it Petition No 1389 of 1987
Under Article 32 of the Constitution of India
G Ramaswamy Additional Solicitor General MK Rama murthy Mrs Shyamala Pappu KK Venugopal Gobind Mukhoty MA Krishnamurthy Ms Chandan Ramamurthy Dalveer Bhand ari C Ramesh GD Gupta LK Gupta G Venkatesh Rao Ms A Subhashini Ms Susma Suri CVS Rao P Parmeshwa ran Mrs Urmila Kapoor Krishna Prasad Indra Makwana and SK Jain for the Appearing Parties
The Judgment of the Court was delivered by SAWANT J
This petition is filed as stated in the petition by an Association of about 2000 employees working in 500 Railway Institutes and Clubs in various parts of the country
Their grievance as in the case of the petitioners in the matters pertaining the Railway Canteens is that they are not treated as railway employees
It is their case that although the InstitutesClubs in which they work are non statutory they are on par with the employees in the statu tory canteens run in the Railway establishments proper
According to them the Railway Institutes and Clubs were set up to provide recreational facilities to the railway employ ees
They are managed by Committees consisting of represen tatives of all the members of the InstitutesClubs elected periodically
The InstitutesClubs have the following cate gory of employees 1 Manager 2 Accountant 3 Clerk 4 Librarian in 596 charge 5 Librarian 6 Watchman 7 Daftry 8 Watermen 9 Canteen employees 10 Billiards Marker etc
These employees are appointed by the Committee and their salaries are paid out of the contributions received from the members of the respective Institutes Clubs and the grants in aid given by the Railway Board to the InstitutesClubs
The Committees of management is presided over by a president who is the concerned Divisional Railway Manager or his nominee
The Railway Administration has the right to dissolve or to from an ad hoc Committee
According to the petitioners further the Railway Board has always treated the Institutes and Clubs as an integral part of the Railways since they not only receive grants in aid but also other facilities from the
Govern ment
Section B of Chapter XXVIII of the Railway Establish ment Manual makes a special provision for the Institutes and Clubs
Paragraph 2808 of the Manual states that a Railway Institute should be looked upon as a club provided by the Railway rent free for the benefit of its employees and therefore the Railway should provide everything which a landlord ordinarily would and the Institute should pay for all that a tenant would usually be liable to pay
Paragraph 2809 states that the Railway Administration will bear a the first cost of the building including the cost of elec tric installations with necessary furniture roads fences tennis courts and other play grounds
Wherever possible a garden will also be provided b the cost of maintenance and alterations
In the case of tennis courts and play grounds the Rail way Administration will bear only the cost of ordinary engineering repairs
The said paragraph however requires that the Institute funds should bear a the cost of roll ing watering grass cutting and other maintenance charges of play grounds other than engineering repairs b the cost of maintenance of its gardens and ornamental grounds c the cost of maintenance and renewal whether partial or complete of electric installations which include electric fans payable at a flat rate of 5 per cent per annum on the capital cost of the installations d the cost of electric current consumed and hire of meter e the occupier s share of municipal taxes for specific direct services rendered to an Institute by a municipality such as conservancy water and the like taxes as distinct from taxes of a general nature f water charges calculated at so much per tap each Railway Administration fixing its own scale of charges
In cases where large quantities of water are supplied by the Railway Administration as in the case of swimming baths the actual cost of water supplied should be recovered
Para 597 graph 2810 provide that i no rent is recoverable in the case of Railway buildings used as officers  club provided conditions stipulated para 1942 E are fulfilled ii no rent is recoverable in the case officers  clubs if the buildings are specially constructed against amounts specifi cally sanctioned by the Railway Board iii no rent is recoverable in the case of clubs if additional expenditure is incurred in converting an existing building into a club or providing anciliaries to make it suitable as a club
if the expenditure is incurred with the specific approval of the Railway Board and iv no rent is recoverable in the case of clubs where the building is erected by the club at its costs on Railway land
Paragraph 28 11 further provides that Class IV staff employed in Railway Institutes may be given residential accommodation free of rent provided such accommodation is either part and parcel of the Institute building and its recognised out houses or is not required for any other railway purpose or cannot be rented to out siders and would otherwise lie vacant
According to para graph 28 13 the membership of the InstituteClub is option al
