* IN THE HIGH COURT OF DELHI + Writ Petition (Civil) No. 11689-90/2006 % Date of decision : 15th April, 2009 Delhi Gymkhana Club Limited ............ Petitioner Through : Mr. Jagat Singh, Advocate VERSUS Union of India .............Respondent Through : Ms. Monica Garg, Advocate for Union of India/respondent no.1 Ms. Sujata Kashyap, Adv. for Government of National Capital Territory of Delhi/respondent no. 2 Mr. P.R. Rajhans, Adv. for the respondent no. 3 CORAM: HON'BLE MS. JUSTICE GITA MITTAL 1.Whether reporters of local papers may be allowed to see the Judgment? Yes 2.To be referred to the Reporter or not? Yes 3.Whether the judgment should be reported in the Digest? Yes GITA MITTAL, J 1. The Delhi Gymkhana Club Ltd. - petitioner no. 1 has brought the present writ petition seeking a declaration that the provisions of the Standard of Weights and Measures Act, 1976 do not apply to it inter alia for the reason that it is at par to a 'hotel' and a 'restaurant'. A further declaration is prayed to the effect that the action of the Consumer Dispute Redressal Forum – VI (New Delhi) considering application no. CC/462/06 filed by respondent no. 3 issuing notice and directing the petitioners to file written statement is illegal, null and void. 1 2. The factual matrix giving rise to this writ petition is in a narrow conspectus. Sh. Harish Tripathi, respondent no. 3 herein is stated to be a member of the Delhi Gymkhana Club Ltd. - petitioner no. 1 herein. The grievance of the respondent no. 3 was that the cost of overheads of the club was being recovered from the members by the monthly subscription of Rs.200/- per month and that the charge of service charges levelled on credit sales by the jumbo shop of the club as well as sale of any item above the printed maximum retail price by the club was in contravention of the rules. The respondent no. 3 was aggrieved by the action of the petitioner no. 1 in supplying food and beverages at rates above the maximum retail price of the commodities. According to the respondent no. 3, the petitioner no. 1 charges a monthly subscription of significant amount from its members which according to him would be sufficient for meeting expenses including salaries of staff and maintenance etc of the club making a complaint that the petitioner no. 1 had charged more than the maximum retail price on a bottle of coca cola and on credit sales of all items, the respondent no. 3 firstly made representations dated 27th February and 28th April, 2004 to the respondent no. 1. Upon failure to receive relief, the respondent no. 3 filed an application dated 12th June, 2006 before the Consumer Dispute Redressal Forum – VI (New Delhi) making a complaint against the said actions of the petitioners which was registered as case no. 2 CC/462/06. The respondent no. 3 prayed that the petitioners be restrained from continuing with the practice of charging in excess of the MRP written on the cold drink bottles. 3. On this complaint, the Consumer Dispute Redressal Forum issued notice under section 13 of the Consumer Protection Act, 1986 requiring the petitioner no. 1 to appear before the forum in person or through a duly authorised agent. The petitioner no. 1 was further directed to place its written statement of the case before the forum in the hearing fixed for 7th August, 2006. Aggrieved by the action and order of the Consumer Dispute Redressal Forum in entertaining the complaint and issuing notice, the present writ petition has been filed seeking the aforenoticed declarations. 4. The writ petition came up for hearing on 24th July, 2006 when an interim order prohibiting the respondents from enforcing the provisions of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 against the petitioner in respect of loose food and beverages article was granted. 5. The petitioner contends that the price charged by the clubs, hotels and restaurants depends upon the quality of level of establishment, location and the facilities provided by it. In addition to the sale of food, drink items for consumption other facilities and services such as air conditioning of the dining room and other areas, interior decoration, hiring of trained staff, etc are 3 also provided. Sale of such commodities by them is incidental to the real service rendered by them. The elected body of the club fixes the rate of articles to be served in the restaurants and parties of the club. The members are taxed over and above the MRP values of articles only to the extent that expenses of the club, as salaries of staff, maintenance etc can be met from the membership fee and the income derived by offering and providing services to the members and their guests. Only members and their guests are permitted to avail the facilities provided by and at the club. 6. The petitioners contend that they cannot be called dealers, wholesale dealers or retail dealers either under the Act of 1976 or the Act of 1985 or the Rules framed thereunder since they are not doing the business of selling, buying, distributing, delivering of goods in packaged form. The charges of packed food and beverages are included in the menu and bill in a composite price. The amount charged by the clubs, hotels, restaurants includes the service charges provided in the form of seating arrangement, pleasant atmosphere, trained staff, etc. It is urged that there is no retail sale of such food and beverages in their premises and hence the two statutes as well as the rules are not applicable to them. 7. The writ petition is separately opposed by the respondents on various grounds. 