Full Judgment Text
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CASE NO.:
Appeal (civil) 37 of 1998
PETITIONER:
The Management of the Tata Iron & Steel Co.Ltd.
RESPONDENT:
Chief Inspecting Officer & Ors.
DATE OF JUDGMENT: 17/12/2004
BENCH:
Ashok Bhan & A.K. Mathur
JUDGMENT:
J U D G M E N T
WITH
Civil Appeal No.2309 of 1999
Tata Iron & Steel Co.Ltd. Appellant
Versus
Labour Court, Jamshedpur & Anr. Respondents
A.K. MATHUR, J.
Both these appeals raise common question of law, therefore
they are disposed off by this common order.
CIVIL APPEAL NO. 37 OF 1998
This appeal is directed against an order passed by the Division
Bench of the Patna High Court dated February 14, 1997 whereby
the Division Bench of the High Court held that the Tata Main
Hospital at Jamshedpur (hereinafter referred to as the ’Hospital’) is
an establishment within the meaning of Section 2(6) of the Bihar
Shops and Establishments Act, 1953 (hereinafter to be referred to as
the "Act") and it is covered by the aforesaid Act. Aggrieved by the
aforesaid order this appeal has been filed by the appellant.
Brief facts which are necessary for the disposal of this appeal
are that the Hospital was established by the Management of Tata Iron
& Steel Company Ltd in the year 1908 for providing medical facilities
to the employees as well as their families and dependent of the
Company, and its associated companies namely, TELCO, Tata
Yodogawa, Tata Robin Fraser and their employees at Jamshedpur.
It is also alleged that apart from catering for the employees of the
appellant and its associated industries it also caters for the
Government employees on payment of charges about Rs.50/- per
day and from other private patients at the rate of Rs.120/- per day. It
is alleged that 75 % of the patients treated are either employees of
the appellant or its associated companies or family members of the
employees of the appellant or its associated companies. 15% of the
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patients are Government employees and the rest 10% of the patients
are outsiders. It is alleged that a letter was sent by the Labour
Superintendent, Jamshedpur to the appellant on November 7,1995
for registration of the Hospital as an establishment under the
provisions of the Act. An objection was taken by the appellant to the
effect that since it is providing medical service to its employees and
its associated industries and it is not involved in the commercial
activities, as such it is not an establishment within the meaning of the
Act and it cannot be covered by the aforesaid Act. This objection was
overruled by the authorities. Hence the present writ petition was filed.
The Division Bench of the Patna High Court after considering
necessary provisions of the Act and the Rules framed there under
affirmed the order of the authority and held that the establishment is
covered by the Act. Hence the present appeal by way of special leave
before this Court.
We have heard learned counsel for the parties. Principally two
submissions have been made; (i) that the present Hospital does not
fall within the definition of ’establishment’ as defined in Section 2(6) of
the Act and (ii) that under section 4(2) read with Schedule 1 of item
No.2 it is a charitable hospital and therefore it is exempted under the
aforesaid section.
Before we advert to the facts of the case, we may mention here
that a statement of revenue and expenditure of the budget of the
Medical Division has been furnished by the appellant and it has been
pointed out that there is always deficit in the medical account under
the Hospital head. It is also admitted position that the Hospital is one
of the Divisions of the appellant. It has also given the details as to the
numbers of patients of the appellant and its associated companies
are taken care and number of Government servants and private
patients are also being treated by the Hospital.
Intervenors have also filed a statement showing what are the
charges effective from April 1,2000 for non-entitled category of
patients and it has been pointed out that admission charge of Rs.75/-
has been revised to Rs.1000/-, charges in the general ward is
Rs.400/- per bed, VIP cabin is charged at Rs.1250/- and ICU cabin
charge is Rs.2250/- per day. Likewise, the details for each of the
medical speciality charges are being levied varying from Rs.100/- to
Rs.1000/-. It is an admitted position that the Hospital is a part of the
establishment of the appellant and the Medical is one of its
Department.