Paragraph 28 17 gives powers to the respective General Managers to frame rules to suit local requirements of the Railway Administrations and other circumstances of the place
The employees of the InstitutesClubs are entitled to free passes and to get medical facilities provided by the Railway Hospitals
The employees belonging to Class IV are eligible for absorption in the Railways and for that purpose they are given relaxation in age
The petitioners therefore claim that they should be treated on the same par as the employees in statutory can teens and non statutory canteens there being no difference in their status
The petition is resisted on behalf of the respondent Union of India
According to the respondents the Institutes and Clubs have their origin in the rules regarding Staff Benefit Fund which is provided for in Chapter VIII of Rail way Establishment Code Vol 1 1985 edition
According to the rules contained in this Chapter as clarified modified by the administrative instructions from time to time
the main objectives of the Fund are to provide additional ameni ties to the railway servants and their families in the sphere of education recreation relief to the distressed financial assistance during sickness and development of sports and scouting activities
The Fund consists of contri bution from Railway revenues at the rate of Rs 14 per capita of the sanctioned strength of non gazetted employees as on 3last March of each year
The contribution of Rs 14 is broadly apportioned amongst 598 various spheres of activities as under i a Education 250 b Recreation other than sports 200 c Relief of distress sickness etc
350 d Miscellaneous items 050 ii Sports activities 250 iii Scouts activities 100 iv Recreational facilities to officers 200 and supervisory staff According to the respondents further as per the provi sions of the Railway Establishment Code and the Establish ment Manual the Institutes and Clubs are managed by a committee representing its membership
It is the Managing Committee which engages such staff as is required and meets the cost of their wages and allowances
The conditions of service including the scales of pay of the staff are decided upon by the respective Managing Committees and hence they vary from Institute to Institute and Club to Club
The cost of the staff running the institute including the pay bill of the staff is met by the Managing Committee from membership fees and from grants received from the Staff Benefit Fund
As will be evident from the apportionment of the per capita grant among the various activities only a sum of Rs4 per capita comes to the share of the recreational facilities
The funds available for recreational facilities are further limited because the membership of the InstitutesClubs is optional
These facilities further in the nature of things are availed of by the members for a few hours beyond working hours
The Managing Committees therefore engage only part time staff
They engage full time staff only when it is considered absolutely necessary
There are about 449 Insti tutes and 332 Clubs and they have engaged about 1741 employ ees of whom about 887 are on full time basis the rest being engaged on part time basis
The whole time employees are allowed passes and Privilege Ticket Orders on a restricted scale in terms of para 1526 of the Railway Establishment Manual
It is therefore contended on behalf of the respond ents that the Railways are not the principal employers of the staff engaged in the InstitutesClubs and they have no control whatsoever on it
The staff is not paid directly from the Consolidated Fund of India
Whatever facilities are provided to the whole time staff are provided only as a 599 special case and not on account of any obligation under any law
It is also contended that in fact it is the Managing Committees who have engaged the staff and they ought to have been joined as parties to the petition
The respondent Union of India having no relationship with the employees the petition is liable to be dismissed on account of non join dermis joinder of parties
The respondent have also ques tioned the locus standi of the present Association to file the petition since according to them no such Association exists
The respondent further point out that the Managing Committees of the InstitutesClubs do not receive any subsi dy or loan from the Railways for meeting specifically the wage bill of the employees as do the Managing Committees of the statutorynon statutory recognised canteens and there fore the present employees stand on a different footing than that of the employees in the statutorynon statutory recognised canteens
In reply to the contention of the petitioners that the rules framed for the constitution of Managing Committees of the InstitutesClubs give power to the Railway Administration to dissolve the Managing Commit tees or to appoint ad hoc Committees it is pointed out that these rules are framed locally by General Managers of Zonal Railways Production Units etc
in terms of the provisions contained in para 2817 of the Establishment Manual
They are not uniform and not all rules so framed provide for either the dissolution of the Managing Committee or appointment of ad hoc Committee by the Railway Administration