8. The respondents contend that the provisions of Standards of 4 Weights and Measures Act, 1976 and (Packaged Commodities) Rules, 1977 apply to the petitioner club. The respondents have urged that these Acts and the Rules thereunder are consumer protection legislations which are meant to protect the interests of consumers with regard to commodities sold in a pre-packed form. Any person carrying a pre-packed commodity to the ultimate consumer for consumption, which may be individual or group of individuals or any other consumer is a retail dealer. The submission is that therefore the commodities sold by the Delhi Gymkhana Club are covered under the statutory provisions and that the proceedings before the Consumer Protection Act are maintainable. 9. The respondents have contended that the petitioner club is not entitled to seek any extra charges over and above the maximum retail price declared on the packaged as part of the price of any item which is sold. The respondent nos. 1 and 2 have urged that the facilities, amenities and ambiance provided to the members or other benefits as brand names, facilities for meetings, entertainment etc are concerned, the petitioner would be required to examine other avenues to recover the expenditure on this count. 10. The respondent no. 3 has contended that the clubs serve a restricted, select private group of members who pay their monthly fees and subscription. The amount of the subscription paid by the 5 members is of significant amount and must be sufficient to meet expenses of the club which include salaries for staff and maintenance etc. The contention on the part of all the respondents that charging any amount above the maximum retail price for the service is an unfair trade practice. 11. I find that the Standards of Weights and Measures Act, 1976 was enacted with the object of establishing standards of weights and measures to regulate inter state trade or commerce in weights, measures and other goods which are sold or distributed by weights, measures or number and to provide for matters connected therewith or incidental thereto. The statutory provisions relevant for the purposes of the present adjudication deserve to be considered in extenso and are set down hereafter:- “2(b) “commodity in packaged form” means commodity packaged, whether in any bottle, tin, wrapper or otherwise, in units suitable for sale, whether wholesale or retail; 2(c) “dealer”, in relation to any weight or measure, means a person who, or a firm or a Hindu undivided family which, carries on, directly or otherwise, the business of buying, selling, supplying or distributing any such weight or measure, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration, and includes - (i) a commission agent who carries on such business on behalf of any principal, (ii) an importer who sells, supplies, distributes or otherwise, delivers any weight or measure to any user, manufacturer, repairer, consumer or any other person but does not include a manufacturer who sells, supplies, distributes or otherwise delivers any weight or measure to any person or category of persons referred to in this clause. 6 Explanation – for the removal of doubts, itis hereby declared that a manufacturer, who sells, supplies, distributes or otherwise delivers any weight or measure to any person other than a dealer, shall be deemed to be a dealer;” 12. In exercise of powers under section 83 of the Act, the Central Government framed a the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 (hereinafter referred to as the “Rules”). By virtue of sub-section 3 of section 1 the applicability of the rules is confined to the following :- “(3) They shall apply to commodities in the packaged form which are, or, are intended or likely to be, - (i) sold, distributed or delivered or offered or displayed for sale, distribution or delivery, or (ii) stored for sale, or for distribution or delivery, in the course of inter-state trade and commerce” 13. The examination of the rules would show that the expression dealer is defined under rule 2(d) thus :- “dealer” in relation to any commodity in packaged form, means a person who, or a firm or a Hindu undivided family which, carries on directly or otherwise, the business of buying, selling, supplying or distributing any such commodity, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration, and includes a commission agent who carries on such business on behalf of any principal, but does not include a manufacturer who manufactures any commodity which is sold or distributed in a packaged form except where such commodity is sold by such manufacturer to any other person other than a dealer; 14. The Rules define a “retail dealer” in rule 2(o), in relation to any commodity in packaged form, as a dealer who 7 directly sells such packages to the consumer and includes, in relation to such packages as are sold directly to the consumer and a “wholesale dealer” who makes such direct sale; 15. The expression “wholesale dealer” is defined under rule 2(w), in relation to any commodity in packaged form as meaning a dealer who does not directly sell such commodity to any consumer but distributes or sells such commodity through one or more intermediaries. The rule clearly explains that nothing in this clause shall be construed as preventing a wholesale dealer from functioning as a retail dealer in relation to any commodity, but where he functions in relation to any commodity as a retail dealer, he shall comply with all the provisions of these rules which a retail dealer is required by these rules to comply. 