P.B.Nayak vs M.D. B.S. Plant . on 26 October, 2021
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Supreme Court of India
P.B.Nayak vs M.D. B.S. Plant . on 26 October, 2021
Author: K.M. Joseph
Bench: K.M. Joseph, Pamidighantam Sri Narasimha
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S).4613 OF 2013
P.B. NAYAK & ORS. ... APPELLANT(S)
VERSUS
MANAGING DIRECTOR, BHILAI STEEL
PLANT & ORS. ...RESPONDENT(S)
JUDGMENT
K.M. JOSEPH, J.
1. The appellants impugn the Judgment of the High
Court rendered in a Writ Petition filed, under Article
226 and 227, by respondents 1 and 2. By the impugned
Order, the Order dated 18.01.2002, passed by the
Appellate Authority, under Section 58(2) of the Madhya
Pradesh Shops & Establishments Act, 1958 (for short,
Signature Not Verified
Digitally signed by
‘the Act’), came to be set aside. The appellants, along
Anita Malhotra
Date: 2021.10.26
15:47:17 IST
Reason:
with certain others, invoked the jurisdiction of the
1
Appellate Authority under Section 58(2) complaining
that their services were terminated illegally by the
respondents which complaint was accepted by the
Appellate Authority. The Appellate Authority directed
the Respondent No. 1 and 2 to reinstate the appellants
with full back wages from 15.04.1997 till the date of
reinstatement. In the alternative the Respondent No. 1
and 2 were directed to pay compensation to each of the
appellants as calculated in the order without
reinstatement. It is this order which stands set aside
by the High Court. The High Court has found that the
Act cannot be made applicable in view of the exemption
available under Section 3(j) of the Act.
THE FRAMEWORK OF THE ACT
2. Section 2(8) defines the word Establishment as: –
(8) “establishment” means a shop, commercial
establishment, residential hotel,
restaurant, eating-house, theatre, or other
place of public amusement or entertainment
to which this Act applies and includes such
other establishment of like nature as the
Government may, by notification, declare to
be an establishment for the purposes of this
Act;
2
3. As can be seen from the said definition,
Establishment means the various places it includes. The
word commercial establishment is defined in Section 2
(4).
(4)”Commercial establishment” means an
establishment which carries on any business,
trade or profession or any work in connection
with, or incidental or ancillary to, any
business, trade or profession and includes:
–
[(a) a society registered or deemed to have
been registered under the [Madhya Pradesh
Societies Registration Act, 1959 (1 of 1960)]
and a charitable or other trust, whether
registered or not, which carries on whether
for gain or not, any business, trade or
profession or work in connection with or
incidental or ancillary to such business,
trade or profession;]
(b) an establishment which carries on the
business of advertising, commission agency,
forwarding or commercial agency or which is
a clerical department of a factory or of any
industrial or commercial undertaking;
(c) an insurance company, joint stock
company, bank, broker’s office and exchange,
but does not include a factory, shop,
residential hotel, restaurant, eating-house
theatre or other place of public amusement
or entertainment;
3
4. It further includes residential hotel. The said
expression is defined in Section 2 (22).
(22) “residential hotel” means any premises
in which a bona fide business is carried on
of supplying for payment lodging or board and
lodging to travellers and other members or
class of members of the public and includes
a residential club;
5. An establishment includes further a restaurant or
eating-house and the said words are defined in Section
2 (23).
(23) “restaurant or eating-house” means any
premises in which it is carried on wholly or
principally the business of the supply of
meals or refreshments to the public or a
class of the public for consumption on the
premises, and includes a Halwai’s shop; but
does not include a restaurant or a canteen
attached to a factory if the persons employed
therein are allowed the benefits provided for
workers under the Factories Act, 1948 (63 of
1948);
6. Further the expression shop is defined in Section
2(24).
(24) “shop” means any premises where goods
are sold, either by retail or wholesale or
both or where services are rendered to
customers, and includes an office, a store
4
room, godown, warehouse or workplace, whether
in the same premises or otherwise used in
connection with such trade or business but
does not include a factory, a commercial
establishment, residential hotel,
restaurant, eating-house, theatre or other
place of public amusement or entertainment
or a shop attached to a factory where the
persons employed in the shop are allowed the
benefits provided for workers under the
Factories Act, 1948 (63 of 1948);
7. It is further necessary to notice the definition
of the word employee. It is defined in Section 2 (6).
(6) “employee” means a person wholly or
principally employed, whether directly or
through any agency, and whether for wages or
other consideration, in or in connection with
any establishment, and include an apprentice,
but does not include a member of the
employer’s family;
8. The word employer is defined in Section 2 (7).
(7) “employer” means a person owning or
having ultimate control over the affairs of
an establishment and includes the manager,
agent or any other person acting in the
general management or control of such
establishment;
9. Under Section 3, the Act will not apply to certain
persons or establishments. Since much turns on the
5
scope of this provision, we may refer to the same.
