Bombay High Court
Cricket Club Of India And Ors. vs Employees' State Insurance ... on 4 January, 1994
Equivalent citations: (1998)IIILLJ270BOM, 1994(2)MHLJ1228
JUDGMENT
1. Appellant No. 1 - The Cricket Club of India - was incorporated under the Indian Companies Act, 1913 and was registered as a Company Limited by Guarantee, having no share capital. The Cricket Club of India was incorporated with the object to encourage and promote various sports and particularly cricket. The Club provides for tennis courts, badminton courts, squash courts, swimming pool facilities and in addition facilities for recreation and entertainment of members. Admission to the Club premises is restricted only to members and their guests. The Club is set up on a large plot of land admeasuring 83, 526 sq. yards secured from State Government on long lease. The Club had laid out cricket ground and constructed a stadium and a Club House. The Club also constructed a banquet hall. The Club has a catering department where food and beverages are prepared for consumption of members and their guests. The club has a kitchen where food is prepared and also a pantry in the swimming pool area where snacks are prepared. It is not in dispute that the Club is a huge undertaking with wide-ranging activities, large budget and army of staff. The members are entitled to facilities at a concessional rate and the employees render services to the members and their guests.
2. The Parliament enacted the Employees' State Insurance Act, 1948 to provide for certain benefits to the employees in case of sickness, maternity and employment injury and to make provision for certain other matters in relation thereto. Sub-section (4) of Section 1 provides that the provisions of the Act shall apply to all factories other than seasonal factories. The expression 'factory' is defined under Section 2(12) of the Act and means any premises including the precincts thereof -
(a) Whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on, or
(b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power or is ordinarily so carried on".
Section 2(14-AA) of the Act defines expression "manufacturing process" and provides that the expression shall have the meaning assigned to it under Factories Act, 1948. Section 2(k) of the Factories Act, 1948 defines expression "manufacturing process" and reads as follows :
" (k) "manufacturing process" means any process for -
(i) making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport delivery or disposal, or
(ii) pumping oil, water sewage or any other substance; or
(iii) generating, transforming or transmitting power; or
(iv) composing types for printing, printing by letter press, lithography, photogravure or other similar process or book binding; or
(v) constructing, reconstructing, repairing, refitting, finishing or braking up ships or vessels; or
(vi) preserving or storing any article in cold storage".
On December 7, 1972, the Regional Director of Employees' State Insurance Corporation addressed communication to the Club calling upon to register the Club as a factory under the Act by filing return in the form prescribed under the Act. The Club resisted registration under the provisions of the Act on the ground that the Club is not an industrial or commercial establishment or a factory and consequently, it is not open for the Director to compel the Club to get registered under the Act. A large correspondence ensued between the parties and the Club consistently refused to get registered under the provision of the Act. Ultimately, on September 7, 1977, the Director informed the Club that kitchen run by the Club falls within the definition of 'factory' under Section 2(12) of the Act and the Club had engaged services of more than 20 employees in the kitchen where manufacturing process is carried out with or without the aid of power. The Director also informed that the catering services rendered by the Club are essential services for the existence of the Club and consequently, the entire Club is required to be treated as a factory and the Club should get registered. The Club entered into correspondence denying the claim and thereupon the Director served notice of demand calling upon the Club to produce all necessary records comprising of attendance register, wages register, cash books, ledgers, etc. The action of the Director gave rise to the filing of the petition by the Club of the Original Side of this Court under Article 226 of the Constitution of of India.
