IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 07.04.2010 Coram The Honourable Mr.Justice S.NAGAMUTHU W.P.No.23452 of 2003 & W.P.M.P.No.28973 of 2003 Pithavadian & Partners 33 (Old No.14) College Road Chennai 600 006 rep.by its Partner Mr.Parthasarathy .. Petitioner ..vs.. Deputy Director Regional Office (Tamil Nadu) Employees State Insurance Corporation 143, Sterling Road Chennai 600 034 ... Respondent Petition filed under Article 226 of the Constitution of India, praying to issue a writ of certiorari calling for the records of the respondent in Proceedings No.TN/Ins-V/51-75324-101/737/02 and quash its order dated 11.8.2003. For Petitioner : Mr.S.Ravindran * For Respondent : Mr.C.Sethu for Mr.K.C.Ramalingam --- O R D E R The petitioner is a partnership firm consisting of professional Architects. Challenge in this Writ Petition is to an order made under section 45 (A) of the ESI Act, 1948 passed by the respondent by his proceedings No.TN/Ins-V/51-75324-101/737/02 dated 11.8.2003. 2. Earlier, similar order under section 45(A) of the ESI Act passed against the petitioner firm was challenged by the petitioner in W.P.No.34050 of 2002. The same was dismissed by a learned Single Judge of this court. Challenging the same, an Appeal was https://hcservices.ecourts.gov.in/hcservices/ preferred in W.A.No.3664 of 2002. In the said Writ Petition as well as in the Writ Appeal, a legal question arose with regard to the applicability of the ACT on the ground that the appellant is a firm of architects and not involved in any construction activities. The learned Single Judge did not agree with the said contention of the petitioner that the petitioner firm cannot be brought within the purview of the Act. However, the Division Bench set aside the order of the learned Single Judge holding that sufficient opportunity had not been given to the petitioner to prove that the petitioner is not indulging in construction activities and that ESI Act is not applicable to them. The matter was therefore remanded to the respondent. 3. Thereafter, the respondent held enquiry into the matter as directed by the Division Bench and has passed the impugned order dated 11.8.2003. In the said order, the respondent has categorically held that the petitioner is not carrying on construction activities. The relevant portion of the said finding of the respondent is extracted below: "It is also clear from the analysis of the written submission made by the employer and also from the various documents as stated above that the employer firm is not carrying on any construction activities. " Having given such a finding, the respondent went on to analyse whether the petitioner firm would fall within the ambit of the definition of a 'shop'. At last, the respondent held that the premises wherein economic activity is carried on leading to the sale or purchase of goods or services will have to be held as a "shop" for the purpose of ESI Act. Accordingly, the respondent held that the petitioner firm is a firm of architects in whose premises the economic activity of rendering professional/consultancy service is rendered through various clients as described in the aforesaid paragraphs for consideration and the fees are paid to the firm by the respective clients which amounts to sale of professional/consultancy services rendered in the premises as stated above and hence the employer firm squarely fits in well within the definition of 'shop'. On the above finding, the respondent directed the petitioner to pay a sum of Rs.2,77,974/- towards ESI Contribution. The petitioner is aggrieved by the same. 4. According to the petitioner, the firm of architects will not fall within the ambit of the term "shop" as contemplated under the Act. But the learned counsel appearing for the respondent would submit that the Act is squarely applicable to the petitioner firm, since professional/consultancy service is rendered by the petitioner firm for consideration. https://hcservices.ecourts.gov.in/hcservices/ 5. The core question is whether the petitioner firm is a "shop" or not so as to bring the same within the ambit of the Act. 6. In this regard, we may refer to Section 40 of the Act, which states that the principal employer shall pay in respect of every employee, whether directly employed by him or by or through an immediate employer, both the employer's contribution and the employee's contribution. The term 'principal employer' has been defined in Section 2(17) of the Act as follows: 'principal employer' means (i) in a factory, the owner or occupier of the factory and includes the managing agent of such owner of occupier, the legal representative of a deceased owner or occupier and where a person has been named as the manager of the factory under the Factories Act, 1948 (63 of 1948), the person so named. (ii) in any establishment under the control of any department of any Government in India, the authority appointed by such Government in this behalf or where no authority is so appointed, the head of the Department (iii) in any other establishment, any person responsible for the supervision and control of the establishment. The term 