination revealed extensive overlaps and shared resources between Torino and Vindas. On this basis, a Section 7A inquiry was initiated to assess retrospective liability from September 1995. Torino objected, arguing legal separation and lack of functional integration. Nevertheless, the Assistant Provident Fund Commissioner (APFC) determined that both entities were part of one integrated unit and clubbed them for EPF applicability. The Appellate Tribunal upheld this order in 2011, and the High Court confirmed it in 2016. The Supreme Court appeal centered on questioning these findings, invoking corporate separateness, and seeking protection under the infancy clause of Section 16(1)(d) for the 1995-1997 period.
E) LEGAL ISSUES RAISED
i. Whether the EPF authorities were justified in treating the appellant and respondent No. 3 as one unit under Section 2A of the EPF Act, 1952?
ii. Whether Torino Laboratories, as a separate juristic entity, could be subjected to the doctrine of clubbing for EPF liability?
iii. Whether separate registration, accounts, and manufacturing activities negated functional integrality?
iv. Whether the benefit of Section 16(1)(d) (infancy protection) was applicable to Torino for the period 1995–1997?
F) PETITIONER/ APPELLANT’S ARGUMENTS
i. The counsels for Petitioner / Appellant submitted that Torino was an independently incorporated entity under the Companies Act and registered under various fiscal and regulatory statutes such as the Drugs and Cosmetics Act, 1940, Factories Act, 1948, and Central Sales Tax Act. They contended that there was no functional integrality, and the manufacturing lines of Torino and Vindas were distinct in nature—tablets and syrups versus injections and capsules. Separate electricity and water connections, individual PAN numbers, tax registrations, and no evidence of inter-company employee transfer further reinforced the distinctness.
The counsel highlighted that the initial proceedings focused on employee strength exceeding 20 but later shifted toward clubbing, which they termed an afterthought. It was further submitted that notice of clubbing should have been issued to Vindas as well. They relied on Pratap Press v. Secretary, Delhi Press Workers’ Union, Dharamsi Morarji Chemical Co. Ltd. v. RPFC, and Raj’s Continental Exports v. RPFC to argue against automatic clubbing in the absence of functional unity. They also pleaded for infancy protection under Section 16(1)(d), asserting that Torino commenced business in 1995 and was eligible for exemption for the initial years.
G) RESPONDENT’S ARGUMENTS
i. The counsels for Respondent submitted that the EPF Act being a social welfare legislation must be interpreted in light of its objective, and the determination of what constitutes an “establishment” must be based on factual integration. The authorities argued that there was ample evidence of unity of ownership, finance, management, and operations, making the entities inseparable for EPF purposes. Reliance was placed on the APFC’s detailed factual findings, which included shared premises, common administrative offices, communications infrastructure, overlapping directors, and security arrangements.
The respondent’s counsel emphasized that separate incorporation and registrations do not automatically exclude application of Section 2A, particularly when evidence points toward artificial segmentation designed to evade statutory obligations. They cited precedents including Associated Cement Companies Ltd., L.N. Gadodia & Sons v. RPFC, and Shree Vishal Printers Ltd. v. Provident Fund Commissioner, stressing the multifactorial tests for clubbing. It was also submitted that the claim for infancy protection was invalid once clubbing was established, and the retrospective application of liability from 1995 was lawful and duly notified.
H) RELATED LEGAL PROVISIONS
i. Section 2A of the EPF Act – Establishment to include all departments and branches.
ii. Section 7A – Power to determine disputes regarding applicability and dues.
iii. Section 16(1)(d) (as it then stood) – Infancy protection.
iv. Indian Evidence Act, 1872 – Section 106 – Burden of proof when facts are especially within knowledge.
v. Article 227 of the Constitution – Supervisory jurisdiction of High Courts.
I) JUDGEMENT
The Supreme Court, affirming the findings of the APFC, the Appellate Tribunal, and the High Court, held that the appellant and respondent No.3 were rightly treated as one unit for the purposes of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The Court highlighted extensive factual commonalities—shared physical premises, administrative facilities, communications infrastructure, management (by the same HUF), financial sources, and even security services. The Court reasoned that such overlaps, cumulatively evaluated, fulfilled the test of functional integrality and unity of purpose.
The Court rejected the contention that separate registration and the existence of distinct products precluded the application of Section 2A. It emphasized the legislative intent behind the EPF Act, which is welfare-oriented, and asserted that separate corporate forms cannot be used as a cloak to bypass such social legislation. The appellant’s plea for infancy protection under Section 16(1)(d) was also denied, given that Torino was held to be a unit of Vindas since 1995. The claim that notices should have been served to Vindas was dismissed on the basis that Vindas was already under EPF coverage. The appeal was dismissed without costs.
a. RATIO DECIDENDI
i. The core rationale laid down by the Court is that the existence of separate juristic identities under corporate law does not automatically preclude the application of the EPF Act’s Section 2A, especially where functional integrality, unity of ownership, and control are established. The Court reiterated that clubbing of establishments is permissible and appropriate when there is significant factual integration and shared operational infrastructure.