Section 3 reads as follows:
“3. Act not applicable to certain persons and
establishments. – (1) Nothing in this Act
shall apply to: –
[(a) persons occupying positions of
management and declared as such under clause
(a) of sub-section (2) of Section 6 or
employed in a confidential capacity not
exceeding ten percent of the total number of
the employees in the establishment or three
in number whichever is less;]
(b) persons whose work is inherently
intermittent such as traveller, canvasser, a
watchman or a caretaker;
(c) persons exclusively engaged in
preparatory or complementary work, such as
clearing or forwarding clerks, responsible
for the despatch of goods by rail or other
means of communication and for customs
formalities or messengers;
(d) persons exclusively employed in the
collection, delivery or conveyance of goods;
(e) offices of the Union or State Government
or of Local Authorities and of the Reserve
Bank of India, the State Bank of India and
the Life Insurance Corporation;
(f) establishment for the treatment or the
care of the sick, infirm, destitute or
mentally unfit;
6
(g) bazars, fairs or exhibition for the sale
of works for charitable or other purposes
from which no profit is derived;
(h) stalls and refreshment rooms at Railway
Stations, or railway dining cars;
[(i) x x x]
(j) clubs not being residential clubs; and
(k) any other class of establishments or
class of persons which the Government may,
by notification, exempt from the operation
of this Act:
Provided that if in the opinion of the State
Government the circumstances existing in any
particular class of cases hereinbefore
mentioned requires that all or any of the
provisions of this Act should be extended
thereto, the State Government may, by
notification, extend to such class of cases
all or any of the provisions of this Act and
thereupon such provisions shall apply to such
class of cases.
(2) The Government may, by notification,
direct that any or all of the provisions of
this Act shall, subject to such terms and
conditions as may be specified in such
direction, not apply to such classes of
establishments or class of persons as may be
specified therein.”
(Emphasis supplied)
7
10. Section 6 provides that every establishment to
which the Act applies shall be registered in accordance
with the Act. Chapter III of the Act deals with SHOPS
AND COMMERCIAL ESTBALISHMENTS. The various provisions
contained in the said chapter provide for regulating
conditions of employment in regard to Shops and
Commercial Establishments. Chapter IV purports to
regulate the conditions of employment in regard to
RESIDENTIAL HOTELS, RESTUANRANTS AND EATING- HOUSES.
Chapter V deals with THEATRES OR OTHER PLACES OF PUBLIC
AMUSEMENT OR ENTERTAINMENT. Chapter VI applies to all
establishments and it deals with EMPLOYMENT OF
CHILDREN, YOUNG PERSONS AND WOMEN. Similarly, Chapter
VII deals with provisions applicable to all
establishments and it deals with LEAVE WITH PAY AND
PAYMENT OF WAGES. Chapter VIII again contains
provisions applicable to all establishments. It is in
Chapter XI, that Section 58 under the section heading
“Notice of dismissal” figures:
“58. Notice of dismissal. – (1) No employer
shall dispense with the services of an
employee who has been employed for a period
of three months or more except for a
8
reasonable cause, and without giving such
employee at least one month’s notice or wages
in lieu of such notice:
Provided that such notice shall not be
necessary if the services of such employees
are dispensed with on a charge of misconduct
supported by satisfactory evidence recorded
at an enquiry held by the employer for the
purpose.
(2) (a) The employee discharged, dismissed or
retrenched may appeal to such authority and
within such time as may be prescribed either
on the ground that there was no reasonable
cause for dispensing with his services or on
the ground that he had not been guilty of
misconduct as held by the employer or on the
ground that such punishment of discharge or
dismissal was severe.
(b) The Appellate Authority may, after giving
notice in the prescribed manner to the
employer and the employee, dismiss the appeal
or direct the reinstatement of the employee
with or without wages for the period during
which he was kept out of employment or direct
payment of compensation without
reinstatement or grant such other relief as
it deems fit in the circumstances of the
case.
(3) The decision of the Appellate Authority
shall be final and binding in both the
parties and be given effect to, within such
time as may be specified in the order of the
Appellate Authority.”
9
11. Section 63 which also falls in Chapter XI provides
that the provisions of the Workmen’s Compensation Act,
1923 (VIII of 1923) and the rules made under the said
Act will apply mutatis mutandis to every employee of
an establishment.
12. We heard the learned Counsel for the appellants
Shri Rajeev Kumar Bansal. We also heard learned Senior
Counsel for the Respondent No. 1 and 2, Shri Dhruv
Mehta assisted by Shri Santosh Kumar.