'factory' has been defined in Section 2(12) of the Act as follows: "factory" means any premises including the precincts thereof:/ a) whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months, an in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on, or b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power or is ordinarily so carried on, but does not include amine subject to the operation of the Mines Act, 1952 (35 of 1952) or a railway running shed. Surely, the petitioner firm is neither a factory nor an establishment. Regarding this legal position, there is no controversy before me. 7. However, under section 1(5) of the Act, the appropriate Government has been empowered to extend the provisions of the Act https://hcservices.ecourts.gov.in/hcservices/ or any of them to any other establishment or class of establishments, industrial, commercial, agricultural or otherwise. The said provision reads as follows: "(5) The appropriate Government may, in consultation with the Corporation and where the appropriate Government is a State Government with the approval of the Central Government, after giving six months' notice of its intention of so doing by notification in the Official Gazette, extend the provisions of this Act or any of them, to any other establishment or class of establishments, industrial, commercial, agricultural or otherwise: Provided that where the provisions of this act have been brought into force in any part of a State, the said provisions shall stand extended to any such establishment or class of establishments within that part if the provisions have already been extended to similar establishment or class of establishments in another part of the State. 8. In exercise of this power conferred under section 1(5) of the Act, the Government of Tamil Nadu issued G.O.Ms.No.1088, Labour and Employment Department dated 22.12.1976, wherein clause 3 of the said Government Order reads as follows: "3. The following establishments whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, namely:- 1. Hotels 2. Restaurants 3. Shops 4. Cinemas including theatres 5. Newspaper Establishments as defined in Section 2 (d) of the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (Central Act 45 of 1955). The contention before this Court in this Writ Petition is that the petitioner firm is a 'shop' as contemplated in the said Government Order. Curiously, the Government Order has not defined the term 'shop'. Therefore, what is a 'shop' in terms of the G.O needs to be looked into. 9. For this purpose, the learned counsel appearing for the petitioner would rely on the judgment of this court in L.M.Chitale https://hcservices.ecourts.gov.in/hcservices/ & Son vs. Commissioner of Labour and others reported in 1963 (2) LLJ P.747. That was a case under the Tamil Nadu Shops and Establishments Act. In the said Act, the term 'shop' has been defined to mean as follows: "any premises where any trade or business is carried on, or where services are rendered to customers, and includes offices, store-rooms, godowns and warehouses, whether in the same premises or otherwise, used in connection with such business, but does not include a restaurant eating- house or commercial establishment." 10. While interpreting the above provision, this Court has held as follows: "The office of a chartered architect is not a premises where any trade or business is carried or, where services are rendered to customers within the meaning of Section 2 (16) of the Madras Shops and Establishments Act. There is a fundamental difference between a profession and a trade or business. That seems to be implicit in the reference to "profession, occupation, trade or business" found in Art.19 of the Constitution. It is normally understood that trade or business is carried on with a profit motive. Even though a profession or an occupation is carried on for the purposes of earning a livelihood, it would certainly be far from correct to say that a profit motive underlies the carrying on of these activities. Section 2(16) of the Act defining a shop is restricted in its scope. It clearly envisages an activity which, as commonly understood, is associated with the carrying on of trade or commerce and cannot take in establishments where professional services are rendered." 11. Relying on the above, the learned counsel for the petitioner would submit that architects are governed by the Architects Act, 1972. They are also further governed by the Architects (Professional Conduct)Regulation, 1980. Under the Act, an architect is a professional and he is neither a businessman nor a trader. It is in this context only this Court held in the said judgment that a person, who is rendering professional service cannot be termed as a businessman so as to bring his office within the ambit of the term 'shop' as contemplated under the Tamil Nadu Shops and Establishments Act. In my considered opinion, a professional like a Doctor, Advocate and an Architect, who are governed by respective statutes and professional conduct Regulations cannot be equated to businessman or traders. As held https://hcservices.ecourts.gov.in/hcservices/ by this Court, there is a world of difference between a profession and trade or business as found in Article 19(2) of the Constitution. 