P.B. Nayak & Ors. vs Managing Director, Bhilai Steel Plant & Ors.

Dismissing the appeal, the Court

HELD: 1.1 A club consists of its members. It is essentially a voluntary association. It has 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. The 1958 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. Section 3 of the Act provides that nothing in the Act will apply to certain persons and establishments. Among the establishments, to which the Act does not apply, Section 3(j), provides for a club not being a residential club. The words ‘residential hotel’ and ‘restaurant or eating house’ 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. 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 establishment’. 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, 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. [Paras 24, 25][451-F-H; 452-A-H]

2.1 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(1)(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, a club is assumed to be 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 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. [Para 27][453-D-H; 454-A]

2.2 The Appellate Authority has found that the club is actually an eating house exclusively to serve the class of members of the Steel Club. It has all the elements of the bar, restaurant and eating house. 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 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. A residential club, in contradiction from a club which is not residential, is 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. [Para 28][454-B-F]

2.3 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 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’. 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, 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. [Para 29] [454-F-H; 455-A-D]

Daly’s Club Law by J.N. Martin – referred to.

3.1 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. [Para 34][456-C-F]

3.2 It is, therefore, necessary to first ascertain whether the club exists only in name, and for all 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-laws 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 be provided social gathering and swimming. The members and their families are to be provided facilities for their cultural and intellectual advancement. [Para 35][456-F-H; 457-A-B]

3.3 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. There is 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 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. [Para 37][457-D, F-H; 458-A-B]

3.4 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 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 “the club 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 memberis the further deposition of the witness for the appellants. [Para 38][458-B-E]

3.5 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 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 were admittedly being carried out in the premises by way of indoor or outdoor games, gatherings to find that the premiseswas 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. [Para 39][458-E-H]

3.6 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. Bye-law No.2 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 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. The bye-laws do not reveal provision for lodging. There is no finding also that the club was providing lodging. Appellants have not made out a case for interference with the impugned Judgment. [Paras 40, 41, 42][459-A-D]

Bangalore Water Supply and Sewage Board v. A.

Rajappa and others AIR 1978 SC 548 : [1978] 3

SCR 207 – referred to.