Liquidation and social welfare contributions: a ceased business is not a running establishment for provident fund or ESI liability.

A company in pure liquidation, whose business has ceased and whose units have remained closed for years, is not a running establishment for contribution purposes. The Provident Funds Act applies to an establishment engaged in industrial activity, and the statutory concept of employer does not extend to an official liquidator where the company is no longer a going concern and the process has moved to sale and distribution of assets. On those facts, no liability arose to deduct workers' share, make contributions, or deposit amounts under the Provident Funds Act, and the same reasoning was applied to the Employees' State Insurance Act.

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Issues: Whether, after a company has been ordered to be wound up and its business has ceased, the official liquidator is liable to deduct workers' share, make contributions, and deposit amounts under the Provident Funds Act and the Employees' State Insurance Act.

Analysis: The scheme of the Provident Funds Act extends beyond a factory to an establishment, and the definition of employer includes the person or authority having ultimate control over the affairs of the establishment. However, the Act still applies to an establishment which is engaged in an industry or otherwise functioning as a running concern. A distinction must be drawn between a going concern and an establishment that is in liquidation and no longer carrying on any industrial activity. The winding up order, read with section 445(3) of the Companies Act, 1956, discharges employees unless the business is continued. In the present case, the units had remained closed for years, revival had been found infeasible, and the matter had reached the stage of sale and distribution of assets in winding up. On those facts, the establishment was not engaged in any industrial activity and the official liquidator did not answer the statutory character of employer for contribution purposes.

Conclusion: The Provident Funds Act was held not applicable to the company in liquidation, and the official liquidator was not liable for contribution. The same conclusion was applied to the Employees' State Insurance Act.

Ratio Decidendi: A company in pure liquidation, whose business has ceased and which is no longer a going concern, is outside the contribution liability under these social welfare statutes, even if its former employees are retained only to assist the liquidator.

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