13. The learned counsel for the appellants would point
out that the High Court ought not have interfered with
the order of the Appellate Authority which was based
on evidence. It is contended that the appellants were
working as employees of the respondent. It is his
contention that the activity which was being carried
out in the club precincts amounted to supply of meals
or refreshments. Since Section 2 (23) defines
“restaurant or eating-house” and as a “restaurant or
eating-house” is also an establishment and what is more
even if the restaurant or eating-house in which the
10
appellants were employees catered for a class of the
public, the Act stood attracted. In other words, the
contention is that even if the Respondent No. 1 & 2
were running a club in so far as the persons who
frequented the club represented a section of the public
that sufficed to attract the Act. He elaborated by
pointing out that under the bye-laws of the club the
members of the club as also their guests and family
members could avail of the services at the eating house
in which the appellants were working as employees.
14. Per Contra, Shri Dhruv Mehta, learned Senior
Counsel mainly points out that as held by the High
Court in the impugned Judgment, the respondent-Club not
being a residential club, it stood exempted from the
Act under Section 3(j) of the Act. He would contend
that there is clinching evidence of the fact that the
respondent-club would fall within the purview of
Section 3(j) in the form of the definition of the word
‘residential hotel’ in Section 2(22). In other words,
he contended that Section 2 (22) defines ‘residential
hotel’ as including a residential club. Therefore, the
11
core concept of the residential hotel is the service
of lodging which is available in a residential hotel.
In other words, the residential club would be providing
facility for lodging. In a club, which is not a
residential club, which falls under Section 3(j), there
would not be lodging. This suffices, according to him,
to cull out the true contours of a non-residential
club. The respondents run a club, which is not a
residential club.
15. The Bye-Laws of the club have been produced before
us. We may notice the following:
“2. AIMS AND OBJECTIVES
The aims and objectives of the STEEL CLUB
are:- to provide the members and their
families with the facilities usually
obtainable in club of this nature and
including-
a) Indoor games like ‘fable Tennis,
Billiards, cards. chess, carrom etc.
b) Outdoor games like Tennis, Badminton,
Squash etc.
c) Library and reading room facilities.
d) Social gatherings, and swimm1ng,
ii) to provide the members and their
families with necessary facilities for their
cultural, social and intellectual
advancement.
12
3. MEMBERSHIP
a) Members
All the officers of Bhilai steel plant,
MECON, HSCL, BRP, and any other officer
of SAIL posted at Bhilai shall be
eligible to become member of monthly fees
after prior approval of the Governing
Body.
b) Associate Members
The Governing Body may, at its
discretion, admit prominent citizens of
the local areas, Government officers and
officers of public Limited companies
having local site office, as Associate
Members of the club, subject to payment
of the prescribed admission fee and
monthly subscription. Ordinary members
on their ceasing to be a member on
retirement from B.S.P. can become
Associate Members on his/her request.
They will have no right for voting.
Maximum, number of such member ship shall
not exceed 20% of the club membership.
c) Temporary Members
Foreigners connected with Bhilai steel
plant as well as outstation guests,
dependent brothers/sisters who are not
resident of Bhilai/Durg, of members/
Associate Members, may be admitted to the
club as temporary members for a maximum
period of three months, at the discretion
of Governing Body. Temporary members will
have no voting right.”
16. Bye-Law 4 provides for the admission fee and
monthly subscription. Bye-Law 6 provides for entry into
the club premise, which reads as follow:
13
“6. ENTRY INTO THE CLUB PREMISES
Family means spouse and children only.
Children who are employed/married shall not
constitute a part of the family. (Dependent
children upto the age of 21 years are
permitted.
i)The club premises are private premises
and entry thereto is restricted to members
and their families, guests of members and
other persons as may be authorised by the
Governing Body. The Governing Body or any
office Bearer of the club as may be
authorised by the Governing Body on his
behalf, may refuse entry to any person to
the club premises at their/his discretion.
ii) The members/ Associate members be
allowed to bring to the club, their guests,
subject to the following conditions:
a) Local guests who are residents of
Bhilai are not allowed.
b) a member/associate member is allowed
to bring out-station guests, at a time
upto ten days in a month continuously.
The charges per guest will be Rs 1 /-
per day.
c) A guest register will be maintained
at the entry of the club. A members must
fill all the particulars regarding the
guests must pay the charges as per above
in advance.
d) For any other special functions, the
charges will be made as decided by the
governing body.
e) Governing body of the club reserves
the right of admission to any guest.”14
17. The club is managed by a Governing Body.
18. It is necessary to notice the permission granted
by the respondent-club to run catering service to one
Shiv Caterers at the respondent-club dated 05.09.1996.
Relevant provision to be noted are, as follows – Clause
(I) provided that the caterer will run the services
only for the members of the Steel Club and their
families and guests. The club was to make available the
premises and other facilities. The caterer was to pay
rent of Rs.5,000/- per month with a discount of 15 per
cent on the catering bill pertaining to the club
account. The period of the catering service was from
27.08.1996 to 31.03.1997. It is further provided that
caterer and its staff members were to observe strict
discipline and Code of Conduct. Clause (VI) is relevant
and it reads as follows:
“VI. All the staff members for running the
canteen will be arranged by you only and
wages and other statutory liabilities to be
incurred in this regard will be borne by you
only. The undersigned or steel club will not
be responsible for the above payment. In
case club is compelled to pay any sum on
your behalf under any statutory liability,
the amount to be paid by me or club will be
15
recovered from your security deposit and
running bills etc.”