Section 2(4) defines ’employee’ which reads as under:
" (4) "employee" means a person wholly or
partially employed for hire, wages including
salary, reward, or commission in, and in
connection with any establishment and includes
’apprentice’ but does not include member of the
employer’s family. It also includes person
employed in a factory who are not workers
within the meaning of the Factories Act, 1948(63
of 1948), and for the purpose of proceeding
under this Act, include an employee, who has
been dismissed, discharged or retrenched for
any reason whatsoever;"
Section 2(5) defines ’employer’ which reads as under:
" (5) "employer" means a person who owns or
exercises ultimate control over the affairs of an
establishment and includes a manager, agent or
any other person in the immediate charge of the
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general management or control of such
establishment;"
Section 2(6) defines ’establishment’ which reads as under:
" (6) " 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-
(i) administrative or clerical service appertaining to
such establishment;
(ii) a shop, restaurant, residential hotel, eating
house, theatre or any place of public
amusement or entertainment; and
(iii) such other establishment as the State
Government may, by notification, declare to be
an establishment to which the Act applies;
but does not include a ’motor transport
undertaking’ as defined in clause (g) of Section
2 of the Motor Transport Workers Act, 1961 (27
of 1961);"
Section 2(16) defines ’shop’ which reads as under :
"(16) "Shop" means any premises where goods
are sold, either by retail or wholesale or where
services are rendered to customers and includes
an office, store-room, godown, warehouse and
work place, whether in the same premises or
elsewhere, used in connection with such sales
or services, but does not include a restaurant, a
residential hotel, eating-house, theatre or other
place of public amusement or entertainment;"
Section 4 deals with exceptions which reads as under :
" 4.Exceptions-(1) The provisions of this Act
shall not apply to any precinct or premises of a
mine as defined in clause (f) of Section 2 of the
Mines Act, 1952 (XXV of 1952).
(2) Notwithstanding anything contained in this
Act, the provisions thereof specified in the third
column of the Schedule shall not apply to the
establishment, employees and other persons
referred to in the corresponding entry in the
second column;
Provided that the State Government may, by
notification, add to, omit or alter any of the
entries in the Schedule in respect of one or more
areas of the State and on the publication of such
notification, the entries in either column of the
Schedule shall be deemed to be amended
accordingly."
Item No.2 of Sehedule I which is relevant for our purpose reads as
under :
" SCHEDULE I
--------------------------------------------------------------------------------------------
Serial Establishments, employees or other Provisions of the
No. persons Act
--------------------------------------------------------------------------------------------
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xx xx xx
2. Establishments for the treatment or the All provisions
care of the infirm, sick, destitute or the
mentally unfit, which are not run for
the profits but for charitable, philanthropic,
religious or educational object. "
Section 6 deals with registration and renewal of the establishment. It
reads as under :
"6. Registration of establishments and renewal
thereof- The State Government may make rules
requiring the registration of establishment or any
class of establishments or renewal thereof and
prescribing manner and the fees payable for
such registration or renewal."
Rest of the provisions deal with hours of work, weekly holidays, other
service conditions and removal of the employees and with necessary
provisions for implementation of the provisions of the Act.
Rules have been framed under this Act in exercise of the
powers conferred under Section 40, they are known as the Bihar
Shops & Establishment Rules,1955 (hereinafter to be referred to as
the ’Rules’). Rule 3 lays down that within thirty days of coming into
force of the aforesaid Rules, an employer shall make application for
registration of the establishment. Rule 3-A deals with renewal of
certificate of registration. Other provisions with regard to the service
conditions have been dealt with under the Rules.
Under the scheme of the Act, when the Hospital did not apply
for registration, then a notice was sent to the Hospital for registration.
The appellant objected to the registration. The said objections were
overruled and the appellant was asked to get the Hospital registered.
