Appeal No 833 of 1966
Appeal by special leave from the order dated June 30 1965 of the Industrial Tribunal Maharashtra in Reference IT No 347 of 1964
SD Vimadlal CM Mehta and BR Agarwala for the appellant
SB Naik K Rajendra Chaudhuri KR Chaudhuri and CS Srinivasa Rao for respondent No 1
The Judgment of the Court was delivered by Bhargava J
The Deputy Commissioner of Labour Bombay referred for adjudication by the Industrial Tribunal Maharashtra Bombay hereinafter referred to as the Tribunal under section 102 of the hereinafter referred to as the Act a dispute between the Cricket Club of India Ltd hereinafter referred to as the Club and the workmen employed by it in respect of various demands made by the workmen relating to classification of employees dearness allowance leave facilities payment for overtime permanency shift allowance etc
A preliminary objection was taken on behalf of the Club that it is not an industry and consequently the provisions of the Act were inapplicable and no reference could be competently made under section 102 of the Act
The Tribunal rejected this preliminary objection holding that the Club came within the definition of industry in section 2j of the Act and made a direction that the case be set down for hearing on merits
The Club has appealed against this interim award of the Tribunal on the preliminary question by special leave
The Club is admittedly a Members  Club and is not a proprietary Club though it is incorporated as a Company under the Indian Companies Act
At the relevant time the Club had a membership of about 4800 and was employing 397 employees who claimed to be workmen
The principal objects of the Club are to encourage and promote various sports particularly the game of cricket in India and elsewhere to lay out grounds for the 603 game of cricket and also to finance and assist in financing cricket matches and tournaments
In addition it provides avenue for sports and games as well as facilities for recreation and entertainment for the Members
It maintains Tennis Courts in pursuance of another outdoor activity
The indoor games for which provision is made include Billiards Table Tennis Badminton and Squash
It also maintains a swimming pool
The Club has also provision for residence of members for which purpose it has constructed 48 residential flats and 40 residential rooms some of which are air conditioned
Persons occupying these residential flats and rooms are charged at different rates according to the accommodation provided
There is also a Catering Department which provides food and refreshments for the members coming to the Club as well as those residing in the residential portion and it also makes arrangements for dinners and parties on special occasions at the request of Members
The affairs of the Club are managed by an Executive Commi ttee and various honorary office bearers
As is usual in most Clubs the membership is varied
There are life members ordinary members temporary members service members and honorary members
Guests both local and from outstation are admitted but subject to certain restrictions and only when they are introduced by a member
The Club owns immovable properties of the value of about Rs 67 lakhs from which an income in the range of about Rs 4 lakhs a year accrues to the Club
The other regular source of income is the subscription  paid by each member
Entrance paid by the Members is treated as a contribution to the capital of the Club
There are regular games for members of the Club but apart from those games in the cricket ground which has a Stadium attached to it matches and various tournaments are held including Test Matches between the Indian teams and foreign teams visiting India
On these occasions public are admitted to watch the matches on tickets sold by the Club
In addition it appears that four sports organisations amongst which mention may be made particularly of the Catholic Gymkhana Ltd have been given the right under agreements entered into with the Club to exclusive use of a number of seats in the Stadium whenever there are official andor unofficial test matches andor matches of similar status sponsored by the Board of Control for Cricket in India or when a fixture is played by a foreign team on the Club grounds though not sponsored by the Board
Under these agreements these organisations make payment to the Club for the members  seats reserved at prescribed rates and they are at liberty to charge whatever they like from their own members who are admitted to those seats with the further facility that they can make their own provision for catering and supply of refreshments to their members over part of the land made available to them by the Club
On the occasion
of 604 annual Badminton and Table Tennis open tournaments a stall is run by the Club where both competitors and spectators are allowed to buy snacks and soft drinks at concessional rates
In the Catering Department alone the turnover of the Club is in the region of Rs 10 lakhs a year
The Tribunal after considering these facts and the various decisions which were available to when it gave its award has come to the conclusion that the Club is an industry  so that this reference under the Act is competent
The Club which has come up in appeal contends that the decision of the Tribunal is not correct and that on the ratio of the decision of this Court in The Secretary Madras Gymkhana Club Employees  Union vs The Management of the Gymkhana Club1 this Court should hold that the Club is not an industry
Our task for the decision of this case has been simplified because this Court in the case of Madras Gymkhana Club1 has clearly laid down the principles of law which have to be applied in determining when a Club can be held to be an industry
In that case the entire previous case law relating to various institutions was fully discussed
After that discussion the conclusion of the Court was mainly expressed in the following words  The principles so far settled come to this