19. All the staff to be employed were to be neatly
dressed and they were to have a common uniform. As per
Clause (X), the catering services was to be made
throughout the working hours of the club and all days
of the week, as decided by the club. Under Clause
(XI), the catering facilities was to be strictly
extended only to the bonafide club members, their
families and guests. Clause (XIV) provided as follows:
“XIV. You will be responsible for the rules
and regulation of employment in accordance
with the government rules and regulation
with regard to the staff engaged by you at
your risk and responsibility.”THE FINDINGS OF THE APPELLATE AUTHORITY
20. The Appellate Authority notes the case of the
appellants to be that the appellants worked in the
establishment of the respondent-club or rather that
they worked in the restaurant for different periods.
The restaurant was being run by the respondents. Their
work was satisfactory. The service of two of the
16
appellants were made permanent. The respondents
appointed Shiva Catering but appellants have not been
employed or paid their wages since April, 1997 and
their termination of service is in violation of Section
58 of the Act.
21. The case of the respondent-club is noted to be that
the appellants were not employed in their
establishment. There was no master-servant
relationship between them. The claim of exemption under
Section 3(j) is noted. The Appellant Authority finds
that the establishment is a club, ostensibly
established for the service Officers of the Bhilai
Steel Plant, MECON, HSCL, BRP and Officers of SAIL
posted at Bhilai. It is found that the plain reading
of the bye-laws would show that the club is definitely
an establishment within the meaning of Section 3(j) of
the Act. The Appellate Authority, however, proceeds to
reason that the establishment is to be identified by
its actual functioning and character and only such
facts would contribute to decide, if such an
establishment is an establishment attracting Section
17
3(j). Evidence was taken. The bye-laws, it was found
went to show there was no mention of any eating house
or catering to the extent of providing liquor and food,
requiring considerable worker force. It was found that
the existence of any restaurant could not be as per the
bye-laws. The identity cards issued to the appellants
were found to be under the seal and signature of the
club. They were found to be designated as Waiter,
Bearer, Cook. The date of issuance in the identity card
was found to be 21.05.1996 in all cases, except two,
where the dates are noted as 27.05.1996 and 28.05.1996.
The existence of restaurant and bar selling food and
liquor, was found established through the Bills. The
bills were found to be issued by Bhilai Caterers, Steel
Club. All the bills bore the seller’s identity as Steel
Club. It is found on the evidence that the club had
control over the catering and its employees, as regard
the discipline. The Appellant Authority found it to
be established that in fact the establishment in
question, has been doing everything what an eating
house or a restaurant or a bar do individually. The
word ‘club’, it is noted, was not defined in the Act.
18
The dictionary meaning of the word ‘club’ was found to
be an association of persons for special purpose. The
establishment provided indoor games like tennis,
billiards, etc., and outdoor games like tennis,
swimming and badminton. The meaning that may be
assigned to the word ‘club’, under Section 3(j), would
be what has been assigned to this word in dictionary
wherein the word was defined as the place where
association of persons takes place for special
purposes. It was further found that in the case of the
establishment in question, the facts show that
establishment is actually an eating house, exclusively
to serve the class of the members of the Steel Club, a
place of amusement/entertainment provided at costs or
payment, food, drink and along with facilities for
entertainment like games, etc. The activities were
found to be that of eating house supplying meals,
refreshment to the members of the club and not the
general public and not a club under Section 3(j). There
existed an eating house/restaurant and bar to serve the
members of the club. They existed in the club premises
and run by the club exclusively for its members. As far
19
as the activity of the club is concerned, it was found
that the Act did not apply to it but the establishment
like bar and restaurant, though exclusively for the
members, would definitely be not club in itself.
Examining the arguments of the respondents that the
Steel Club is neither a residential hotel nor
restaurant or eating place, as defined in Section 2(22)
and Section 2(23) of the Act, the Authority confined
itself to Section 2(23). It was found that an
establishment carrying on business of supply of meals
or refreshment to a class of public would be an eating
house, for the purpose of Section 2(23) of the Act. The
members of the club were found to be the class of the
public. An establishment of bar, restaurant and for
service to the members of the club, would definitely
not be a club within the meaning of Section 3(j) of the
Act though such establishment may be under the
management of the club. The Authority finds further
that for example, there are many establishments under
the management of Bhilai Steel Plan but all of them
were not factories, manufacturing steel and such
establishments are identified by their functioning and
20
nature subjecting them to respective applicable laws.
Thereafter, the Authority proceeded to find that the
appellants were employees and granted the relief, as
already noted.