Against this order, the present writ petition was filed before the High
Court. The question is whether the present Hospital is an
establishment or not. If it is an establishment, then it is under
obligation to apply for registration. It is an admitted position that the
Hospital is a part of the appellant management and as is more than
evident that it is one of the Divisions of the appellant, as per the
budgetary provisions pointed out above. Therefore, there is no two
opinion in the matter that the Hospital is a part of the appellant-
Management. But the question is whether this Hospital is covered by
the definition of the ’establishment’ or not. The definition of
’establishment’ as reproduced above, clearly shows that any
establishment which carries on any business, trade or provisions or
any work connected with or incidental or ancillary to, any business,
trade or profession and it includes shop, restaurant and other place of
amusement and it further says that the State Government by
notification may declare such other establishment to be an
establishment to which this Act applies. The only exception is the
motor transport undertaking as defined in clause (g) of the Motor
Transport Workers Act, 1961. The question is whether this Hospital
is engaged in business or not. In this connection, Mr. T. R.
Andhyarujina, learned senior counsel for the appellant has submitted
that the definition of ’business is too wide and normally business or
trade is for some profit or gain. But this Hospital is not working for any
profit or gain and he emphasized with reference to the particulars
given by him, that the Hospital is running in loss. Therefore, the
question is what are the attributes of the business. In this connection,
learned counsel has invited our attention to the dictionary meaning of
the word, ’business’ as given in Black’s Law Dictionary, which reads
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as under:
" "business". A commercial enterprise carried
on for profit; a particular occupation or
employment habitually engaged in for livelihood
or gain."
So far as the definition of ’business’ is concerned, it is clear from the
facts that right from the beginning when the Hospital was established,
it was catering to the needs of the employees and their families at
TISCO and its associated companies but at the same time it was
open for the Government servants and private patients also. The
Government servants and private patients were charged for their
treatment in the Hospital. It is not primarily meant to cater to the
employees of the appellant or their associated companies but also for
the private individuals also. Therefore, it cannot be said that the
Hospital was only meant to cater the need of the employees of the
appellant. It had the business activities by charging fees from the
Government servants as well as private patients for their treatment in
the Hospital. It may also be relevant to mention here that the
establishment of the present Hospital is an obligation on the part of
the appellant management because otherwise they had to contribute
under the Employees State Insurance Act,1948. Under the said Act
the employees as well as the employer , both have an obligation to
make contribution for the medical facilities provided by the E.S.I.
Hospitals. All the establishments have to get themselves registered
under section 2 A of the E.S.I. Act. They have also to make
necessary contribution as per the provisions of the Act. At the same
time, under section 87 of the Act, exemption can also be granted by
the Government by issuing notification exempting any factory or
establishment or class of establishments in any specified area from
operation of this Act for a period of one year and may from time to
time by like notification renew any such exemption for periods not
exceeding one year at a time. It is admitted by learned counsel for the
appellant that the present establishment had obtained exemption up
to the year 1996 but after that exemption was not granted and a
petition was filed in the Court and stay order has been granted.
Therefore, even if the establishment of the Hospital may be for the
purpose of taking care of their employees , it is under statutory
obligation of the appellant management otherwise they would have to
make registration under Section 2A of the E.S.I. Act, 1948. It is
admitted that the appellant sought exemption from operation of the
Act which was granted up to the year 1996. Be that as it may, the fact
remains that from the materials available on record it is apparent that
the Hospital is not only catering for the employees but it caters to the
Government and private patients as well for which it is charging fee
for the services rendered, it is irrelevant whether it is running for
profit or loss. Profit or loss is part of the business and it is incidental
to every business. Therefore, it is not decisive of the matter whether
the establishment is running for profit or gain. Our attention was
drawn to a decision of this Court in the case of Ruth Soren vs.
