1. This is an appeal against an order of the Registrar, Bombay Industrial Relations Act, declining to delete the name of Hamidbhai Weaving Mills, Ichalkaranji, from the list of undertakings maintained by him under the Bombay Industrial Relations Act, 1946. The undertaking was originally started by Appasaheb Dewal Shirgawe in 1948 as a proprietary concern and was duly registered as an undertaking under S. 11 of the Bombay Industrial Relations Act. In 1953 Appasaheb admitted his sons, Mohamed Gaus, Hamidsaheb and Ghulam Hussein into Partnership with him. Ghulam Hussein was minor at that time and he was only admitted to the benefits of the partnership but the two other sons became full-fledged partners of Appasaheb. A deed of partnership was executed on 11 January, 1954. The partnership continued on the list of undertakings under the old registration.
2. This partnership was dissolved by a deed of dissolution dated 1 May 1956 and the partnership assets were distributed among the partners as stated in the deed. The liabilities and outstanding of the firm were also divided into four parts and taken over by each of the partners on all the accounts are stated to have been made up till the date of the dissolution of the partnership. The minor son Ghulam Hussein's share was taken over by Appasaheb as his guardian. Three units were formed after the dissolution of the partnership described as Hamidbhai Weaving Mills Unit Nos. 1, 2 and 3. Although closure of the partnership business from 30 April, 1956 was formally notified there was no actual closure as the business was resumed by the units without interruption from 1 May, 1956. The same workmen continued to be employed by the individual units and there was no change in their wages or other service conditions. Separate tex-marks were obtained for each unit and licenses under the Factories Act were separately obtained. The three units I was told have been separately assessed to income-tax and were given separate sales-tax registration. The partnership of Hamidmiya Weaving Mills then applied to the Registrar for deleting the undertaking from the list. The Registrar visited the premises and examined the account books and the result of his visit has been summarized in his order. He came to the conclusion that to all intents and purposes the original undertaking continued to work even after partitioning and the partitioned units remained as component parts of the original undertaking and since the partnership was recognized as an undertaking under the Bombay Industrial relations Act and continued to work though in a different form, it could not be removed from the list even though it was split up and each unit employed less than 20 workmen. As a result of these findings he declined to remove the undertaking from the list of undertakings. This appeal is against his order.
3. It was contended in appeal that by the dissolution of the partnership, the original undertaking had ceased to exist and the learned Registrar's finding that it continued to exist was erroneous.
4. The question as to the circumstances under which the splitting up of a concern will not be recognized for the purposes of industrial law and the old concern shall be deemed to be in existence in spite of the split-up has been considered by the Bombay High Court in J. G. Vakharia v. Regional Provident Fund Commissioner, Bombay : (1957)ILLJ448Bom . In that case a father and his two sons carried on the business of manufacturing silk yarn and dealing in silk yarn and silk cloth in the name and style of the Standard Silk Mills. The partners purported to close their manufacturing business and entered into and agreement stating that the business was being discontinued from 22 October, 1953. The agreement recorded that in future if any of the parties wanted to start any department, that party would be entitled to start that department of his own accord and at his own cost by executing rent notes to the partnership firm of Standard Silk Mills. Five processing units were thereafter started which did the manufacturing process which were originally done by the Standard Silk Mills. In respect of each of these five units rent notes were executed in favour of the Standard Silk Mills by the father and four sons two of whom were minors. On these facts the High Court after examining the agreement and the rent notes and other circumstances of the case came to the conclusion that the lease did not bring about any change in the conditions that prevailed before the lease was executed and subsequent to it. Their lordships characterized the transaction as a subterfuge to defeat the provisions of the Employees' Provident Funds Act and laid down the duty of the Court in such cases in the following words :-
'The Court must not countenance any subterfuge which would defeat the provisions of a social legislation and the Court must even if necessary strain the language of the Act in order to achieve the purpose, which the legislature had in placing this legislation on the statute book. Therefore, not only the Court must disapprove all subterfuges to defeat a social legislation but must actively try to prevent such subterfuges succeeding in their object. In our opinion, this is a clear case of subterfuge and this subterfuge cannot be permitted to succeed so as to defeat the rights of the employees who are benefited by the Employees' Provident Funds Act.'
5. There are certain circumstances in this case which distinguish it from the case of the Standard Silk Mills. In the first place the partnership in the Standard Silk Mills was not dissolved but continued to subsist in spite of the ostensible closure of its business and its transfer to the lessees. Such is not the case here. The partnership of Hamidbhai. Weaving Mills, the appellant in this appeal, was dissolved and its business closed. The business which the units carried on after the dissolution of the partnership was the independent business of the three brothers. The account books of the units and probably of the old partnership were examined by the Registrar. The three units had separate books and the Registrar does not appear to have found anything to suggest that the accounts were manipulated or concealed the existence of the old partnership. In the case of Standard Silk Mills the partners' title to partnership properties as well as their dominion remained unaffected by the split-up while in this case the partners' title has been irrevocably destroyed and what was formerly partnership property became after the dissolution the separate properties of the partners in accordance with the terms of the partnership. It is true that the three units continued to work in the same premises and with the same machinery. But the erstwhile partners were now working not on the machinery and the premises which belonged to the partnership but on these portions which had been allotted to them and which had become their separate property, Similarly the premises were partitioned off. One engine and several other items of partnership assets were kept joint but that was because they were necessary for the business of all the units and could not be conveniently divided. But even in the case of these items the father irrevocably lost his title to them as they were kept joint with the three brothers only. The Registrar found that the warping and winding work of units Nos. 2 and 3 was done by unit No. 1 for which it was paid by them. The father was doing the sizing and drawing work of all the units but he did that work on payment. The Registrar apparently did not find anything in the books suggesting that payments by one unit to another or to the father were not genuine payments. These circumstances go strongly in favour of the genuineness of the dissolution of the partnership. It is true that the same workmen are employed by the units. But the Registrar does not appear to have found anything in the books suggesting that the payments were in point of fact made by the old partnership or by the units on behalf of the partnership. The irrevocable destruction of the partners' title in the assets of the firm followed by the division of the assets by metes and bounds and the fact that the accounts were not found to be suspicious in any way are cogent factors showing bona fides of the transaction. The dissolution has affected the partners' rights as much as the rights of the workmen. It has not adversely affected the workmen alone without at the same time affecting the partners as was found to be the case with the Standard Silk Mills. Under the circumstances, the old firm must be taken to have gone out of existence and its name should have been deleted from the existing list of undertakings.
6. The appeal is accordingly allowed and the Registrar is directed to delete the appellant mills from the list maintained by him.