THE FINDINGS OF THE HIGH COURT
22. We notice the following findings:
“15. Halsbury, 4th Edn., Vol.6, para
201, P.56 defines club as “Except a
proprietary club or an investment club,
it may be defined as a society of
persons associated together, not for
the purpose of trade, but for social
reasons, the promotion of politics,
sport, art, science or literature, or
for any other lawful purpose; but
trading, activities will not destroy
the nature of a club if they are merely
incidental to the club’s purposes.
Therefore, a club cannot be held to be
a place of public entertainment even if
the club supplies the goods to its
members at a fixed price.
xxx xxx xxx
17. Section 3 exempts certain persons
and establishments from application of
the Act. Section 3 sub-section (j)
exempts clubs not being a residential
clubs from the application of the Act.
There is no evidence available on
record. that petitioner No.2 is a
residential club. Even the Appellate
21
Tribunal has not held that petitioner
No.2 is a residential club. It is
neither a proprietary club nor any
investment club. As per the bye-laws
available on record, officers of the
Bhilai Steel Plant, MECON, HSCL, BRP AND
SAIL are eligible to be the members of
the club on payment of prescribed
admission and monthly fee. The
discretion is reserved to the governing
body to admit other class of persons to
induct as associate members of the club
subject to payment of prescribed fee.
Apart from above 2 clauses, temporary
membership can be granted to the
foreigners connected with Bhilai Steel
plant for a limited period. Entry in the
club premises is restricted to its
members and other persons authorized by
the governing body. The aims and
objectives as contained in clause-2 of
the bye-laws are to provide the members
and their families with facilities
usually obtainable in clubs of this
nature including indoor games, outdoor
games, library, reading room, social
gathering and to provide necessary
facilities for their cultural, social
and intellectual advancement Learned
Appellate Tribunal referring to Section
2 of the bye-laws of the establishment
has observed that there is no mention
of any eating house or catering to the
extent of providing liquor or food
requiring considerable work force,
therefore, it has held that existence
of restaurant is not in accordance with
bye-laws.
18. In the considered opinion of this
Court, the above finding of the
appellate Tribunal is perverse, as in
22
sub-clause (1) of clause-2 of the bye-
laws, it has been specifically
mentioned that the aims and objectives
of the Steel club are to provide to its
members and their families with the
facilities usually obtainable in clubs
of this nature including other aims and
objectives mentioned in subsequent part
of clause 2. Existence of catering
facilities in the club to members alone
would not convert the establishment
into restaurant or eating house. The
Steel Club is entitled for exemption
from the application of the Act of 1958,
as per the provisions of Section 3(j)
of the Act.”
23. It was further found that Steel Club-second
respondent, may be held to be an industry under Section
2(f) of the Industrial Disputes Act, 1947, as held by
this Court in Bangalore Water Supply and Sewage Board
v. A. Rajappa and others1 and the appellants may be
held to be its employees. However, the provisions of
the Shops and Establishments Act, cannot be made
applicable to such Steel Club, in view of the exemption
available under Section 3(j) of the Act.
1 AIR 1978 SC 548
23
ANALYSIS AND FINDINGS
24. A club would consist of its members. It is
essentially a voluntary association. It would have its
bye-laws. The bye-laws would, undoubtedly, constitute
the contract, binding its members. There would be a
Governing Body or Managing Committee to manage its
affairs.
25. The Act recites that the Law-Giver enacted it to
regulate the conditions of work and employment in
shops, commercial establishments, residential hotels,
restaurants, eating houses, theatres, other places of
public amusement or entertainment and other
establishments. As we have noted, the word
‘establishment’ has been defined to mean ‘a shop,
commercial establishment, a residential hotel,
restaurant, eating house, theatre or other place of
public amusement or entertainment, to which the Act
applies’. At this juncture, that we must notice Section
3 of the Act. It provides that nothing in the Act will
apply to certain persons and establishments. Among the
establishments, to which the Act does not apply,
24
Section 3(j), provides for a club not being a
residential club. We have noticed the definition of
‘residential hotel’ (Section 2(22) and ‘restaurant or
eating house’ (Section 2(23)). These words have been
defined to mean the premises where the activities, as
defined, are carried out. Section 2(24) defines the
word ‘shop’ again as the premises, where, goods or
services are rendered, inter alia. The definition of
the word ‘establishment’ as far as residential hotel,
restaurant or eating house and a shop, is with
reference to the premises and the activities, which are
carried out therein. In Section 2(4), ‘commercial
establishment’ is defined as an establishment, which
carries on any business, trade or profession, or any
work in connection with any business, trade or
profession, inter alia, and includes a society under
the Madhya Pradesh Societies Registration Act and a
charitable or other trust and certain other
establishments. However, a factory, shop, residential
hotel, restaurant or eating house, theatre or other
place of public amusement or entertainment, are not
included in the definition of ‘commercial
25
establishment’. As already noted, the word
‘establishment’ is defined to mean ‘commercial
establishment, shop, residential hotel, restaurant or
eating house, theatre or place of public amusement or
entertainment. The Act provides for this method of
defining the word ‘establishment’ for the following
reasons. Certain provisions of the Act have been made
applicable to shops and establishments. Certain other
provisions have been made specifically applicable to
residential hotels, restaurants and eating houses.