Managing Committee, EAST I.S.S.D.A. & Ors. reported in (2001) 2
SCC 115. There also, Their Lordships have observed that an
establishment for the purpose of this Act i.e. Bihar Shops and
Establishments Act, 1953 means an establishment which carries on
any business , trade or profession or any work in connection with or
incidental or ancillary thereto. In the context of educational institution
after referring to the case of Bangalore Water Supply & Sewerage
Board’s case, Their Lordships observed that in the case of an
educational institution, it may be industry but not Establishment
under the Act of 1953, it was observed as under:
" Even so, the question for consideration is
whether educational institution falls within the
definition of "establishment" carrying business,
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trade or profession or incidental activities
thereto, "Establishment" , as defined under the
Act, is not as wide as "industry" as defined under
the Industrial Disputes Act. Hence, reliance on
Bangalore Water Supply & Sewerage Board v.
A. Rajappa for the appellant is not of any help"
Therefore, this case does not provide any assistance with regard to
the present case at hand. In the said case also it was held that the
respondent which was running an educational institution in which the
appellant was employed, being not an establishment, the application
under section 26(2), before the Labour Court against the appellant
made by the respondent was incompetent and it was observed that
running of the educational institution will not be covered by the
establishment. But in the present case. from the facts as mentioned
above, it is more than evident that the Hospital is not being run for the
employees of the appellant management or their associated
industries only but it caters to the need of the Government servants
as well as private patients and fee is charged from them. Therefore,
the Hospital is doing business and it is not doing charity.
Similarly, in the case of B.R.Enterprises etc. etc. vs.
State of U.P. & Ors. etc.etc. reported in (1999) 9 SCC 700, it was
observed as follows:
" Article 301 is confined to trade and commerce
while Article 298 refers to trade and business
and to the making of contracts for any purpose.
The use of the words "business " and "contracts
for any purpose" and its title"\005 trade, etc."
makes the field of Article 298 wider than Article
301. Significantly, the different use of words in
the two articles is for a purpose; if the field of the
two articles are to be the same, the same words
would have been used. It is true, that since
"trade" is used both in Articles 298 and 301, the
same meaning should be given. But when the
two articles use different words, in a different set
of words conversely, the different words used
could only be to convey different meanings. If
different meaning is given then the field of the
two articles would be different. So, when instead
of the words "trade and commerce" in Article
301, the words " trade or business" are used it
necessarily has a different and wider
connotation than merely "trade and commerce".
" Business" may be of varying activities, may or
may not be for profit, but it necessarily includes
within its ambit "trade and commerce"; so
sometimes it may be synonymous but its field
stretches beyond "trade and commerce"
Another aspect that was emphasized was that since it is running in
loss and it is not making any profit, therefore it is not covered by the
definition of establishment. It may be relevant to mention that the
profit or loss is not decisive of the matter with regard to the business.
In this connection, reference may be made to the decision of this
Court in the case of Board of Revenue & Ors. v. A. M. Ansari & Ors.
reported in (1976) 3 SCC 512 wherein Their Lordships while
interpreting the definition of business with reference to A.P.General
Sales Tax Act, 1957 have held as follows:
" \005 profit motive is not an essential constituent
in view of the amendment introduced in the
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definition of the term ’dealer’ in 1966. As regards
the other ingredients the auctions of the forest
produce by the Government of Andhra Pradesh
are admittedly carried on only annually and not
at frequent intervals. Thus the important element
of frequency being lacking in the instant cases, it
cannot be held that the said Government was
carrying on the business of sale of forest
produce."
