New Delhi, Oct. 28 (PTI): Delhi High Court has ruled that outsourcing units cannot be clubbed with each other or the company outsourcing work to them for taking benefit of the employees’ provident fund (EPF).

Holding that interdependence between them could not be a ground for clubbing under the EPF Act, Justice S.N. Dhingra said: “Two independent establishments cannot be clubbed together to show a unity of functions only because they are interdependent on each other at a particular time.”

Taking into account that outsourcing is one of the modes of doing business where several ancillary units would be exclusively doing work for big companies, the court said such small units perform independent business for big automobile and engineering companies.

“These ancillary units (outsourcing units) are independent business entities despite the fact that they are dependent on the automobile company or engineering firm. These units cannot be clubbed with each other or with the main company for the purpose of the EPF Act on the ground of interdependence,” the court said.

Outlining the condition in which the two companies could be clubbed together to get benefits under the act, the bench said this could be done when an establishment was bifurcated to deprive workmen of the benefits of labour laws.

“Where two establishments are, in fact, one, but they have been artificially bifurcated only to deprive the workmen of the benefits of labour laws, then only the two establishments can be clubbed together and their joint employee strength can be counted for the purpose of Section 7a of the act.”

The verdict was delivered on a petition filed by the regional provident fund commissioner challenging an order of the EPF appellate tribunal treating two companies as separate entities.

The commissioner had covered Golden Masala Company under the EPF Act by clubbing six employees of the firm Molu Ram Suraj Mal on the ground that they were interdependent and in the absence of one, the other would not exist. Molu Ram Suraj Mal was grinding spices exclusively for Golden Masala Company.

The commissioner held that Molu Ram Suraj Mal was a contractor of Golden Masala Company and, therefore, its employees must be treated as employees of the latter.