Applicability of Social Security Laws: liquidator not liable for PF/ESI deductions where establishment is not a running concern.

Where an establishment is not a running concern and is not engaged in industries specified for coverage, the statutory conditions for applicability of the Employees' Provident Funds and Employees' State Insurance regimes are not satisfied and the official liquidator in the course of winding up is not liable to deduct employees' contributions or to make employer contributions. The analysis rests on definitions of employer and employee, statutory extension from "factory" to "establishment," and the principle that liability arises only where the business is continued as a going concern rather than merely wound up and assets sold.

---

---

Issues: Whether the official liquidator of Rohtas Industries Ltd., in the course of winding up, is liable to deduct workers' provident fund and employees' state insurance contributions and to make employer's contributions under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and the Employees' State Insurance Act, 1948.

Analysis: The court examined definitions of "employee" (Section 2(f)) and "employer" (Section 2(e)) in the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and the applicability provision (Section 1(3)) which requires an establishment to be engaged in industries specified in Schedule I or notified under clause (b). The court considered statutory amendments replacing the term "factory" with "establishment" to broaden scope, and the distinction in Section 445(3) of the Companies Act whereby officers and employees are deemed discharged on winding up except where the business is continued. The court reviewed precedent distinguishing a liquidator's liability where he continues a business as a going concern from a liquidator merely winding up and selling assets. Factual findings established that the company's units had been closed since 1984, revival attempts were abandoned, and the court's present role was confined to sale of assets and distribution in winding up. Because the establishment was not engaged in industrial activity specified in Schedule I nor notified under Section 1(3)(b) at the relevant time and the business was not being continued as a going concern, the statutory conditions for applicability of the Provident Funds Act were not satisfied. The court further held that the same reasoning applies to parallel liability under the Employees' State Insurance Act, 1948.

Conclusion: The official liquidator is not liable to deduct workers' provident fund or employees' state insurance contributions, nor to make employer contributions and deposit the same under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and the Employees' State Insurance Act, 1948; the Act is not applicable in the present winding up where the establishment is not a running concern.

---