Therefore, to say that the Hospital is not making any profit that is not
the touchstone whereby we can judge whether they are doing the
business or not. If the activity is frequent, continuous and relating to
business, whether they earn profit or not that is not the crux of the
matter. Profit or loss is incidental to the business. What is essential is
the frequency, continuity and relating to transactions. These
ingredients are present in the present activities of the Hospital that it
is continuing and regularly taking care of the patients be it private
patients or patients belonging to the appellant management or their
associated industries. Therefore, the emphasis of the learned counsel
that it is not making profit is not relevant for the present case. Our
attention was also invited to various other definitions with regard to
the business in the context of relevant enactment. It is not necessary
to refer to those definitions. Suffice it to say that the profit and loss is
not an essential ingredient of business, what is important is
frequency, relating to business and continuity. Therefore, from the
materials placed by the parties, it is more than apparent that the
present Hospital is a part of the establishment of the appellant
management and it caters not only for the employees of the appellant
management & its associated companies but for Government
servants and private patients as well from whom fee is charged.
Therefore, they are doing business and they fall within the definition
of establishment as defined in Section 2 (6) of the Act.
The next question which has been argued by learned senior
counsel for the appellant was that it was doing charity, therefore, it is
entitled to exemption under section 4(2) read with Item No.2 of
Schedule I. We fail to understand how this activity of the present
Hospital can be treated to be a charity. As pointed out above, it is
under the obligation of the appellant Management to subscribe for
the employees under the Employees State Insurance Act, 1948 by
making contribution. Since they were not subscribing contribution
because they obtained exemption under section 87 of the E.S.I.Act,
1948 as they run the hospital for the benefit of the employees , the
exemption was granted to them till 1996 but subsequently that
exemption was refused. Therefore, it cannot be said that what they
are doing is charity. Apart from that they are charging fee from the
Government Servants and the private patients for the services
rendered by them. It is not their case that they are treating all and
sundry without any charges. In this connection, learned counsel for
the appellant invited our attention to a decision of this Court in the
case of Additional Commissioner of Income Tax, Gujarat,
Ahmedabad v. Surat Art Silk Cloth Manufacturers’ Association, Surat
reported in (1980) 2 SCC 31. This was a case under the Income-Tax
Act, 1961 and in that connection Their Lordships reviewed all the
case law in paragraph 6 of the judgment and observed that law is well
settled that if there are several objects of a trust or the institution,
some of which are charitable and some non-charitable and the
trustees or the managers in their discretion are to apply the income or
property to any of those objects, the trust or institution would not be
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liable to be regarded as charitable and no part of its income would be
exempt from tax. In other words, where the main or primary objects
are distributive, each and every one of the objects must be charitable
in order that the trust or institution might be upheld as a valid charity.
Their Lordships have applied the principle of dominant purpose. The
question is whether it is satisfied in the present case or not. In the
present case, the dominant purpose is to cater for the needs of the
employees of the appellant Management and its associated
Industries. In fact, it was established for that particular purpose only.
But the services were also extended to Government servants and to
the private patients not free of cost. Therefore, the dominant purpose
for establishing the hospital is not charitable which is exempted
under the Act and the law which has been laid down by this Court in
the aforesaid case is that the principle of dominant purpose should
be found out from the activities or the business. If the dominant
purpose is appearing as charity then it will be admissible to the
benefit of a charity and if it is incidental purpose then it will not be
entitled to the benefit. In the present case, neither of the situation
arises. It is established that this hospital caters as a social measure
for the employees of the appellant Management and its associated
industries and for the benefit of the Government servants as well as
private patients, on payment of fee. Therefore, it does not qualify for
any cause as charitable institution so as to be exempted under
section 4(2) of the Act read with Item No.2 of Schedule I. In this
connection, our attention was also invited to a decision in the case of
Le Cras. V. Perpetual Trustee Co.Ltd. & Ors. reported in (1967) 3 All
E.R. 915. In this case, a testator bequeathed by his will two-thirds of
the income of his residuary estate to the Sisters of Charity for the
general purposes of St.Vincent’s Private Hospital for a period of two
hundred years or for so long as they should conduct the Hospital. The
private hospital was having 82 beds and close to a public hospital
which had 500 beds. This was also conducted by the Sisters of
Charity who were a voluntary association of women devoting
themselves without reward. The reason for establishing the private
hospital was to relieve the pressing demand of the public for
admission to the general hospital. Charges were made at the private
hospital for beds; it provided accommodation and medical treatment
in greater privacy than would be possible in a general hospital. There
were surpluses of income over expenditure but the private hospital
was not conducted for profit. The surpluses had been used to
contribute to the maintenance of the general hospital and for the
general purposes of the Sisters of Charity. In that context their
Lordships held that the gift of income to the Sisters of Charity for the
general purposes of the private hospital was a valid charitable gift.
