Case: P.B. NAYAK &amp; ORS Vs. MANAGING DIRECTOR, BHILAI STEEL PLANT &amp; ORS

The members and their families are to be provided facilities for their cultural and intellectual advancement. 36. The inquiry conducted by the Appellate Authority was predominantly based on the definition of the word restaurant or eating house (Section 2(23)). The Appellate Authority glossed over the vital clue provided by the inclusion of the residential club as a residential hotel. 37. It must be noticed that the second respondent is, admittedly, a club under its bye-laws. The objective of the club was to provide various indoor or outdoor games, library and reading room facilities and social gatherings. It also contemplated providing members and their families with facilities for their cultural, social and intellectual advancement. The appellants are correct in contending that the authority and the court are not to be held hostage by the words used in the bye-laws. In other words, the bye-laws may unerringly point to activities which are associated with a club.However, in point of fact what actually goes on in the premises, may be only activities as are described in Section 2(23) of the Act, namely, the premise of the club may be used wholly or principally only for the purpose of an eating place or restaurant. If that is the case the court would not be oblivious to the actual nature of activities and still clothe the organisation as a Club exempted under Section 3(j). However, in this regard there is unmistakable evidence to show that the objects in the bye-laws were actually realised and the members were indeed being provided with various facilities. The witness for the appellant has stated that the workmen were allotted duty separately by the Club Manager. He has said that the he was working in the canteen which was run by the Club. Other people were working in the canteen, bar, billiard room, concert room and table tennis room. Members came there to play tennis, badminton and cards. The witness for the respondents have spoken about the club providing facilities like indoor games, outdoor games, social gathering and also about there being facility for social cultural development for the families of the club members. There are 1400 members of the Club. The club has been working since 1982. The Appellate Authority has also found that the club does provide indoor and outdoor games. It goes on to find that as far as the activities of the club is concerned, the Act does not apply. But a bifurcation is made qua the catering service. 38. We can safely conclude that second respondent was a genuine club. There were three different class of members. The club was a private premise. Entry to the club premises was restricted to the members and their families and other persons permitted by the governing body. The club did indeed provide various facilities to be availed by the members and others permitted to come to the club. It is to cater to their needs by way of food that apparently the catering contract was entered into. The appellate authority finds that identity cards were issued to the appellants in the year 1996. No doubt the dates of issue as already noted precede the day 05.09.1996, the date on which the catering contract is seen issued. The witness for the appellants has stated in his evidence that the club invites Shiva Caters for party and give contract to him and like this every year any one comes on contract. They arrange parties and we used to work with them. No outsider come to the steel club for taking tea, whiskey or eating samosa but he can come as a guest of the member is the further deposition of the witness for the appellants. 39. In the light of this state of facts and the definition of the word restaurant and eating place the conclusion appears to be inevitable that the respondent club cannot be characterized as premises which was wholly or principally used for the business of supply of meals and refreshment to the public. In the first place as already noticed, the members of the Club and their guests and family members cannot be described as the public. Even proceeding on the basis that the members of the club and their family members and the guests whom they would bring would constitute a class of the public, the fact remains that the Court must turn a blind eye to the multifarious activities which are both contemplated in the bye-laws and which were admittedly being carried out in the premises by way of indoor or outdoor games, gatherings to find that the premises was being used wholly or principally for the business of supply of meals or refreshment. The fact that by catering services, food and refreshment and even liquor as are permitted in Clubs under law was being provided would not make it a case where the club became premises in which the supply of meals and refreshments was wholly or principally what was carried out. 40. The Appellate Authority proceeds on the basis that providing food, refreshment and drink are not contemplated in the bye-laws and therefore, it would attract Section 2(23) of the Act. We notice in this regard that bye-law No.2 (See para 15 of this judgment) does provide that the aims and objectives of the club was to provide to the members and their families the facilities usually obtainable in a club of this nature and including the various facilities like indoor and outdoor games etc. Therefore, providing of food and refreshment cannot be described as falling outside the scope of the bye-laws. In other words, a proper interpretation of bye-law No.2 would mean that the specifically enumerated facilities in bye-law No.2 are not exhaustive. 41. The bye-laws do not reveal provision for lodging. There is no finding also that the club was providing lodging. In such circumstances, the question that should have been asked was, whether, being a club, which was not residential in nature, it stood exempted. This was not done.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]27. The argument of the Respondents No. 1 and 2 is essentially based on the second respondent-club not being a residential club and, consequently, the Act not being applicable to the establishment. As can be seen, Section 3 exempts certain persons and establishments from the purview of the Act. Section 3 [(a) to Section 3 (1) (d)] describes persons to whom the Act does not apply. Section 3 (1) e to Section 3 (1) j deals with establishments to which the Act does not apply. A club would be an establishment. It is not a person. Even though, it could also be treated as an association of persons or voluntary association of persons, however, in the context of Section 3, we would proceed on the basis that a club is an establishment. In this regard, the word establishment has been defined as meaning also a residential hotel in Section 2(22). A residential hotel has been defined as meaning any premises, in which, a bonafide business is carried on of supplying for payment, board or lodging, and lodging to travellers and other members or class of members of public and including a residential club. Therefore, a residential club, is treated as residential hotel, which in turn, is included in the definition of the word establishment. A residential club would be an establishment under Section 2(8). It is clear that a club is treated as an establishment subject only to qualification that it is a