Every human activity in which enters the relationship of employers and employees is not necessarily creative of an industry
Personal services rendered by domestic and other servants administrative services of public officials service in aid of occupations of professional men such as doctors and lawyers etc employment of teachers and so on may result in relationship in which there are employers on the one side and employees on the other but they must be excluded because they do not come within the denotation of the term industry
Primarily therefore industrial disputes occur when the operation undertaken rests upon cooperation between employers and employees with a view to production and distribution of material goods in other words wealth but they may arise also in cases where the co operation is to produce material services
The normal cases are those in which the production or distribution is of material goods or wealth and they will fall within the expression trade business and manufacture  Further it was held that  before the work engaged in can be described as an industry it must bear the definite character of trade  or business  or manufacture  or calling or must be capable of being described as an undertaking in mate 1 1968 1 SCR 742
603 game of cricket and also to finance and assist in financing cricket matches and tournaments
In addition it provides avenue for sports and games as well as facilities for recreation and entertainment for the Members It maintains Tennis Courts in pursuance of another outdoor activity
The indoor games for which provision is made include Billiards Table Tennis Badminton and Squash
It also maintains a swimming pool
The Club has also provision for residence of members for which purpose it has constructed 48 residential flats and 40 residential rooms some of which are air conditioned
Persons occupying these residential flats and rooms are charged at different rates according to the accommodation provided
There is also a Catering Department which provides food and refreshments for the members coming to the Club as well as those residing in the residential portion and it also makes arrangements for dinners and parties on special occasions at the request of Members
The affairs of the Club are managed by an Executive Committee and various honorary office bearers
As is usual in most Clubs the membership is varied
There are life members ordinary members temporary members service members and honorary members
Guests both local and from outstation are admitted but subject to certain restrictions and only when they are introduced by a member
The Club owns immovable properties of the value of about Rs 67 lakhs from which an income in the range of about Rs 4 lakhs a year accrues to the Club
The other regular source of income is the subscription  paid by each member
Entrance paid by the Members is treated as a contribution to the capital of the Club
There are regular games for members of the Club but apart from those games in the cricket ground which has a Stadium attached to it matches and various tournaments are held including Test Matches between the Indian teams and foreign teams visiting India
On these occasions public are admitted to watch the matches on tickets sold by the Club
In addition it appears that four sports organisations amongst which mention may be made particularly of the Catholic Gymkhana Ltd have been given the right under agreements entered into with the Club to exclusive use of a number of seats in the Stadium whenever there are official andor unofficial test matches andor matches of similar status sponsored by the Board of Control for Cricket in India or when a fixture is played by a foreign team on the Club grounds though not sponsored by the Board
Under these agreements these organisations make payment to the Club for the members  seats reserved at prescribed rates and they are at liberty to charge whatever they like from their own members who are admitted to those seats with the further facility that they can make their own provision for catering and supply of refreshments to their members over part of the land made available to them by the Club
On the occasion of 604 annual Badminton and Table Tennis open tournaments a stall is run by the Club where both competitors and spectators are allowed to buy snacks and soft drinks at concessional rates
In the Catering Department alone the turnover of the Club is in the region of Rs 10 lakhs a year
The Tribunal after considering these facts and the various decisions which were available to it when it gave its award has come to the conclusion that the Club is an industry  so that this reference under the Act is competent
The Club which has come up in appeal contends that the decision of the Tribunal is not correct and that on the ratio of the decision of this Court in The Secretary Madras Gymkhana Club Employees  Union V The Management of the Gymkhana Club2 this Court should hold that the Club is not an industry
Our task for the decision of this case has been simplified because this Court in the case of Madras Gymkhana Club1 has clearly laid down the principles of law which have to be applied in determining when a Club can be held to be an industry
In that case the entire previous case law relating to various institutions was fully discussed
After that discussion the conclusion of the Court was mainly expressed in the following words  The principles so far settled come to this
Every human activity in which enters the relationship of employers and employees is not necessarily creative of an industry
Personal services rendered by domestic and other servants administrative services of public officials service in aid of occupations of professional men such as doctors and lawyers etc employment of teachers and so on may result in relationship in which there are employers on the one side and employees on the other but they must be excluded because they do not come within the denotation of the term industry