Therefore, what prevailed in the mind of Their Lordships is the
dominant purpose for which the hospital was being run. That is not
the case here.
Similarly in the case of Trustees of Tribune Press, Lahore v
Commissioner of Income-tax, Punjab reported in AIR 1939 PC 208,
similar question arose under the Income Tax Act,1922. In the said
case while dealing with the Income Tax Act, 1922 held as follows :
" Though the personal or private opinion of the
Judge is immaterial, nevertheless for a charitable gift to be
valid it must be shown (1) that the gift will or may be
operative for the public benefit, and(2) that the trust is one
the administration of which the Court itself could, if
necessary, undertake and control. There is nothing in the
Income-tax Act to discharge the Court of its responsibility
in coming to a finding as to the character of the object of a
trust- a matter which bears directly upon it’s validity."
Here also the question was what is the dominant purpose for which
the trust is created. If the trust is dominantly for the purpose of charity
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then of course it will qualify for the exemption. This is not the case
here. Our attention was also invited to a decision of this Court in the
case of Joseph Rowntree Memorial Trust Housing Association Ltd. &
ors. v. Attorney General reported in [1983] 2 W.L.R. 214. Similarly,
in this case also, the question came up for determination was
whether the scheme was charitable in law or not. Their Lordships
held as follows:
" That the words describing the beneficiaries of
the first set of charitable purposes in the
preamble to the Statute of Elizabeth had to be
read disjunctively so that beneficiaries could be
either aged, impotent or poor but that in order to
be considered charitable the gift to such people
had to have as its purpose the "relief" of a need
attributable to the condition of the beneficiaries;
that, since the provision of special
accommodation relieved a particular need of the
elderly , whether poor or not, attributable to their
aged condition, the schemes were within the
scope of the charitable purpose of providing
relief to the aged."
Therefore, the ratio is the dominant purpose in each case. If it is
meant essentially for charitable purpose and not open for any other
purpose, then of course such institution will qualify for exemption as
charitable institution.
Similarly, in the case of P.C.Raja Ratnam Institution V. M.C.D.&
Ors. reported in 1990 (Supp.) SCC 97, the question arose whether
under Delhi Municipal Corporation Act, 1957, the school run by the
society is covered under charitable purpose or not. Their Lordships
held as follows:
" The test of ’charitable purpose’ is satisfied by
the proof of any of the three conditions, namely,
relief of the poor, education, or medical relief.
The fact that some fee is charged from the
students is also not decisive inasmuch as the
proviso indicates that the expenditure incurred in
running the society may be supported either
wholly or in part by voluntary contributions.
Besides, the explanation is, in terms inclusive
and not exhaustive."
However, in this case, Their Lordships remitted the case for fresh
decision as the High Court had not adverted to the aforesaid cause.
But in the present case, the facts are well known and it is more than
clear that the establishment of the Hospital was not for charitable
purpose, it was meant as social measure for the benefit of the
employees of the appellant Management and its associated
industries as a statutory obligation & for the other patients charges
were levied. Therefore, by no stretch of imagination it can be said that
Hospital is being run for a charitable purpose.
In the result, in view of our discussions made above, we
find that the view taken by the High Court is correct and there is no
ground to interfere with the same. The appeal is accordingly
dismissed. No costs.
Civil Appeal No.2309 of 1999:
In view of the order passed in Civil Appeal No.37 of 1998,
this appeal also fails and is accordingly dismissed. No costs.