Still further, theatres or other places of public
amusement or entertainment receive special treatment
in Chapter V. There are, however, other provisions, as
noticed, which apply to all establishments. As far as
Section 58 of the Act is concerned, it taboos the
dispensing with the services of an employee by an
employer where the employee has been employed for a
period of three months or more, except for a reasonable
cause and after giving, such an employee, at least one
month’s notice or wages in lieu of such notice. The
proviso dispenses with the notice, if there is a charge
of misconduct, supported by satisfactory evidence
26
recorded in an enquiry. The employee, who is
discharged, dismissed or retrenched, can appeal against
the same, complaining that there was no reasonable
cause, inter alia, for the dispensing of his services.
The word ‘employee’ has been defined, as noticed, ‘as
a person, wholly or principally employed, whether
directly or through any agency and whether for wages
or for other consideration, in or in connection with
any establishment’. An apprentice is also covered by
the definition of the word ‘employee’. The word
‘employer’ is defined as ‘the person owning or having
control over the affairs of an establishment and
includes the manager, agent or any other person, acting
in the general management or control of such
establishment.
26. Therefore, the scheme of the Act is that the rights
conferred on an employee to appeal against the action
of the employer of an establishment, is fundamentally
based on there being an establishment, to which, the
Act applies. In other words, if the Act does not apply,
the dismissal, termination or retrenchment of the
27
employee cannot attract Section 58 of the Act. This
is despite the fact that but for the exemption, he is
an employee in an establishment otherwise.
27. The argument of the Respondents No. 1 and 2 is
essentially based on the second respondent-club not
being a residential club and, consequently, the Act not
being applicable to the establishment. As can be seen,
Section 3 exempts certain persons and establishments
from the purview of the Act. Section 3 [(a) to Section
3 (1) (d)] describes persons to whom the Act does not
apply. Section 3 (1) e to Section 3 (1) j deals with
establishments to which the Act does not apply. A club
would be an establishment. It is not a person. Even
though, it could also be treated as an association of
persons or voluntary association of persons, however,
in the context of Section 3, we would proceed on the
basis that a club is an establishment. In this regard,
the word ‘establishment’ has been defined as meaning
also a residential hotel in Section 2(22). A
residential hotel has been defined as meaning any
premises, in which, a bonafide business is carried on
28
of supplying for payment, board or lodging, and lodging
to travellers and other members or class of members of
public and including a residential club. Therefore, a
residential club, is treated as residential hotel,
which in turn, is included in the definition of the
word ‘establishment’. A residential club would be an
establishment under Section 2(8). It is clear that a
club is treated as an establishment subject only to
qualification that it is a residential club. A club,
which is not a residential club, may have been within
the ambit of the word ‘establishment’ but for the fact
that the word ‘residential hotel’ takes within its
sweep only residential club. More importantly, the Act
specifically exempts clubs which are not residential
clubs.
28. Thus, proceeding, indeed, on the basis that the
second respondent-club is an establishment, the only
question to be determined is whether it is a club,
which is not a residential club. The Appellate
Authority has found that the club is actually an eating
house exclusively to serve the class of members of the
29
Steel Club. It has all the elements of the bar,
restaurant and eating house. Even though, the Appellate
Authority was called upon to deal with Section 2(22)
of the Act, defining the words ‘residential hotel’, we
find that the Appellate Authority confined itself only
to the definition of the words ‘restaurant or eating
house’ as defined in Section 2(23) of the Act. The
Appellate Authority has proceeded to finally find that
an establishment of bar, restaurant and for service to
the members of the club, would definitely not be a club
withing the meaning of Section 3(j) of the Act.
Therefore, the finding of the Appellate Authority
completely overlooked the invaluable input provided by
the definition of the words ‘residential hotel’ as
contained in Section 2(22) of the Act. We find clear
illumination of the mind of the Legislature being
provided by the definition of the words ‘residential
hotel’ for the reason that it helps the Court to
understand the ambit of Section 3(j), which provides
for exemption of a club, which is not residential. This
is for the reason that a residential club, in
contradiction from a club which is not residential, is
30
treated as an establishment under Section 2(8) of the
Act. In other words, a club, which is residential,
would not be entitled to the exemption, provided in
Section 3(j), whereas, a club which is non-residential
is exempted.
29. It is, therefore, necessary to probe further as to
what is the meaning of the expression ‘residential
club’. Words ‘residential club’ is found in the
definition of the word ‘residential hotel’. A
residential hotel is defined as any premises, where
lodging or board and lodging is provided. It is,
undoubtedly, to be a bonafide business of supplying
lodging or board and lodging. The service of lodging
or board and lodging must be for payment. The aforesaid
services may be provided to travellers and other
members or class of members of the public. Thus, the
recipients of the services are to be the travellers or
members of the public or a class of members of the
public. A perusal of Section 2(22) of the Act would
reveal, the distinguishing feature, which is an
indispensable requirement, to make any premises, a
31
residential hotel, is that lodging must be provided.