The respond ents also deny that the Railway Board has treated Insti tutesClubs as an integral part of the Railways
It is also pointed out that the Railway free passes and privilege ticket orders are given only to the full time employees as a special case
But even they are given on a restricted scale
As regards the medical facilities again it is pointed out that it is given to the employees and not to their family members or dependent relatives
As regards the facilities of absorption in the Railways by relaxing the age limit the respondent points out that it is not only this staff but also the staff of cooperative societies canteen commission bearers vendors of departmental canteen who are eliteble for such relaxation in age limit to the extent of the serv ice rendered in such organisation whichever is less for appointment in Group D categories
But they have to appear before Railway Service CommissionsRailway Recruitment Board alongwith casual labourors and substitutes and they are considered only after the eligible casual labourers and substitutes are considered
It is lastly submitted on behalf of the respondents that although there is no obligation on the Railways the Railways have issued administrative in structions to the Zonal Railways etc
that whenever it is found 600 absolutely necessary by the Managing Committees of the Institutes Clubs to employ staff on full time basis they should be paid remuneration keeping in view the local market conditions
It is also the contention of the respondents that the Railways are providing financial assistancegrants in aid for various non welfare activities and to non railway agen cies such as private schools run in the railway colonies cooperative societiesbanks etc
Since the employees engaged in these activitiesnon railway organisations do not ipso facto become railway servants the employees of these Insti tutesClubs can also not become the railway employees for the same reason
The service in the railway InstitutesClubs is purely in the nature of private employment
On the other hand the railway employees are recruited according to the rules of recruitment
They are subjected to rigorous stand ards with regard to age limit educational qualifications medical fitness interviews character verification etc
as well as to stiff competition
To treat the employees in Railway InstitutesClubs as railway employees would amount to a back door entry of these employees to Government serv ice without following the regular procedure
It is also contended by them that the letters of appointment offered to these employees by the respective Managing Committees make it clear that they are not to be treated as railway serv ants
For all these reasons these employees form a separate class and they are not comparable with any other category of staff of the Railways
It is also submitted on behalf of the respondents that the analogy of the employees in railway canteens is not applicable to these employees because the status of the canteen employees is itself being contested by the respondents
It is lastly contended that if this Court deems it proper to treat the full time employees of the InstitutesClubs as railway servants it will have to be left open to the Respondents to frame such rules as it considered necessary for the efficient running of the InstitutesClubs and for engaging such staff as are considered necessary
If the employees concerned are then directed to be absorbed only subject to the requisite standards of age educational qualifications etc
and only such of them as are found suitable many of the present employees may be faced with unemployment which will not be in the interests of the employees themselves
After considering the respective contentions of the parties and the documents on record we are of the view that there is a material difference between the canteens run in the Railway establishments and the Railway Institutes and Clubs
In the first instance the canteens are invariably a part of the establishments concerned
They 601 are run to render services during the hours of work since the services by their very nature are expected directly to assist the staff in discharging their duties efficiently
The lack of canteen facilities is ordinarily bound to hamper and interfere with the normal working of the staff and affect their efficiency
The importance of the services rendered by the canteens to the staff in the day to day discharge of their work therefore needs no further emphasis
Suffice it to say that the canteen services are today re garded as a part and parcel of every establishment
So much so that they have been made statutorily mandatory under the in establishments governed by the said Act where more than 250 workers are employed
The canteen services are thus no longer looked upon as a mere welfare activity but as an essential requirement where sizable number of employees work
That is why even the Railway Administration has by its Establishment Manual made a provision for canteens even where the does not apply and has laid down procedure for their registration and approval and for extending to them almost the same facilities and monetary assistance as in the case of the statutory canteens