Primarily therefore industrial disputes occur when the operation undertaken rests upon cooperation between employers and employees with a view to production and distribution of material goods in other words wealth but they may arise also in cases where the co operation is to produce material services
The normal cases are those in which the production or distribution is of material goods or wealth and they will fall within the expression trade business and manufacture  Further it was held that  before the work engaged in can be described as an industry it must bear the definite character of trade  or business  or manufacture  or calling or must be capable of being described as an undertaking in mate 1 1968 1 SCR 742
605 rial goods or material services
Now in the application of the Act the undertaking may be an enterprise of a private individual or individuals
On the other hand it may not
It is not necessary that the employer must always be a private individual who carries on the operation with his own capital and with a view to his own profit
The Act in terms contemplates cases of industrial disputes where the Government or a local authority or a public utility service may be the employer
 Dealing with the scope of the word undertaking it was held that the word undertaking must be defined as any business or any work or project which one engages in or attempts as an enterprise analogous to business or trade
 Further essential features were indicated by laying down that  where the activity is to be considered as an industry it must not be casual but must be distinctly systematic
The work for which labour of workmen is required must be productive and the workmen must be following an employment calling or industrial avocation
The salient fact in this context is that the workmen axe not their own masters but render service at the behest of masters
This follows from the second part of the definition of industry
Then again when private individuals are the employers the industry is run with capital and with a view to profits
These two circumstances may not exist when Government or a local authority enter upon business trade manufacture or an undertaking analogous to trade
 It was also decided by the Court that if a Club is a member s selfserving institution it cannot be held to be an industry
These are the main principles which have to be kept in view in arriving at the decision whether the Club is an industry or not
The principal argument of Mr Vimedalal learned counsel for the Club was that there is a basic and overall similarity between the Club and the Madras Gymkhana Club so that the decision of this Court in the case of the latter is fully applicable
It was pointed out that both Clubs are Members  Clubs and not proprietary Clubs
The primary objects of both the Clubs are to provide venues for sports and games and facilities for recreation and entertainment of Members and guests introduced by Members
Both Clubs are sports social and recreational Clubs
Grounds are maintained by both Clubs for promotion of sports with the slight 606 difference that while in the Madras Gymkhana Club the outdoor games promoted are Golf Rugby Foot ball and Tennis in the Club the two outdoor games on which the Club concentrates are Cricket and Tennis
Both have indoor games while the Club in addition maintains a Swimming Pool for the Members
Both Clubs run tournaments and matches for the benefit of members and open tournaments are held for exhibition to members as well as non members
Both Clubs are maintaining Catering Departments for the entertainment of members and their guests
In both Clubs guests are allowed only when introduced by members
The annual turnover in both Clubs in the Catering Department is in the region of about Rs 9 to 10 lakhs
Residential accommodation is maintained in both Clubs and is open only to Members
Both Clubs have capital investments from which income accrues to them though the scale of investments by the Madras Gymkhana Club is much smaller inasmuch as its total investment is of the region of Rs 412 lakhs while the Club has investment of immovable property to the tune of about Rs 67 lakhs
In both Clubs admission to outsiders is restricted in similar manner
The management in both cases is by Committees elected by Members and annual accounts are made up audited and laid before and adopted at the annual general meetings
Even in other respects such as in the matter of admission of Members relations between members inter se convening of meetings and expulsion of members the rules are similar
In neither of the two Clubs are profits distributed between members
It was thus urged that there is in fact no substantial difference between the nature of the Club and the Madras Gymkhana Club and consequently it should be held that this Club is not an industry
It was further urged that a few minor differences will not alter the legal inference and will not make the ratio of the Madras Gymkhana Club1 case inapplicable
Mr SB Naik counsel appearing for the Union however urged that the differences that exist are not minor and they are such as should lead to the inference that this Club carries on its activities in such a manner that it must be held to be an industry  as explained in the Madras Gymkhana Club1 case
The first point urged before us was that an examination of the objects of the Club would show that it is not purely a social or recreational Club confining its activities to Members like the Madras Gymkhana Club
Our attention was drawn to objects of the Club as given in paragraph 3 clauses a c d g 1 and na of the Memorandum of Association of the Club
It was argued that the activity of encouraging and promoting the game of cricket in India and elsewhere mentioned in el
a financing and assisting in financing visits of foreign teams and of visits of 1 1968 1 SCR 742
607 Indian teams to foreign countries in cl
c organising and promoting or assisting in the organisation or promotion of Provincial Cricket Associations and Inter Provincial Tournaments in el
