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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.