12. Though an attempt is made by the learned counsel for the respondent that the term 'shop' as defined in the Tamil Nadu Shops and Establishments Act cannot be imported to the ESI Act, I find it very difficult to accept the said contention. As there is no definition of the term 'shop' either in the ESI Act or in the Order issued by the Government as referred to above, it is absolutely necessary to draw analogy from the definition given in similar enactments. Therefore, I have no hesitation to hold that the service to their clients that too for consideration cannot be termed either as a trade or a business. Thus, in my view, an Architect is pure and simple a professional. 13. The learned counsel for the petitioner relied on another judgment of the Karnataka High Court in M/s.Singhvi Dev and Unni Chartered Accountants vs. the Regional Director, ESI Corporation and others reported in 2010 LLR 275, wherein the Karnataka High Court has also held that the Chartered Accountants firm cannot be brought within the meaning of the word 'shop' so as to cover under the ESI Act to be applicable to the said firm. The said view taken by the Karnataka High Court fully fortifies the view which I have held in this judgment. Thus, I am in full agreement with the view taken by the Karnataka High Court. 14. The learned counsel for the petitioner has relied upon a judgment of the Hon'ble Supreme Court in V.Sasidharan and M/s.Peter and Karunakar and others reported in 1984 (2) LLJ 385, wherein the question, which arose for consideration was whether the firm of lawyers can be brought within the definition of 'commercial establishment" as defined in the "Commercial Establishments Act, 1960. In the said judgment, the Hon'ble Supreme Court has categorically held that the expression 'shop' includes offices, warehouses, store rooms or godowns which are used in connection with trade or business. The Supreme Court further proceeds to say "it does not require any strong argument to justify the conclusion that the office of the Lawyer or of, firm of lawyers is not a 'shop' within the meaning of Section 2(15) of the Act. Whatever may be the popular conception or misconception regarding the role of today's lawyers and the alleged narrowing of the gap between a profession on the one hand and a trade or business on the other, it is trite that traditionally Lawyers do not carry on a trade or business to customers. The concept as well as the phraseology of the definition of 'shop' is inapposite in the case of Lawyers' Office or the office of the firm of Lawyers". The law laid down by the Hon'ble Supreme Court in the above judgment squarely https://hcservices.ecourts.gov.in/hcservices/ applies to the facts of the present case. Applying the said principle again, I have to hold that the firm of architects, which is more or less equivalent to the firm of lawyers cannot be brought within the ambit of the term 'shop' for the purpose of the ESI Act. 15. However, the learned counsel appearing for the respondent would rely on three judgments of the Hon'ble Supreme Court to substantiate his contention that the architects firm is a shop for the purpose of the ESI Act. The first one is Employees' State Insurance Corporation vs. R.K.Swamy and others reported in (1994) 1 SCC 445, wherein the meaning of the term 'shop' came to be considered by the Hon'ble Supreme Court. In that case, the Government Order referred to above issued by the Government of Tamil Nadu came to be challenged. While upholding the said Government Order, the Hon'ble Supreme Court held that 'Shop' is a place where services are sold on retail basis. The Supreme Court further held that the word 'shop' has acquired expanded meaning. It held that advertising agency, which is paid by his clients for the services it renders, is a 'shop'. Relying on this, learned counsel for the respondent would submit that here in this case also since the services are rendered by the architects for consideration, the firm would come within the ambit of the term 'shop'. But, I am not impressed by the said argument. As I have already stated, the judgment of the Hon'ble Supreme Court is in respect of an advertising agency. A person, who is involved in advertisement business cannot be termed as a professional. Either he must be termed as a trader or a businessman. It is in this context only the Hon'ble Supreme Court held that an advertising agency, which is paid by his client for the services rendered is a 'shop'. The Hon'ble Supreme Court had no occasion to consider in the said judgment as to whether a professional, who is governed by a Statute like a Doctor or an Advocate or an Architect is also governed by the term 'shop'. 