d buying repairing making supplying selling and dealing in all kinds of apparatus and appliances and all kinds off provisions liquid and solid required by persons frequenting the Club buildings or the cricket grounds or other premises of the Club in clause g and paying all or any part of the experts of any cricket match tour or tournament or any other sporting events or match or competition in any other form of game athletics or sport and any kind of entertainment exhibition or display in clause 1  are not activities which should form part of a social and recreational Club
The argument ignores the fact that the Club is not only a social and recreational Club but is a Club of Members organised with one of the primary objects of encouraging and promoting sports and games
The activity of promotion of sports and games by a set of people combining together to form a Club cannot be said to be an undertaking in the nature of a trade or business in which material goods or material services are provided with the aid of the employees
In clause na the object mentioned is to construct on any premises of the Club buildings of any kind for residential commercial sporting or other uses and to repair or alter or pull down or demolish the same
In this clause emphasis was laid on the word commercial and it was urged that if buildings are constructed for commercial purposes this object will make the Club an industry 
We do not consider it necessary to deal with this point at this stage because the very next point relating to investment of large sums of money in immovable properties indicates how this object is being carried out in practice and when dealing with this point we shall indicate that this activity is not of such a nature as to make the Club an industry 
We have already mentioned earlier that the Club has acquired immovable properties of the value of about Rs 67 lakhs
Some of these properties consist of buildings which are being used by the Members of the Club
These are the main Club building and the residential flats and rooms
In addition there is a Stadium that is used on occasions when Cricket Matches are held on the grounds maintained by the Club
Apart from all these there are a certain number of buildings just outside the Stadium which are let out for use as shops and offices by business concerns
The income that the Club earns is primarily from these last mentioned constructions
It was urged that the Club in thus constructing building for the purpose of earning income from rents payable by business concerns to whom those premises are let out is carrying on an activity which is in the nature of trade or business and consequently it should be held that the Club is an industry
The Tribunal accepted this submission and held  608 A company which has as its business acquiring of immovable properties on a large scale and for making profit out of the rents thereof would come within the definition of industry 
The properties of the CCI which are let out viz 48 residential f1flats 40 ordinary and air conditioned rooms and the premises let to shops and offices form a very large group of properties the management of them as well as the earnings from them particularly in the case of the rooms which are let out with compulsory boarding require co operation between capital and labour
 In examining this aspect the Tribunal a ears to have fallen into an error in ignoring the circumstance that the income which earned by the Club from investment on these immovable properties cannot be held to be income that accrues to it with the aid and co operation of the employees
The material on the record shows that out of 397 employees only 14 attend the three immovable properties consisting of the Club Chambers North Stand Building and Stadium House
It may be presumed that the buildings which are let out for use as shops and offices are part of the Stadium House but there is nothing to show how many of these employees are employed in the work connected with these buildings
In fact on the face of it it would appear that once those buildings have been let out to other persons for use as shops and offices there would be no need at all for the Club to maintain an employee staff in order to look after those buildings so that it is likely that all the 14 employees who it is admitted attend the immovable properties must be doing so primarily in order to look after the Club buildings and the residential accommodation
It has already been mentioned earlier that the income which the Club is earning from these immovable properties is primarily from the buildings let out for use as shops and offices and that income the circumstances cannot be held to have been earned as a result of any co operation between the Club and its employees
In earning this income the Club is not carrying on an activity as a result of which material goods or material services are produced with the co operation of employees
So far as the residential buildings are concerned where it appears that some employees must be contributing their labour the principal consideration for holding that it does not amount to an activity of the nature of an industry is that this residential accommodation is provided exclusively for the Members of the Club
It has been stated that it is meant primarily for outstation Members of the Club who occupy this residential accommodation when they visit Bombay
In addition it seems that there are 11 Members of the Club who are residing more or less permanently in 11 of these residential rooms
It is also true that members 609 occupying the residential accommodation are required to take advantage of the catering facilities provided by the Club
They are charged consolidated amounts for occupation of the rooms as well as for the food served to them
The Tribunal has held that this activity is in the nature of keeping a Hotel
The view taken by the Tribunal is clearly incorrect because it ignores the circumstance that this facility is available only to Members of the Club and to no outsider