3. The Club asserted that the provisions of the Act are applicable only to factories in which the manufacturing process is carried on with or without the aid of power. It was contended that the Club is not a factory as the Club is registered under the Bombay Shops and Establishments Act. The Club does not dispute that 24 employees of the Club are working in kitchen and pantry and food is prepared by use of power. The petition was resisted by the respondents by filing return, inter alia, claiming that the provisions of the Act are clearly attracted as the catering services rendered by the Club squarely fall within the definition of 'manufacturing process' and being an essential service, in absence of which the Club cannot smoothly function, the demand made by the respondents cannot be questioned. The learned single Judge by the impugned judgment dated January 7, 1992 accepted the contentions urged on behalf of the respondents and declined to grant relief sought by the Club. The learned Judge held that the Club had employed 10 or more persons in the premises and the manufacturing process was carried out and the definition of the expression 'factory' under Section 2(12) of the Act is clearly attracted. The decision of the learned Single Judge is under challenge in this appeal.
4. Dr. Chandrachud, learned counsel appearing on behalf of the Club, submitted that the Club cannot be treated as factory under Section 2(12) of the Act because the Club is not an industry as laid down by the Supreme Court in the decision Cricket Club of India v. Bombay Labour Union & Anr. The reliance on the decision is not accurate. It is undoubtedly true that the Supreme Court had held that the activity of Cricket Club of India is not an industry as it is members self service institution. The decision was specifically overruled in the subsequent judgment delivered by the Supreme Court and Bangalore Water Supply and Sewerage Board v. A. Rajappa. The Supreme Court observed that promotion of sports and games by itself is not a legal reason for excluding the organisation from the category of industries if all the necessary ingredients are present. The Supreme Court held that the nature of activities carried out by the Club cannot be described as self service without taking liberty with reality. The Supreme Court then observed that the testimony of the activities can leave none in doubt that this colossal Club is a vibrant collective undertaking which offers goods and services to a section of community for payment and there is a co-operation between employer and employees in this project. In view of the later decision of the Supreme Court, it is futile to suggest that the Club is not an industry or will not attract the definition of 'factory' under Section 2(12) of the Act. Dr. Chandrachud very rightly did not dispute that the Club had engaged services of more than 20 employees in the catering department which runs a kitchen and pantry.
5. The learned counsel then urged that the Club cannot be treated as a factory because the activities carried out in kitchen and pantry do not amount to manufacturing process as defined under Section 2(k) of the Factories Act. The contention is no longer res-integra in view of the decision of the Division Bench of this Court reported in 1980 LIC 100 Poona Industrial Hotels Ltd. v. I. C. Sarin & Anr. The Division Bench was examining the question as to whether preparation of food with the aid of various electrical appliances in kitchen or hotel would amount to manufacturing process and the hotel can be described as factory. The Division Bench noticed that the definition of factory consists of two parts, the first part requiring that 20 or more persons must be employed, while the second part demands that in any part of the premises manufacturing process must be carried on. The Division Bench then observed that the preparation of the food necessarily implies making of the food which is an article or substance as mentioned in the definition of the phrase "manufacturing process". It was held that several articles which go into the preparation of the food are altered or cleaned or otherwise treated or adapted before the ultimate item of food emerges in the kitchen and this process of making food will have to be treated as "manufacturing process" as defined under Section 2(k) of the Factories Act. The decision of the Division Bench was examined by the Supreme Court in the case G. L. Hotels Ltd. & Ors. v. T. C. Sarin & Anr. and the finding that the preparation of food carried in the kitchen amounts to manufacturing process under Section 2(k) of the Factories Act was upheld.
Dr. Chandrachud then submitted that the expression "manufacturing process" under Section 2(k) of the Factories Act demands that the process of making an article must be with the view to use or sell or dispose of and the food prepared by the Club in the kitchen and the pantry is not for the purpose of use and sale. The contention cannot be accepted because the food is prepared in the kitchen and pantry obviously for the purpose of sale to the members and their guests. It is futile to suggest that the activities of the Club are in the nature of self service and therefore, the food served to the members and their guests does not amount to sale. It is not in dispute that charges are levied for the food served to the members and their guests and the expression use and sale must be understood in its ordinary sense and we have no hesitation in sharing the view taken by the learned Single Judge that the food was being supplied by way of sale. The contention of Dr. Chandrachud that the food was prepared for the purpose of consumption and therefore the expression 'use' is not attracted also cannot be accepted. It was suggested that the expression 'use' connotes that the article manufactured will be available for a substantially long duration and articles like food items which are immediately consumed are not manufactured for the purpose of use. The submission is only required to be stated to be rejected. An article can be used for many purposes including one of consumption. We are not prepared to accede to the submission that when the food item prepared in the kitchen is consumed, the process of preparation of food is not with a view to use of the same.