However the same cannot be said of the Institutes and Clubs
Although for them also the Railway Establishment Manual makes provisions in the same Chapter XXVIII dealing with Staff Welfare the provisions are of a materially different nature and pattern
In the first in stance there is no provision either for subsidy or loan directly from the funds of the Railway Administration
The InstitutesClubs have to run on the membership fees and fixed grants received from the Staff Benefit Fund
The Fund consists of receipts from the forfeited provident fund and bonus and of fines
The grant is made as pointed out by the Respondents to each InstituteClubs at the rate of Rs 14 per capita of the non gazetted staff employed at the rele vant establishment
Out of this contribution only Rs4 per capita are spent on the activities of the Institutes and Clubs the rest of the amount being spent on education relief in case of distress and sickness sports scouts activities and for other miscellaneous purposes
There is further no dispute that the wages and allowances of the staff of the InstitutesClubs are paid by the InstitutesClubs themselves and they are not subsidised by the Railway Administration as in the case of the statutory and nonstatutory recognised canteens
By their very nature further the services of the Institutes Clubs are availed of beyond working hours only
It is common knowledge that not all members of the Railway staff avail of them
One has to be a member to do so by paying fees
The membership is also optional
That is why most of the staff employed in the Institutes 602 Clubs is part time
As has been stated by the respondents out of about 1741 employees engaged in 449 Institutes and 332 Clubs nearly half are part time employees
The services rendered by the employees are not of a uniform nature
They are engaged for different services with different service conditions according to the requirement
The InstitutesClubs further do not engage in uniform activi ties the activities conducted by them varying depending upon the infrastructure and the facilities available at the respective places
What is more importance as far as the issue involved in this petition is concerned is that the provision of the InstitutesClubs is not mandatory
They are established as a part of the welfare measure for the Railway staff and the kind of activities they conduct depend among other things on the funds available to them
The activities have to be tailored to the budgets since by their very nature the funds are not only limited but keep on fluctuating
If the costs of the activities go beyond the means they have to be curtailed
So also while starting a new activity it is necessary to take into account its financial implications and the capacity of the InstituteClub to raise the neces sary funds
The only varying component of the funds is the membership fee which is uncertain
If as contended by the petitioner Association the workers engaged in these InstitutesClubs are treated as Railway employees the danger is that these welfare activi ties which are otherwise encouraged by the Railway Adminis tration may in course  of time shrink and cease altogether for want of funds
This will not be in the interests of the workers themselves
One cannot lose sight of the fact that today the emoluments of government servants including those of the Railway employees may they belong to Class IV or to a higher category are substantial and inhibit fresh re cruitment
The services rendered by a government agency therefore become costly and uneconomical
Compared to the services which are rendered by the InstitutesClubs and the benefits which flow from them an increase in their adminis trative expenditure which may result from granting the status of the railway employees to their workers
will be disproportionately high and forbidding
This will also have a snow bailing effect on other welfare activities carried on by the Railways and similar activities carried on by all other organisations
We also cannot lose sight of fact that the workers engaged in the welfare activities today are drawn from the respective localities without restrictions of the qualifications of education age etc
Whatever little scope for employment is available to the local population at the respective places may 603 also vanish with the cessation of these activities
After all the number of employees who may benefit by becoming railway employees does not today exceed 887 who are the full time employees scattered all over the country
But they may deprive many of their bread in the presenti and in the future
For as pointed out by the Respondents if the Railway Service Rules are made applicable many of the present employees will also have to face immediate unemploy ment
This is of course yet a larger related socio economic consideration
On the facts placed before us which we have discussed above we are also not persuaded to hold that there is a relationship o employer employee between the Railway Admin istration and the employees engaged in the Institutes and Clubs
Neither law nor facts spell out such relationship