It is in the nature of a self service by the Club organised for its Members
The rules which have been brought to our notice make it clear that apart from Members no one is allowed to stay in these residential rooms and that in exceptional cases where some important visitors come to the Club or competitors taking part in tournaments visit this place they are permitted to stay in these residential rooms but in such cases they are all made Honorary Members of the Club
The facility is thus availed of by them in the capacity of Members of the Club even though that membership is honorary
The principle of having honorary members is quite common to most Clubs and existed even in the Madras Gymkhana Club
Once a person becomes an honorary member provision of facilities of the Club for him partakes of the same nature as for other members and consequently such an activity by the Club continues to remain a part of it as a self serving institution
It is quite wrong to equate it with the activity of a Hotel
It may also be mentioned that there is definite evidence given on behalf of the Club that the charges for the residential accommodation with catering are much lower in the Club than the charges made for similar facility in any decent Hotel in Bombay where comparable accommodation may be provided
This further clarifies the position that this is a facility provided by the Club at concessional rates exclusively for its Members
We may at this stage also deal with the argument advanced on behalf of the Union in respect of the nature of catering activities of the Club
So far as the catering in the Refreshment Room maintained by the Club and for persons occupying the residential accommodation is concerned it is confined to Members of the Club only
No outsider is allowed to take advantage of this facility
In fact the bye laws of the Club clearly lay down that even if a guest is introduced by a Member the guest is not entitled to pay for any refreshment served to him
The transaction continues to be confined to the Member of the Club who introduces the guest
The Club is of course not open to public in general and even when non members are admitted in the Club they are only allowed as guests of members with certain restrictions
Such guests cannot enter into any transaction with the Catering Department of the Club
Consequently this catering activity is also in the nature of a self service by the Club for its members
In connection with this activity of catering reliance was however placed by the respondent Union on two aspects
One is that 610 it has been admitted that on occasions when Badminton and Table Tennis open tournaments are held a stall is kept by the Club where apart from Members competitors and spectators can also buy snacks and soft drinks and it was urged that this sale of snacks and soft drinks to non members is clearly an activity in the nature of business or trade
It appears however that these stalls are opened as a rare feature only on occasions when annual Badminton and Table Tennis open tournaments  are held
We have been informed that there is only one Badminton and one Table Tennis open tournament every year so that these stalls are run only twice a year
Further there is a clear Statement that the snacks and soft drinks are provided to competitors and spectators at concessional rates
This indicates
that the provision of these stalls is not for the purpose of carrying on an activity of selling snacks and soft drinks to outsiders but is really intended as provision of a facility to persons participating in or coming to watch the tournament in order that the tournaments may be run successfully
These stalls are thus brought into existence as a part of the activity of promotion of games and is not a systematic activity for the purpose of carrying on transactions of sale of snacks and soft drinks to outsiders
The opening of stalls on two such occasions in a year with this limited object cannot be held to be an under taking of the nature of business or trade
It was then pointed out that there have been occasions when very big parties have been held in this Club where catering has been provided by the Club and at these parties non members have attended in large numbers
On behalf of the respondent Union an example was cited of an occasion when a function was held to celebrate the Golden Jubilee of the Bank of India and catering was provided for a large number of guests at the Club
In answer to interrogatories served by the workmen it was admitted by the Secretary of the Club that there was also another function of celebration of the silver Jubilee of the Bombay Mercantile Co operative Bank Ltd when also catering was provided by the Club
It was stated on behalf of the workmen that on these occasions the invitations were issued not in the name of any Member of the Club but in the name of the organisations which held the functions
The affidavit filed by the Secretary of the Club however shows that in these two cases or in other cases where parties or functions are held in the Club the Club never enters into any contract with any outsider
The Club in fact
provides the catering at the instance of a Member of the Club
It appears that some Members of the Club are connected with organisations like the Bank of India or the Bombay Mercantile Co operative Bank Ltd and they adopted the course of arranging the function with the Club in their capacity as Members
The privity of contract was between them and the Club and the Club itself had 611 nothing to do with the two organisations
May be that in arranging such functions the Members of the Club to some extent abused their privilege of having functions arranged by the Club but it cannot be held that the Club in agreeing to cater at such functions was really intending to sell its goods to persons other than Members
The Club in fact realised the dues for such functions from the Members only
