Separate Charitable Trusts Running Hospital From Same Building Can Be Clubbed For EPF Assessment: Punjab & Haryana High Court

"Nowadays it is common knowledge that artificial devices, subterfuges and facades are commonly resorted to, to create a smokescreen of separate entities for a variety of purposes. The Court of law faced with such a scenario has a duty to lift the veil and see behind applying the well-established tests to determine whether the entities are really separate entities or are they really a single entity." Punjab and Haryana High Court, in a significant ruling, held that multiple charitable trusts operating from the same premises with common management and workforce can be clubbed as a single establishment for the purpose of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

A bench of Justice Kuldeep Tiwari observed that Section 2-A of the EPF Act is an enabling provision in a welfare enactment designed to prevent the evasion of statutory dues through the creation of artificial legal facades.

The case arose from three writ petitions filed by Gajanand Dalmia Charitable Trust, Seth Murlidhar Dalmia Charitable Trust, and Purni Devi Dalmia Charitable Trust. The petitioners challenged orders passed by the Assistant Provident Fund Commissioner and the EPF Appellate Tribunal, which had clubbed the three trusts into a single establishment under the name "M/s Dalmia Charitable Hospital" for provident fund assessment. The trusts contended that since each entity independently employed fewer than twenty persons, they were not covered by the provisions of the EPF Act.

The primary question before the court was whether the three petitioner-trusts constitute a single establishment within the meaning of Section 2-A of the EPF Act or whether each of them is a separate and independent establishment. The court was also called upon to determine whether the "test of functional integrality" is the sole determinative factor for clubbing separate juristic entities under the Act.

Section 2-A Of EPF Act Is An Enabling Provision For Welfare Legislation

The Court rejected the petitioners' contention that Section 2-A only contemplates the clubbing of different departments or branches of a single establishment and not separate juristic entities altogether. Relying on the Supreme Court’s precedent in L.N. Gadodia & Sons v. Regional Provident Fund Commissioner (2011), the Court noted that Section 2-A must be interpreted liberally to achieve the object of social and economic security for industrial workers.

The bench emphasized that the issue is no longer res integra and that the competent authority is fully empowered to examine whether ostensibly separate entities are, in substance, part of the same establishment. The court observed that when entities are run by the same family under common management with a common workforce and financial integrity, they are expected to be treated as branches of one establishment for the purposes of the EPF Act.

Court Empowered To Lift The Corporate Veil To Uncover Subterfuges

The Court held that the existence of separate registrations under the Income Tax Act or the Societies Registration Act does not preclude the clubbing of units if they are found to be a single integrated whole. Justice Tiwari observed that courts have a duty to "lift the veil" when artificial devices are used to create a smokescreen of separate entities to evade welfare legislation.

The judgment noted that myriad fact situations may arise where employers attempt to show units as separate so that the EPF Act is not attracted. In such cases, the court must apply well-established tests to determine the real thread of unity between the units, regardless of their status as separate juristic persons under other statutes.

"The contention that Section 2A cannot be applied if ostensibly two separately registered entities are involved, has only to be stated to be rejected."

Functional Integrality Is Not The Sole Determinative Test

Addressing the "star argument" of the petitioners regarding the lack of functional integrality, the Court clarified that while functional integrality is a relevant factor, it is not the sole criterion applicable in every case. Citing South India Millowners’ Association v. Textile Workers’ Union (1962), the Court held that the significance of various tests varies according to the specific facts of each case.

The bench explained that the test of functional integrality—whether one unit can exist conveniently without the other—is less significant when an employer carries on the same line of business at different places or through different units. In the present case, since all three trusts were engaged in the same business of running a hospital, the absence of strict functional interdependence did not automatically prove they were separate establishments.

Managerial Control and Common Indicia Establish Unified Management

The Court meticulously examined the factual findings recorded by the authorities, noting that all three trusts operated the hospital from the same building. The ownership of the building was joint between two trusts, while the third was a tenant. More importantly, the letterheads of all three trusts disclosed identical telephone numbers, and the attendance registers of all three entities were signed by the same individual.

Furthermore, the Court pointed out the "unity of ownership" as Shri R.N. Dalmia, Shri Kamal Dalmia, and Smt. Veena Dalmia—all members of the same family—were common trustees of each of the three petitioner-trusts. These circumstances clearly demonstrated that the managerial control of all three trusts was vested in one and the same management, justifying their clubbing as a single unit.

"The material on record clearly establishes that the petitioner-trusts are collectively operating a single unit, namely, a hospital."

The High Court concluded that there was no illegality or perversity in the orders passed by the Assistant Provident Fund Commissioner or the Appellate Tribunal. The Court found that the authorities had correctly applied the relevant indicia of geographical proximity, unity of ownership, management, and purpose to treat the trusts as a single establishment for EPF dues.

Consequently, the Court upheld the assessment of provident fund dues and dismissed the writ petitions. The ruling reinforces the principle that social welfare statutes like the EPF Act will prevail over formalistic corporate structures when such structures are used to deprive workers of their statutory benefits.

Date of Decision: July 13, 2026