If the present service conditions of these employees are unsat isfactory the remedy lies elsewhere
lO Since we are disposing of the petition on merits it is not necessary to deal with the legal contentions raised on behalf of the Respondents that the petitioner Association has no locus standi and that the petition is not maintain able for nonjoinder andor misjoinder of the parties
In the result we dismiss the Writ Petition and discharge the rule with no order as to costs
R NJ Petition dismissed


Summary:
The Constitutional validity of similar provisions in the States of Kerala and Tamil Nadu which result in imposition of Sales Tax on cooked food sold only in luxury hotels while exempting the same from sales tax in modest eating houses was challenged by some hoteliers in both States on the ground that this amounted to hostile discrimination and therefore violative of Article 14 of the Constitution
While the Kerala High Court rejected the challenge the High Court of Madras upheld it
Consequently one set of appeals and a Writ Petition under Article 32 of the Constitution have been preferred by the unsuccessful hoteliers of Kerala and the other set of appeals by the State of Tamil Nadu against the decision of the Madras High Court allowing the Writ Peti tions filed before it by the hoteliers
Upholding the constitutional validity of the impugned provisions in both States while dismissing the appeals and Writ Petition filed by the hoteliers and allowing the ap peals by the State of Tamil Nadu this Court HELD It is the substance and not form alone which must be seen
The difference in the cooked food classified dif ferently taxed and taxfree is as intelligible and real as the two types of customers to whom they are served at these different eating houses
This difference must also be avail able to support the difference in the incidence of the impugned sales tax
This classification does bear rational nexus with the 517 object sought to be achieved
The object clearly is to raise the needed revenue from this source determined by the fiscal policy which can be achieved by taxing sale of costly food on the affluent alone in the society
The clas sification is made by grouping together only those places where costly food is sold leaving out the comparatively modest ones
The classification is therefore rounded on intelligible differentia and has a rational nexus with the object sought to be achieved
In other words those grouped together possess a common characteristic justifying their inclusion in the group but distinguishing them from those excluded and performance of this exercise bears a rational nexus with the reason for the exercise
526B D The scope for classification permitted in taxation is greater and unless the classification made can be termed to be palpably arbitrary it must be left to the legislative wisdom to choose the yardstick for classification in the background of the fiscal policy of the State to promote economic equality as well
It cannot be doubted that if the classification is made with the object of taxing only the economically stronger while leaving out the economically weaker sections of society that would be a good reason to uphold the classification if it does not otherwise offend any of the accepted norms of valid classification under the equality clause
526F G The predominant object is to tax sale of cooked food to the minimum extent possible since it is a vital need for sustenance
Those who can afford the costlier cooked food being more affluent would find the burden lighter
This object cannot be faulted on principle and is indeed laud able
In addition the course adopted has the result of taxing fewer people who are more affluent in the society for raising the needed revenue with the added advantage of greater administrative convenience since it involves dealing with fewer eating houses which are easier to locate
This accords with the principle of promoting economic equality in the society which must undoubtedly govern formulation of the fiscal policy of the State
532G H The classification is made in the present case to bring within the tax next hotels or eating houses of the higher status excluding therefrom the more modest ones
A rational nexus exists of this classification with the object for which it is made and the classification is rounded on intelligible differentia
This being a relevant basis of classification related to the avowed object the legislature having chosen an existing classification instead of resort ing to a fresh method of classification it cannot be a ground of invalidity even assuming there are other better 518 modes of permissible classification
The classification made under the impugned provisions is neither discriminatory nor arbitrary
533F G 534B Ganga Sugar Corporation Limited vs State of Uttar Pra desh  Ors
   Ms section Kodar vs State of Kerala   PH Ashwathanarayana Setty  Ors
vs State of Karnataka  Ors
 1989 Suppl
1 SCC 696 ITO vs KN Takim Roy Rymbai Federation of Hotel and Res taurant Association of India  Ors
vs Union of India  Ors
  AR Krishna lyer  Ors
vs State of Madras 1956 7 STC 346 Kadiyala Chandrayya vs The State of Andhra 1957 8 STC 33 and Budhan Chowdhary vs State of Bihar   referred to