The Members were responsible for payment to the Club and did in fact make the payments
The Club in thus catering for such functions was in fact catering for its Members and was not at all intending to carry on an activity of providing the facility of catering at the instance of outsiders
On behalf of the workmen it was urged that functions of this nature are numerous and a regular feature in this Club
In fact the Tribunal in its order has held that  a systematic arrangement by which Companies and other institutions book the grounds through members whereby the Club makes profit by charging refreshments per head would bring a Club on the other side of the border line so as to make it an industry
 In accepting this view the Tribunal again fell into an error for  two reasons
The first was that the Tribunal did not attach due importance to the circumstances that the functions were arranged by the Club only because of the request of a Member and the Club confined its contract with the Member without in any way dealing with outside organisations
The second point is that there was no material to show that such functions form a systematic arrangement
In fact only two instances were put forward on behalf of the workmen where functions were arranged for purposes of celebrating the Jubilee functions of two Banks
Further the affidavit of KK Tarapor filed on behalf of the Club shows that during the four years 1961 62 1962 63 1963 64 and 1964 65 the total number of functions at which the attendance was 800 and more including Members of the Club was 28
We were told that the Tribunal had asked for the figures of functions held during these four years at which the attendance was 800 or more and thereupon this information was supplied in the affidavit of Tarapur
There is no material to show how many of these 28 functions were of the nature of the two functions held for celebration of Jubilees of the two Banks
It is quite likely that a large number of these parties at which the attendance was 800 or more may have been given personally by Members of the Club on their own account in order to entertain people for their own personal celebrations on occasions such as marriages of sons or daughters
In fact the evidence given before the Tribunal was limited to only two specific instances where functions were held for celebration by organisations and
not by Members of the Club themselves
In the absence of any material showing that a large number of parties were of that nature no inference could follow that this was a sys L13Sup
CI68 8 612 tematic arrangement by which the Club was attempting to make profit and the Tribunal in phasing its decision on this ground was not correct
The few instances cited do not in our opinion indicate that the Club is carrying on this activity in such a manner that it must be held to be an industry
Very great reliance was placed in support of the decision of the Tribunal on the fact that the Club has erected a Stadium at the Cricket field where matches are held and makes an income of about Rs 2 lakhs on each occasion when a Test Match is held on the Cricket ground by charging for admission tickets sold to persons who come as spectators to watch the Test Matches
It was further pointed out that apart from charging for admission to the Stadium from spectators by selling tickets to them the Club has also entered into agreements with four organisations under which a number of seats in the Stadium are given exclusively for the use of those organisations
We have already had occasion to mention earlier one such organisation viz the Catholic Gymkhana Ltd The nature of these agreements is clear from the copy of the Agreement filed before the Tribunal which was entered into between the Club and the Catholic Gymkhana Ltd
Under that Agreement the Club allotted for seating accommodation to the Gymkhana 831 seats in the North Stand for a period of 12 years
The allotment was for use by the Gymkhana on all occasions when official andor unofficial Test Matches andor matches of similar status sponsored by the Board of Control for Cricket in India were held or a fixture played by a foreign touring teem not sponsored by the said Board
Under the Agreement the Gymkhana had to pay Rs 5 per seat for the first fixture Rs 5 per seat for the second fixture Rs 4 per seat for the third fixture and Rs 4 per seat for the fourth fixture
The question that arises is whether these charges made by the Club from these organisations like the Catholic Gymkhana Ltd or from spectators to whom tickets are sold bring into existence an activity of the nature of business or trade so as to convert it into an industry
It is to be noted that one of the principal objects of the Club is the promotion of the game of cricket
In fact the very first object mentioned in the Memorandum of Association is to encourage and promote the game of cricket in India and elsewhere
The second object is of laying down grounds for playing the game of cricket and the third object is clearly for the purpose of encouraging matches between Indian and foreign teams
It is clear that the Cricket grounds are being maintained by the Club in pursuance of these objectives
The game of cricket can only be promoted and encouraged if when matches are held facilities are provided not merely for holding the matches but also for people to watch the matches and to create interest in the public in general in the game of cricket
It was obviously with this object that the Stadium was constructed
Its use by spectators interested in 613 the matches or by members of other organisations interested in the game of cricket is purely for the purpose of encouraging and promoting the game of cricket in pursuance of that primary object of forming the Club
It is true that in carrying on this object of the Club the Club has been charging the spectators by selling tickets to them and also charging organisations to whom seats are specially allotted