16. Rule 23 of the Rules is also relevant and states thus :- “23. Provisions relating to whole sale dealer and retail dealers :- (1) no wholesale dealer or retail dealer shall sell, distributes, deliver, display or store for sale any commodity in the packaged form unless the package complies with, in all respects, the provisions of the Act and these rules. (2) No retail dealer or other person including manufacturer, packer and wholesale dealer shall make any sale of any commodity in packaged form at a price exceeding the retail sale price thereof. Explanation – for the removal of doubts, it is hereby declared that a sale,distribution or delivery by a wholesale dealer to a retail dealer or other person is a “retail sale” within the meaning of this sub-rule. (4) where, after any commodity has 8 been pre-packed for sale, any tax payable in relation to such commodity is revised, the retail dealer or any other person shall not make any retail sale of such commodity at a price exceeding the revised retail sale price, communicated to him by the manufacturer, where the manufacturer is not the packer and it shall be the duty of the manufacturer or packer, as the case may be, to indicate by not less than two advertisements in one or more newspapers and also by circulation of notices to the dealer and to the Director in the Central Government and Controllers of Legal Metrology in the States and Union Territories, the revised prices of such packages but the difference between the price marked on the package and the revised prince shall not, in any case,be higher than the extent of increase in the tax or in the case of imposition of fresh tax higher than the fresh tax so imposed; Provided that publication in any newspaper,of such revised price shall not be necessary where such revision is due to any increase in, or in imposition of, any tax payable under any law made by the State Legislatures; Provided further that the retail dealer or other person shall not charge such revised prices in relation to any packages except those packages which bear marking indicating that they were pre-packed in the month in which such tax has been revised or fresh tax has been imposed or in the month immediately following the month aforesaid: (5) Nothing in sub-rule (4) shall apply to a packaged which is not required under these rules to indicate the month and the year in which it was pre-packed. (6) No retail dealer or other person shall obliterate, smudge or alter the [retail sale price], indicated by the manufacturer or the packer, as the case may be, on the package or on the label affixed thereto. (7) the manufacturer or packer shall not alter the price on the wrapper once printed and used for packing. 17. The expression “sale” is defined in rule 2(v) as “sale”, with its grammatical variations and cognate expressions and means 9 transfer of property in any weight, measure or other goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of any weight, measure or other goods on the hire-purchase system or any other system of payment by installments, but does not include a mortgage or hypothecation of, or a charge or pledge on such weight, measure or other goods. 18. The respondent nos. 1 and 2 have pointed out that the Apex Court in the judgment pronounced in Crl.A.No. 963-965/1999 in the State of Kerala vs. Flora & Ors. and in Civil Appeal No. 5310/1990 in India Photographic Company v. H.D. Shourie has upheld the validity of the Packaged Commodities Rules and issued orders for implementing the provisions of this consumer protection legislation. There can be no dispute at all with the binding principles laid down by the Apex Court in this pronouncement. Undoubtedly, the provisions of consumer protection legislation deserve to be implemented in right earnest. However, there is no issue raised in the present writ petition with regard to the validity of the rules. A fundamental question with regard to the applicability of the statutory provisions and the rules framed thereunder to the services rendered by a club has been raised. It was observed by the Supreme Court that acceptance of “such a plea would result in frustrating the provisions of the 1986 10 Act and thereby encourage the retailers or distributors of foreign- made goods to charge prices according to their convenience without letting the consumer know he actual price of the commodity. The Apex Court has articulated a summation of the Act that it enjoins a declaration of weight, measure, number and price. It imposes punishment where a declaration has not been made or has been incorrectly made. 19. The whole object and purpose of setting out standards in weights and measure is for protection of the consumer who should be fully informed of the price of the products to enable them to chose from a sufficient number of alternatives to ensure competitive prices and quality when purchasing a packaged commodity from wholesalers or retailers. Further the rules have been made as to the manner of declaration of contents of the package and specification of the unit, weight, measure or number along with the maximum sale price which are to be declared on the packaged commodity. 20. In order to adjudicate on the issue raised, it is necessary to first consider what is the definition of the expression 'club' and the nature of activities undertaken therein. There does not appear to be any statutory definition of the expression 'club' in the statutes under consideration. The same would therefore derive its meaning from the meaning given or associated with it in common parlance. This expression has however been incorporated into the 11 Finance Act (19 of 2005), .88(a)(vii) by virtue of an amendment to the statute titled Finance Act (32 of 1994). As a result of this amendment, sub-section 25a has been inserted into section 65. In this enactment ‘a club or association’ is defined in Section 65 thus:-- “65. xxx (25a) “club” or association” means any person or body of persons providing services, facilities or advantages, for a subscription or any other amount, to its members, but does not include - (i) any body established or constituted by or under any law for the time being in force; or (ii) any person or body of persons engaged in the activities of trade unions, promotion of agriculture, horticulture or animal husbandry; or (iii) any person or body of persons engaged in any activity having objectives which are in the nature of public service and are of a charitable, religious or political nature; or (iv) any person or body of persons associated with press or media;” 21. It is noteworthy that Section 2(24) of he Bombay Shops & Establishment Act, 1948 defines a 'residential hotel' in the following terms :- “(24) “Residential hotel” means any premises used for the reception of guests and travelers desirous of dwelling or sleeping therein and includes a [residential club];” 22. A 'club' has also been defined in the Halsbury’s Laws of England, 3 rd Edn., Vol.5, page 252 as a society of persons associated together for social intercourse, for the promotion of politics, sport, art, science, or literature, or for any purpose except the acquisition of gains. 