6. Dr. Chandrachud then submitted that while construing the expression 'factory' under Section 2(12) of the Act, the definition should be limited only to those premises where manufacturing activity is carried on and should not cover the entire establishment. The contention is that, at the most, the manufacturing activity is carried out in the kitchen and pantry of the Club and only those employees who are working in the kitchen and pantry should be covered by the provisions of the Act. In support of the submission, reference was made to the observations of the Supreme Court in the case The Nagpur Electric Light and Power Company Ltd. v. The Regional Director, Employees' State Insurance Corporation. It is not possible to accede to the submission in view of the decision of the Supreme Court in G. L. Hotels Limited (re. supra) where identical contention was examined. The Supreme Court explained the observation made in the earlier case of the Nagpur Electric Light and Power Company Ltd. by pointing out that the observation "no part of the premises is used for the purpose unconnected with the manufacturing process" is not the basis of the conclusion arrived at. The later decision clarified that the observation has to be understood in the context in which it was made and cannot be interpreted to mean that in every case such connection has necessarily to be established in all respects. It was then observed :
"It is enough, according to us, that the manufacturing activity has a broad connection with the activities carried on in the rest of the premises. For example, in the present case, it cannot be denied that kitchen is an integral part of the hotel business. Those who occupy a hotel do depend upon the food and the beverages which are prepared in its kitchen. It is not possible to conceive of a hotel without a kitchen. Lodging and boarding are both essential components of the services rendered by a hotel. Hence, it cannot be denied that the activity in the kitchen has a connection with activities carried on in the rest of the hotel premises".
The observations of the Supreme Court squarely apply to the facts of the present case. It cannot even be debated that kitchen is an integral part of the Club activities. Indeed, a large number of members and their guests regularly visit the Club to partake the food prepared in the kitchen. There is hardly any Club in Bombay which does not provide for catering facilities and indeed it is difficult to conceive of a Club which lacks catering services. The Clubs provide facilities for sports but large number of members visit Club not necessarily to participate in the sporting activities but to entertain themselves and their guests by partaking beverages and food served by the Club. We have no hesitation in concluding that the activity in the kitchen has a direct connection with the activities carried on in the rest of the Club premises. The contention of Dr. Chandrachud, that the kitchen activity has no relation at all with the activities in the other premises of the Club, therefore, cannot be accepted and it is necessary for the Club to get registered under the provisions of the Act in respect of all the employees whose services are engaged by the Club irrespective of the fact in which Department they are working.
The object of Parliament, in enacting the provisions of the Employees' State Insurance Act is to extend the welfare coverage to as large section of the employees as possible and being a beneficial legislation, the interpretation of definition should be in consonance with the object to be achieved. The coverage of the Club under the provisions of the Act would confer benefit on the lowly paid employees engaged by the Club and, in our judgment, the benefit cannot be denied by construction which would defeat the object to be achieved under the provisions of the Act. In our judgment, the view taken by the learned Single Judge does not suffer from any infirmity and the appeal must fail.
7. Accordingly, appeal is dismissed with costs.
The respondents are entitled to enforce the Band guarantee furnished by the Club in accordance with order dated November 25, 1992 delivered by Supreme Court in Civil Appeal No. 4975 of 1992. It is also open for the respondents to adopt appropriate methods for realisation of the balance amount, if any, from the Club.
Miss Chandurkar orally applies for stay of enforcement of the Bank guarantee. Prayer refused.