16. The next judgment relied on by the learned counsel for the respondent is Kirloskar Consultants Ltd. vs. Employees' State Insurance Corporation reported in (2001) 1 SCC 57. That was a case where the appellant provided under a roof the services of several different professionals like Engineers, Architects, Financial Consultants and Management Consultants, guidance and advice to other companies, Corporations, boards and even local authorities on how best to manage their business for optimum utilisation of plant, machinery and other infrastructure. The appellant Kirloskar Consultants Limited was registered as a commercial establishment under the provisions of the Shops and Establishments Act. The Hon'ble Supreme Court had adopted the same logic made in R.K.Swamy and others mentioned above to hold that the business carried on by the appellant therein is of consultancy services to its customers in respect of industrial, https://hcservices.ecourts.gov.in/hcservices/ technical, marketing and management and preparation of project reports by engaging the services of architects, engineers and other experts. In substance, the nature of activities carried on by the appellant is commercial or economical and would amount to parting with the same at a price. Hence, it was held by the Hon'ble Supreme Court that the said concern was a shop. Here again, as I have already stated, there was no occasion for the Hon'ble Supreme Court to consider whether the firm of professionals will fall within the ambit of the shop. In this case also, the Hon'ble Supreme Court had to hold that the consultancy services, which are industrial, technical, marketing and management activities will make the establishment as a shop. 17. The third judgment relied on by the learned counsel for the respondent is Southern Agencies, Rajahmundry vs. A.P.Employees' State Insurance Corporation reported in (2001) 1 SCC 411. In that case, the appellant was a partnership firm engaged in retail sale of steel furniture, fans and similar items. It had its administrative office and sale office at Rajahmundry. The nature of the activities carried on by the appellant in that case was considered to be commercial or economical. In those circumstances, the Supreme Court held that the said concern would also fall within the definition of the expression 'shop'. Thus, the said judgment also has no application to the facts of the present case. 18. As a matter of fact, a question arose before the Hon'ble Supreme Court in M.P.Electricity Board vs. Shiv Narayan (2005 (7) SCC 283) as to whether the legal profession is a commercial activity wherein after having referred to the dictionary meaning of the terms "commercial" and "professional" and after having a survey of many previous judgments has ultimately held in para 14 of the judgment as follows: "14. A professional activity must be an activity carried on by an individual by his personal skill and intelligence. There is a fundamental distinction, therefore, between a professional activity and an activity of a commercial character. Considering a similar question in the background of Section 2(4) of the Bombay Shops and Establishments Act, 1948 (79 of 1948), it was held by this Court in Devendra M. Surti (Dr.) v. State of Gujarat that a doctor’s establishment is not covered by the expression “commercial establishment”. 19. As it has been held by this Court in L.M.Chitale's case cited supra and the Hon'ble Supreme Court in Shiv Narayan's case, a profession is totally different from a trade or business. An architect is not doing either a trade or a business and he is https://hcservices.ecourts.gov.in/hcservices/ governed by a separate enactment and also governed by separate Rules. An Architect is pure and simple doing a profession. Therefore, the firm of architects cannot be held to be a 'shop' so as to bring the firm within the ambit of the ESI Act in terms of the Government Order referred to above. At the same time, apart form doing the professional work, if the firm of architects is involved in any trade or business such as construction work, sale of goods etc., then the firm would certainly fall within the ambit of the Act. In the instant case, the respondent, in the impugned order itself, has held that there is no such commercial activity undertaken by the petitioner. In view of the above, the impugned order passed by the respondent is not sustainable and the same is liable to be set aside. 20. In the result, the Writ Petition is allowed and the impugned order is set aside. It is submitted by the learned counsel for the petitioner that pursuant to the order impugned in this Writ Petition, some amount has been paid by the petitioner. In view of the quashing of the impugned order, the respondent shall repay the said amount to the petitioner after the period of limitation for appeal is over. No costs. The connected Miscellaneous Petition stands closed. Sd/ Asst.Registrar 19.4.2010 * Corrected order to be issued Sd/- Asst. Registrar 11.5.2010 /true copy/ Sub Asst.Registrar ajr https://hcservices.ecourts.gov.in/hcservices/ To Deputy Director ) Regional Office (Tamil Nadu) )To be substituted to Employees State Insurance Corporation )the order already 143, Sterling Road )despatched on Chennai 600 034 )28.4.2010 ) +1cc to M/s.T.S.Gopalan & co. for ) Petitioner Sr 22871 ) +1cc to Mr.K.C.Ramalingam, Advocate ) for Respondent Sr 22876 ) KJ(CO) km/20.4. KJ(CO) km/12.5. W.P.No.23452 of 2003 https://hcservices.ecourts.gov.in/hcservices/