12 So far as the definition of “club” is concerned, in the Black's Law Dictionary (Revised Fourth Edn 1968) it is described as 'a voluntary, incorporated or unincorporated association of persons for purposes of a social, literary, or political nature, or the like. A club is not a partnership.' 23. In 75 Fla. 792, 78 So. 693, 695, L.R.A. 1918E, 639 Van Pelt v. Hilliard, an unincorporated members club has been described as “a society of persons each of whom contributes to the fund out of which the expenses of conducting the society are paid”. In the same judgment, an unincorporated proprietary club was described as “one the property and funds of which belong to a proprietor who usually conducts the club with a view to profit.” Wikipedia describes a “club” as “an association of two or more people united by a common interest or goal.” It is further explained that “a service club, for example, exists for voluntary or charitable activities; there are clubs devoted to hobbies and sports, social activities clubs, political and religious clubs, and so forth.” The Longman's Contemporary English (International Edn 2004 page 213) describes a “club” as “an organisation for people who share a particular interest or enjoy similar activities, or a group of people who meet together to do something they are interested in for instance play rugby, golf, squash etc. Longman cited other examples, for instance, a jazz club, a sports club, 13 professional sports club”. 24. The expression “association” refers to “an act of a number of persons in uniting together for some special purpose or business. This expression appears to have an indefinite and vague meaning and indicates a collection of persons who have joined together for a similar object and purpose”. 25. It is, therefore, clearly evident that a club is not constituted or created for the purposes of sale or trade or commercial activities in any goods or services. It is a forum where a group of persons having common interest are able to get together to share, develop or indulge in the same. It is set up to enable pursuit of such objects that the members of the club may decide and to provide additional facilities and special ambiance which may include refreshments, meals, beverages etc for the duration of the time spent in pursuit of such activity at the club. 26. The next question which requires to be answered is what is the nature of the act of service of refreshment and beverages to its members by the club and whether the same tantamounts to a sale. It is the respondent no. 3's case itself that a club is not in the business of supplying packaged foods and beverages etc as that of the hotels and restaurants to their customers on commercial basis. The respondent no. 3 has himself dwelt at length in his counter affidavit with the submission that foods and beverages provided by the club for comfort and relaxation of its 14 members. 27. Interestingly, the complainant – respondent no. 3 has drawn a distinction between the objects for establishment of a hotel and restaurant vis-a-vis those for a club. It has been contended that hotels and restaurants are establishments engaged in commercial activities to do business for earning profits with an aim to distribute such profits among the promoters, entrepreneurs and investors whereas clubs are established not to engage themselves in any such commercial activities but are formed for the promotion of social, cultural, educational and sports activities which are run and managed by club members through contributions by way of fees and subscriptions. Based on these averments, the respondent no. 3 would contend that there can be no comparison between supplying packaged foods and beverages by the hotels and restaurants to their customers on commercial basis and the supply of the same by the club to the members, subscribers for thier comfort and relaxation. The respondent no. 3 has also pointed out yet another difference between a club and a hotel. It has been urged that clubs serve a restricted, select, private group of members who pay their fees and subscriptions whereas hotels and restaurants serve the public at large. 28. The petitioner has however equated clubs to hotels and restaurants while submitting that all three are not engaged in the 15 business of selling packaged commodities as in the case of retail sale agencies or wholesalers. The further submission is that the pre-dominant business of clubs, hotels and restaurants is to provide hospitality services to the members of club. 29. In view of the aforenoticed admissions by the respondent no.3 it may not have been necessary to examine this issue any further. The issue raised before this court is very basic and deserves to be examined from the aspect of the test of 'pre- dominant activity' in which clubs are engaged to ascertain the intent, character and nature thereof as to whether the activity of a club fulfills the character of a retail seller and as to whether the sale by a club qualifies as a 'retail sale' to invite the applicability of the Standards of Weights and Measures Act, 1976 as amended and the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 framed thereunder.