It may be lodging and board or it may be lodging alone.
This meaning does justice to the word ‘residential’
which qualifies hotel. In other words, there may be
hotels which do not provide lodging. Such hotels may
fall under Section 2(23). What is meant to be conveyed
by the word ‘residential hotel’ is the element of
service of lodging, being present which is provided in
the hotel. It is in the company of such words, defining
residential hotels that the word ‘residential club’ is
‘included’. We would think that the word ‘residential’
qualifies the word ‘club’. The expression
‘residential’, in the context of the Act, and
particularly in contrast with a club not being a
residential club, would mean that lodging is provided
in such a club. In other words, the distinction between
a residential club, which would be an establishment
under Section 2(8), and, a club, which is not a
residential club, which would be exempted under the
Act, is that in the former, there would be lodging
provided, whereas, in the latter, the facility of
lodging is not, as such, made available. Undoubtedly,
32
but for the fact that the Legislature has included a
residential club expressly in the definition of the
word ‘residential hotel’, it may have been open to
question in that a club is ordinarily understood as
being distinct from a hotel.
30. The Appellate Authority has not found that the
second respondent is a residential club. Appellate
Authority did not even consider the said provision,
that is, Section 2 (22), though Respondents No. 1 and
2 did invite its attention to the said provision. There
is no material also placed before the Court to conclude
that the second respondent-club was a residential club.
If the second respondent-club is not found to be a
residential club, then, it is clear that it would be a
club, which is not a residential club. It would stand
exempted under Section 3(j) of the Act.
31. The question however would arise as to whether the
second respondent is a club? Is it a restaurant or
eating house falling under Section 2(23) of the Act?
The Appellate Authority has found it to be restaurant
or eating house as defined in Section 2 (23), and
33
therefore, an establishment under Section 2(8) of the
Act. We have already referred to the findings rendered
by the Appellate Authority.
32. In Daly’s Club Law by J.N. Martin, the word ‘club’
has been understood as follows:
“The word “club” means essentially an
association of individuals in a way that
involves to some degree the factors of
free choice (which connotes a power of
exclusion), permanence, corporate
2
identity and the pursuit as a common aim
of some joint interest other than the
acquisition of gain (or some mutual
advantage directly connected with the
acquisition of gain, such as those
provided by membership of a professional
society or trade union. It is the last-
named qualification that distinguishes
clubs from business or professional
partnerships, and from trade unions and
the like.”
33. Clubs have been classified broadly into Members
Clubs and Proprietorship Clubs. There are different
classes of members clubs.
34. In the light of the scheme of the Act, it may not
be sufficient to claim the benefit of the exemption
2 Not to be confused with corporate status: a club may be a
corporate body, but may also be an unincorporated association
(See Flemying v. Hector (1836), 2 M. & W. 172.)
34
under Section 3 (j) for the respondents to flaunt the
appellation of the organisation as a club. The club
cannot become a cloak or made a front behind which what
is done is as contained in Section 2(23) of the Act.
In other words, if the activity which is carried out
‘wholly or principally’ is the business of supply of
meals or refreshment to the public or to a class of
public, then the employees working in connection would
get the protection under the Act. At the same time,
if there is genuinely a club where the members assemble
not for the purpose of wholly or principally having
their meals or refreshment but in connection with other
activities and any meals, refreshment and drinks are
also served then a distinction must indeed be drawn.
This is inevitable as harmonizing of the provisions of
Section 3 (j) under which legislature has carved out
an exemption in favour of clubs not being residential
by not applying the provisions of the Act must be given
effect to.
35. It is, therefore, necessary to first ascertain
whether the club exists only in name, and for all
35
intents and purposes it is a restaurant or eating
house. Undoubtedly, the second respondent is a club.
There are members. The members are defined as the
members of the Bhilai Steel Plant, MECON, HSCL, BRP and
any other officer of SAIL found eligible to become a
member of the Club. The governing body may also grant
rights as associate member to certain others.
Similarly, there can be temporary members. Entry into
the club premises is regulated by bye-law 6 of the
Club. The club premises are described as private
premises. Entry is restricted to the members, families
of members and such other persons as are authorised by
the governing body. There is a governing body which
manages the affairs of the club. The aims and
objectives of the club are provided in bye-law No.2,
that is to provide the members and their families with
the facilities obtainable in a club of this nature
including indoor games like table tennis, billiards,
cards, chess, carrom etc. Also, bye-laws contemplate
providing of facilities of outdoor games like tennis,
badminton, squash etc. The bye-laws also contemplate a
library and reading room. So also, the members are to
36
be provided social gathering and swimming. The members
and their families are to be provided facilities for
their cultural and intellectual advancement.
