# P.B. NAYAK & ORS v. MANAGING DIRECTOR, BHILAI STEEL PLANT & ORS

- **Citation:** [2021] 10 S.C.R. 432
- **Court:** Supreme Court of India
- **Decided:** 2021-10-26
- **Case number:** Civil Appeal No. 4613 of 2013
- **Bench:** K. M. Joseph, Pamidighantam Sri Narasimha
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/p-b-nayak-ors-v-managing-director-bhilai-steel-plant-ors-34652
- **Pages:** 28

## Headnote

Madhya Pradesh Shops and Establishment Act, 1958: s.3(1)(j)
- Applicability of the Act to respondent-club in view of exemption
under s.3(1)(j) - Among the establishments, to which the Act does
not apply, s.3(1)(j), provides for a club not being a residential club
- The 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 - The service of
lodging or board and lodging must be for payment - The said 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 - As per the Bye-laws of the respondent-club, only the Officers
of Bhilai Steel Plant, MECON, HSCL, BRP and SAIL are eligible to
be members of respondent-club on payment of prescribed fee - The
club premises are described as private premises - There is a
governing body which manages the affairs of the club - Entry is
restricted to the members, families of members and such other persons
as are authorised by the governing body - No outsider could come
to the club for taking tea, liquor or eating samosa but he can come
as a guest of the member - Bye-laws contemplate providing of
facilities of indoor/outdoor games, library and reading room - The
members and their families are to be provided facilities for their
cultural and intellectual advancement - The members of the club
and their guests and family members cannot be described as the
'public' - Thus, 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 - Respondent-club is, therefore,
not a residential club and is exempted from the Act.
Madhya Pradesh shops and Establishment Act, 1958: s.(22),
2(23) - Residential hotel - Restaurant and eating house - A perusal
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of s.2(22) of the Act 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
s.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'.
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

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SUPREME COURT REPORTS
[2021] 10 S.C.R.
[2021] 10 S.C.R. 432
432
P.B. NAYAK & ORS.
v.
MANAGING DIRECTOR, BHILAI STEEL PLANT & ORS.
(Civil Appeal No. 4613 of 2013)
OCTOBER 26, 2021
[K. M. JOSEPH AND
PAMIDIGHANTAM SRI NARASIMHA, JJ.]
Madhya Pradesh Shops and Establishment Act, 1958: s.3(1)(j)
- Applicability of the Act to respondent-club in view of exemption
under s.3(1)(j) - Among the establishments, to which the Act does
not apply, s.3(1)(j), provides for a club not being a residential club
- The 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 - The service of
lodging or board and lodging must be for payment - The said 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 - As per the Bye-laws of the respondent-club, only the Officers
of Bhilai Steel Plant, MECON, HSCL, BRP and SAIL are eligible to
be members of respondent-club on payment of prescribed fee - The
club premises are described as private premises - There is a
governing body which manages the affairs of the club - Entry is
restricted to the members, families of members and such other persons
as are authorised by the governing body - No outsider could come
to the club for taking tea, liquor or eating samosa but he can come
as a guest of the member - Bye-laws contemplate providing of
facilities of indoor/outdoor games, library and reading room - The
members and their families are to be provided facilities for their
cultural and intellectual advancement - The members of the club
and their guests and family members cannot be described as the
'public' - Thus, 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 - Respondent-club is, therefore,
not a residential club and is exempted from the Act.
Madhya Pradesh shops and Establishment Act, 1958: s.(22),
2(23) - Residential hotel - Restaurant and eating house - A perusal
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of s.2(22) of the Act 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
s.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'.
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
P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT
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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
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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.
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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
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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
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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
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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.
Case Law Reference
[1978] 3 SCR 207
referred to
Para 23
CIVIL APPELLATE JURISDICTION: Civil Appeal No.4613 of
2013.
From the Judgment and Order dated 02.02.2009 of the High Court
of Chhattisgarh at Bilaspur in W.P. No.501 of 2002.
Rajeev Kumar Bansal, Abhishek Sharma, Akshay K. Ghai, Advs.
for the Appellants.
Dhruv Mehta, Sr. Adv., Santosh Kumar-I, Advs. for the
Respondents.
The Judgment of the Court was delivered by
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
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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,'the Act'), came to be set aside.
The appellants, along with certain others, invoked the jurisdiction of the
AppellateAuthority under Section 58(2) complaining that their services
were terminated illegally by the respondents which complaint was
accepted by the Appellate Authority. The AppellateAuthority 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;
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
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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;
4. It further includes residential hotel.The said expression is
definedin 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 definedin 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 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).
P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT
[K. M. JOSEPH, J.]
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(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 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;
(g) bazars, fairs or exhibition for the sale of works for charitable
or other purposes from which no profit is derived;
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(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)
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 IVpurports 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
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of three months or more except for a 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."
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 appellantsShriRajeev
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"
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is also an establishment and what is more even if the restaurant or eatinghouse in which the 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 aclub 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 atthe 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 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 includinga)
Indoor games like 'Table Tennis, Billiards, cards.
chess, carrom etc.
b)
Outdoor games like Tennis, Badminton, Squash etc.
c)
Library and reading room facilities.
d)
Social gatherings, and swimming,
ii) to provide the members and their families with necessary
facilities for their cultural, social and intellectual advancement.
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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:
"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
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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 outstation 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."
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
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liability, the amount to be paid by me or club will be 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 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 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
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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. 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.