So far as seats allotted to those organisations are concerned we are inclined to accept the argument advanced by Mr Vimedalal that this arrangement instead of enuring to the benefit of the Club in fact is to its disadvantage
We have already indicated that at least in one case of the Catholic Gymkhana Ltd the charge that is made from the Gymkhana is at a very low rate of Rs 5 or Rs 4 per seat
On the face of it if the Club was intending to make profits it need not have given those seats to the Gymkhana and could have sold the seats to outsiders at much higher rates
The very fact that such agreements have been entered into with organisations connected with the game of cricket shows that in entering into these agreements the primary object of the Club was to encourage persons who are interested in the game of cricket even though at the disadvantage of charging them at much lower rates
So far as charges from spectators are concerned by selling tickets to them they are obviously realised in order to ensure that the Club can carry on its activity of the promotion of game of cricket and also make up losses for purposes of providing other facilities and amenities to the Members of the Club
It is to be noticed that in the whole period of 37 years only 13 Test Matches have been held on the grounds of the Club
Even these Matches are not organised by the Club itself
They are in fact organised by the Board of Control for Cricket in India
The Board then arranges with the Bombay Cricket Association which is the controlling body for the venue of the Test Match
The Bombay Cricket Association has no ground or Stadium of its own
It is the Bombay Cricket Association that approaches the Club to promote the Test Matches to be played at the Brabourne Stadium of the Club and the Club accedes to these requests
It will thus be seen that the Club comes in at the last stage of providing the venue and making arrangements for the successful holding of the Test Matches and it is for that purpose on the few occasions when Test Matches are allotted to the grounds of the Club that the Club is able to sell tickets in the Stadium and make some income
In these circumstances we are not inclined to accept the submission made on behalf of the workmen that this activity by the Club is an undertaking in the nature of trade or business
It is in fact an activity in the course of promotion of the game of cricket and it is incidental that the Club is able to make an income on these few occasions which income is later utilised for the purpose of fulfilling its other objects as incorporated in the Memorandum of Association
The holding 614 of the Test Matches is primarily organised by the Club for the purpose of promoting the game of cricket
This activity by the Club cannot by itself in our opinion lead to the inference that the Club is carrying on an industry
Lastly reference was made to the circumstance that unlike the Madras Gymkhana Club the Club has been incorporated as a Limited Company under the Indian Companies Act
It was urged that the effect of this incorporation in law was that the Club became an entity separate and distinct from its Members so that in providing catering facilities the Club as a separate legal entity was entering into transactions with the Members who were distinct from the Club itself
In our opinion the Tribunal was right in holding that the circumstance of incorporation of the Club as a Limited Company is not of importance
It is true that for purposes of contract law and for purposes of suing or being sued the fact of incorporation makes the Club a separate legal entity but in deciding whether the Club is an industry or not we cannot base our decision on such legal technicalities
What we have to see is the nature of the activity in fact and in substance
Though the Club is incorporated as a Company it is not like an ordinary Company constituted for the purpose of carrying on business
There are no share holders
No dividends are ever declared and no distribution of profits takes place
Admission to the Club is by payment of admission fee and not by purchase of shares
Even this admission is subject to balloting
The membership is not transferable like the right of shareholders
There is the provision for expulsion of a Member under certain circumstances which feature never exists in the case of a shareholder holding shares in a Limited Company
The membership is fluid
A person retains rights as long as he continues as a Member and gets nothing at all when he ceases to be a Member even though he may have paid a large amount as admission fee
He even loses his rights on expulsion
In these circumstances it is clear that the Club cannot be treated as a separate legal entity of the nature of a Limited Company carrying on business
The Club in fact continues to be a Members  Club without any shareholders and consequently all services provided in the CLub for Members have to be treated as activities of a self serving institution
For these reasons we consider that the order made by the Tribunal holding that the Club is an industry  is incorrect and must be set aside
The appeal is allowed and the order of the Tribunal
dismissing the preliminary objection of the Club is set aside
In the circumstances of this case we direct parties to bear their own costs of this appeal


Summary:
The Deputy Commissioner of Bombay made a reference under section 102 of the  to the Industrial Tribunal Maharashtra of a dispute between the appellant Cricket Club of India Ltd and the workmen employed by it in respect of various demands made by the workmen
A preliminary objection was taken on behalf of the Club that it was not an industry  and the provisions of the Act were not applicable to it so that a reference under section 102 was not competent
The Tribunal rejected this preliminary objection holding that the club came within the definition of industry in section 2j of the Act and set down the case for hearing