36. The inquiry conducted by the Appellate Authority
was predominantly based on the definition of the word
‘restaurant or eating house’ (Section 2(23)). The
Appellate Authority glossed over the vital clue
provided by the inclusion of the residential club as a
residential hotel.
37. It must be noticed that the second respondent is,
admittedly, a club under its bye-laws. The objective
of the club was to provide various indoor or outdoor
games, library and reading room facilities and social
gatherings. It also contemplated providing members and
their families with facilities for their cultural,
social and intellectual advancement. The appellants are
correct in contending that the authority and the court
are not to be held hostage by the words used in the
bye-laws. In other words, the bye-laws may unerringly
point to activities which are associated with a club.
However, in point of fact what actually goes on in the
37
premises, may be only activities as are described in
Section 2(23) of the Act, namely, the premise of the
club may be used wholly or principally only for the
purpose of an eating place or restaurant. If that is
the case the court would not be oblivious to the actual
nature of activities and still clothe the organisation
as a Club exempted under Section 3(j). However, in this
regard there is unmistakable evidence to show that the
objects in the bye-laws were actually realised and the
members were indeed being provided with various
facilities. The witness for the appellant has stated
that the workmen were allotted duty separately by the
Club Manager. He has said that the he was working in
the canteen which was run by the Club. Other people
were working in the canteen, bar, billiard room,
concert room and table tennis room. Members came there
to play tennis, badminton and cards. The witness for
the respondents have spoken about the club providing
facilities like indoor games, outdoor games, social
gathering and also about there being facility for
social cultural development for the families of the
club members. There are 1400 members of the Club. The
38
club has been working since 1982. The Appellate
Authority has also found that the club does provide
indoor and outdoor games. It goes on to find that as
far as the activities of the club is concerned, the Act
does not apply. But a bifurcation is made qua the
catering service.
38. We can safely conclude that second respondent was
a genuine club. There were three different class of
members. The club was a private premise. Entry to the
club premises was restricted to the members and their
families and other persons permitted by the governing
body. The club did indeed provide various facilities
to be availed by the members and others permitted to
come to the club. It is to cater to their needs by way
of food that apparently the catering contract was
entered into. The appellate authority finds that
identity cards were issued to the appellants in the
year 1996. No doubt the dates of issue as already noted
precede the day 05.09.1996, the date on which the
catering contract is seen issued. The witness for the
appellants has stated in his evidence that “the club
39
invites Shiva Caters for party and give contract to him
and like this every year any one comes on contract.
They arrange parties and we used to work with them.”
No outsider come to the steel club for taking tea,
whiskey or eating samosa but he can come as a guest of
the member is the further deposition of the witness for
the appellants.
39. In the light of this state of facts and the
definition of the word ‘restaurant and eating place’
the conclusion appears to be inevitable that the
respondent club cannot be characterized as premises
which was ‘wholly or principally’ used for the business
of supply of meals and refreshment to the public. In
the first place as already noticed, the members of the
Club and their guests and family members cannot be
described as the ‘public’. Even proceeding on the basis
that the members of the club and their family members
and the guests whom they would bring would constitute
a class of the public, the fact remains that the Court
must turn a blind eye to the multifarious activities
which are both contemplated in the bye-laws and which
40
were admittedly being carried out in the premises by
way of indoor or outdoor games, gatherings to find that
the premises was being used ‘wholly or principally’ for
the business of supply of meals or refreshment. The
fact that by catering services, food and refreshment
and even liquor as are permitted in Clubs under law was
being provided would not make it a case where the club
became premises in which the supply of meals and
refreshments was ‘wholly or principally’ what was
carried out.
40. The Appellate Authority proceeds on the basis that
providing food, refreshment and drink are not
contemplated in the bye-laws and therefore, it would
attract Section 2(23) of the Act. We notice in this
regard that bye-law No.2 (See para 15 of this judgment)
does provide that the aims and objectives of the club
was to provide to the members and their families the
facilities usually obtainable in a club of this nature
and ‘including’ the various facilities like indoor and
outdoor games etc. Therefore, providing of food and
refreshment cannot be described as falling outside the
41
scope of the bye-laws. In other words, a proper
interpretation of bye-law No.2 would mean that the
specifically enumerated facilities in bye-law No.2 are
not exhaustive.
41. The bye-laws do not reveal provision for lodging.
There is no finding also that the club was providing
lodging. In such circumstances, the question that
should have been asked was, whether, being a club,
which was not residential in nature, it stood exempted.
This was not done.
42. In such circumstances, we are of the view that
appellants have not made out a case for interference
with the impugned Judgment. The Appeal fails and it
shall stand dismissed. There will be no order as to
costs.
………………………………………………………………………J.
(K.M JOSEPH)
………………………………………………………………………J.
(PAMIDIGHANTAM SRI NARASIMHA)
NEW DELHI;
OCTOBER 26, 2021.
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