The decision reiterates the principle that in interpreting beneficial legislation, a purposive approach must be adopted. Artificial segmentation by companies through different incorporations, tax registrations, or licenses cannot be allowed to defeat statutory rights of workers under welfare laws. The burden lies on the employer to prove separateness; mere formal separateness is insufficient when real control and functionality point to a unified establishment.
The Court’s interpretation of Section 2A was grounded in the precedents of Associated Cement Companies Ltd., South India Millowners’ Association, L.N. Gadodia & Sons, and others, where unity of finance, management, supervision, and purpose was recognized as determinative factors. Functional integrality is not an indispensable test; rather, a cumulative, contextual analysis is required.
b. OBITER DICTA
i. While the main legal principles were dispositive of the case, the Court took the opportunity to reflect on broader themes relevant to labour jurisprudence. It remarked that artificial devices, subterfuges, and facades are often used to create a smokescreen of corporate separateness, and it is the duty of courts to lift the corporate veil in such instances, particularly in welfare legislation like the EPF Act. The Court stated that mere differences in products, management titles, or fiscal registrations cannot create genuine separateness where operational and managerial control remains intertwined.
The Court also addressed the obligations of employers in such disputes, observing that Section 106 of the Indian Evidence Act imposes a duty upon parties with exclusive knowledge to bring forward material evidence. Employers, being in control of their records and organisational structuring, must shoulder the burden of disproving the authorities’ findings.
Further, the Court reminded that each case must be judged on its own factual matrix, and a rigid application of the functional integrality test is neither sufficient nor necessary. This nuanced approach broadens the discretion of enforcement authorities and courts in ensuring legislative objectives are not thwarted.
c. GUIDELINES
The Court did not lay down fresh binding guidelines but reiterated and clarified the following legal standards for future application in similar matters:
i. Clubbing of establishments under Section 2A does not depend solely on formal registration or separate incorporation. Real-world integration and control are more relevant.
ii. Unity of ownership, management, financial control, premises, administrative resources, and staff are all relevant factors. No single factor is determinative.
iii. Functional integrality is an important but not exclusive criterion. Other factors like geographical proximity, operational overlap, and shared infrastructure can independently or collectively justify clubbing.
iv. Separate books of accounts or registrations under tax or factory laws are not conclusive evidence of separateness for the purposes of the EPF Act.
v. Courts must adopt a purposive interpretation when dealing with beneficial legislation, especially when artificial structuring is designed to defeat statutory compliance.
vi. Employers bear the burden of disproving factual integration. A mere formal denial is not sufficient; documentary and substantive evidence is required.
vii. Infancy protection under Section 16(1)(d) is not available where the establishment is determined to be a unit of an older covered entity.
J) CONCLUSION & COMMENTS
This judgment by the Supreme Court strengthens the interpretive framework used in the implementation of social welfare legislation like the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The Court firmly restated the principle that form must not defeat substance, especially when employers seek to avoid liability through artificial structuring or formalistic separation of units. The case reiterates the responsibility of corporate actors to respect labour obligations, and that welfare laws like the EPF Act will be applied with full vigour, even if it necessitates lifting the corporate veil.
Notably, the judgment shows judicial maturity in balancing the need for legal certainty with the objectives of statutory welfare. It underscores that functional integrality is a guiding, not exclusive, standard. The EPF authorities are empowered to assess the holistic relationship between entities, and when substantial overlap is shown, such entities may be clubbed, even retrospectively, for compliance purposes.
This judgment also sends a clear message to the corporate sector that the doctrine of corporate separateness is not sacrosanct in labour matters. When businesses, particularly family-owned groups, operate with shared infrastructure and unified control, they cannot invoke legal separateness to escape liability under protective laws.
This decision aligns Indian jurisprudence with international principles concerning corporate veil piercing in labour law and enriches the doctrinal landscape regarding welfare statutory interpretation.
K) REFERENCES
a. Important Cases Referred
i. Associated Cement Companies Ltd. v. Workmen, AIR 1960 SC 56
ii. Management of Pratap Press v. Delhi Press Workers’ Union, AIR 1960 SC 1213
iii. L.N. Gadodia & Sons v. RPFC, (2011) 13 SCC 517
iv. Rajasthan Prem Krishan Goods Transport Co. v. RPFC, (1996) 9 SCC 454
v. Shree Vishal Printers Ltd. v. Provident Fund Commissioner, (2019) 9 SCC 508
vi. Regional Provident Fund Commissioner v. Naraini Udyog, (1996) 5 SCC 522
vii. Regional Provident Fund Commissioner v. Dharamsi Morarji Chemical Co. Ltd., (1998) 2 SCC 446
viii. Sumangali v. Regional Director, ESIC, (2008) 9 SCC 106
ix. Management of Wenger and Co. v. Their Workmen, (1963) Supp. 2 SCR 862
x. South India Millowners’ Association v. Textile Workers’ Union, [1962] Supp. 2 SCR 926
b. Important Statutes Referred
i. Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 – Sections 2A, 7A, 16(1)(d)
ii. Indian Evidence Act, 1872 – Section 106
iii. Constitution of India – Article 227
iv. Factories Act, 1948
v. Companies Act, 1956 / 2013 (as applicable)
vi. Drugs and Cosmetics Act, 1940