In appeal to this Court by special leave it was contended inter alia on behalf of the respondents that the objects and other facts on the record showed the Club was an industry as it was carrying on various activities in the nature of trade or business such as constructing buildings for the purpose of earning income from the rents payable by business concerns letting out residential accommodation in the club premises to members some of whom lived there more or less permanently undertaking catering activities through maintaining stalls and otherwise where various things were sold not only to members but outsiders also providing catering for large parties on a systematic basis deriving large income from holding cricket test matches and other games at its Stadium and the club premises it was further contended that the club was incorporated as a limited company under the Companies Act and the effect of this in law was that the club became an entity separate and distinct from its members so that in providing catering facilities the club as a separate legal entity was entering into transactions with the members who were distinct from the club itself
HELD The order made by the Tribunal holding that the club was an industry was incorrect and must be set aside
The appellant was a dub of members organised with the primary object of encouraging and promoting sports and games
The activity of promotion of sports and games by a set of people combining together to form a club cannot be said to be an undertaking in the nature of a trade or business in which material goods or material services are provided with the aid of the employees
607 C D The Secretary
Madras Gymkhana Club Employees  Union vs The Management of the Gymkhana Club 1968 1 SCR 742 followed
601 i The Tribunal fell into an error in ignoring the circumstances that the income which was earned by the club from investment of immovable properties could not be held to be income that accrued to it with the aid and cooperation of the employees
From the evidence it was clear that in effect no employees of the club were engaged in looking after the buildings which were let out for use as shops and offices
608 C D E ii The facility of residential accommodation provided by the club could not be said to be in the nature of keeping a hotel as this facility was provided exclusively for members of the club at much lower charges than those prevailing at hotels in the city with comparable accommodation
It was in the nature of a serf service by the club organised for its members
509 B iii The catering provided in the refreshment room of the club was also clearly provided only for the members and the bye laws of the Counoil lay down that even if a guest was introduced by a member the guest was not entitled to pay for any refreshment served to him The transaction continued to be confined to the members of the club who introduced the guest
509 G iv The catering facilities provided to members and outsiders at stalls at the time of sports tournaments were only so provided twice a year and at concessional rates
The provision of these stalls could not therefore be said to be for the purpose of carrying on an activity of selling snacks and soft drinks to outsiders but was really intended as provision of a facility to persons participating in or coming to watch the tournaments in order that these may he run successfu lly
These stalls were thus brought into existence as a part of the activity of promotion of games and was not as a systematic activity for the purpose of carrying on transactions of sale of snacks and soft drinks to outsiders
610 C D v Although large parties were held at the club where catering was provided by the club and non members attended such parties these facilities were in fact provided at the instance of the members of the club
The privity of contract was between the member concerned and the club and the dues for such functions were realised from the members only
The club was thus  in fact catering only for its members
FUrthermore in the absence of any evidence that a large number of such parties were held no inference could follow that holding such parties was a systematic arrangement by which the club was attempting to make profits
611 D F vi The primary object with which the club entered into contracts with certain organisations whereby a certain number of seats in the Stadium were given exclusively for the use of such organisations whenever any test matches were held was to encourage persons who were interested in the game of cricket even though at the disadvantage of having to charge 1ower rates for such seats
Furthermore charges from other spectators by selling tickets to them when test matches were held were obviously realised in order to ensure that the club could carry on its activity of the promotion of the game of cricket and also make up losses for purposes of providing other facilities and amenities to the members of the club
In these circumstances it could not he said that these activities including the holding of cricket test matches were in the nature of carrying on trade or business but were activities in the course of promotion of the game of cricket and it was incidental that the club was able to derive an income from such activities which income was later utilised for the purpose of fulfilling its other objects as incorporated in the Memorandum of Association
613 D H 602 vii Though the club was incorporated as a Company it was not like an ordinary Company constituted for the purpose of carrying on business
There were no shareholders
No dividends were ever declared and no distribution of profits took place
Admission to the club was by payment of admission fee and not by purchase of shares
The membership was not transferable like the right of shareholders
There was provision for expulsion of a member under certain circumstances which feature never exists in the case of a shareholder holding shares in a Limited Company
ln view of these and other distinguishing features the club cannot be treated as a separate legal entity of the nature of a limited company carrying on business
614 D F