residential club. A club, which is not a residential club, may have been within the ambit of the word establishment but for the fact that the word residential hotel takes within its sweep only residential club. More importantly, the Act specifically exempts clubs which are not residential clubs.The Appellate Authority has found that the club is actually an eating house exclusively to serve the class of members of the Steel Club. It has all the elements of the bar, restaurant and eating house. Even though, the Appellate Authority was called upon to deal with Section 2(22) of the Act, defining the words residential hotel, we find that the Appellate Authority confined itself only to the definition of the words restaurant or eating house as defined in Section 2(23) of the Act. The Appellate Authority has proceeded to finally find that an establishment of bar, restaurant and for service to the members of the club, would definitely not be a club withing the meaning of Section 3(j) of the Act. Therefore, the finding of the Appellate Authority completely overlooked the invaluable input provided by the definition of the words residential hotel as contained in Section 2(22) of the Act. We find clear illumination of the mind of the Legislature being provided by the definition of the words residential hotel for the reason that it helps the Court to understand the ambit of Section 3(j), which provides for exemption of a club, which is not residential. This is for the reason that a residential club, in contradiction from a club which is not residential, is treated as an establishment under Section 2(8) of the Act. In other words, a club, which is residential, would not be entitled to the exemption, provided in Section 3(j), whereas, a club which is non-residential is exempted.30. The Appellate Authority has not found that the second respondent is a residential club. Appellate Authority did not even consider the said provision, that is, Section 2 (22), though Respondents No. 1 and 2 did invite its attention to the said provision. There is no material also placed before the Court to conclude that the second respondent-club was a residential club. If the second respondent-club is not found to be a residential club, then, it is clear that it would be a club, which is not a residential club. It would stand exempted under Section 3(j) of the Act.The Appellate Authority has found it to be restaurant or eating house as defined in Section 2 (23), and therefore, an establishment under Section 2(8) of the Act. We have already referred to the findings rendered by the Appellate Authority.33. Clubs have been classified broadly into Members Clubs and Proprietorship Clubs. There are different classes of members clubs.34. In the light of the scheme of the Act, it may not be sufficient to claim the benefit of the exemptionunder Section 3 (j) for the respondents to flaunt the appellation of the organisation as a club. The club cannot become a cloak or made a front behind which what is done is as contained in Section 2(23) of the Act. In other words, if the activity which is carried out wholly or principally is the business of supply of meals or refreshment to the public or to a class of public, then the employees working in connection would get the protection under the Act. At the same time, if there is genuinely a club where the members assemble not for the purpose of wholly or principally having their meals or refreshment but in connection with other activities and any meals, refreshment and drinks are also served then a distinction must indeed be drawn. This is inevitable as harmonizing of the provisions of Section 3 (j) under which legislature has carved out an exemption in favour of clubs not being residential by not applying the provisions of the Act must be given effect to.Undoubtedly, the second respondent is a club. There are members. The members are defined as the members of the Bhilai Steel Plant, MECON, HSCL, BRP and any other officer of SAIL found eligible to become a member of the Club. The governing body may also grant rights as associate member to certain others. Similarly, there can be temporary members. Entry into the club premises is regulated by bye-law 6 of the Club. The club premises are described as private premises. Entry is restricted to the members, families of members and such other persons as are authorised by the governing body. There is a governing body which manages the affairs of the club. The aims and objectives of the club are provided in bye-law No.2, that is to provide the members and their families with the facilities obtainable in a club of this nature including indoor games like table tennis, billiards, cards, chess, carrom etc. Also, bye-laws contemplate providing of facilities of outdoor games like tennis, badminton, squash etc. The bye-laws also contemplate a library and reading room. So also, the members are to be provided social gathering and swimming. The members and their families are to be provided facilities for their cultural and intellectual advancement.36. The inquiry conducted by the Appellate Authority was predominantly based on the definition of the word restaurant or eating house (Section 2(23)). The Appellate Authority glossed over the vital clue provided by the inclusion of the residential club as a residential hotel.37. It must be noticed that the second respondent is, admittedly, a club under its bye-laws. The objective of the club was to provide various indoor or outdoor games, library and reading room facilities and social gatherings. It also contemplated providing members and their families with facilities for their cultural, social and intellectual advancement. The appellants are correct in contending that the authority and the court are not to be held hostage by the words used in the bye-laws. In other words, the bye-laws may unerringly point to activities which are associated with a club.However, in point of fact what actually goes on in the premises, may be only activities as are described in Section 2(23) of the Act, namely, the premise of the club may be used wholly or principally only for the purpose of an eating place or restaurant. If that is the case the court would not be oblivious to the actual nature of activities and still clothe the organisation as a Club exempted under Section 3(j). However, in this regard there is unmistakable evidence to show that the objects in the bye-laws were actually realised and the members were indeed being provided with various facilities. The witness for the appellant has stated that the workmen were allotted duty separately by the Club Manager. He has said that the he was working in the canteen which was run by the Club. Other people were working in the canteen, bar, billiard room, concert room and table tennis room. Members came there to play tennis, badminton and cards. The witness for the respondents have spoken about the club providing facilities like indoor games, outdoor games, social gathering and also about there being facility for social cultural development for the families of the club members. There are 1400 members of the Club. The club has been working since 1982. The Appellate Authority has also found that the club does provide indoor and outdoor games. It goes on to find that as far as the activities of the club is concerned, the Act does not apply. But a bifurcation is made qua the catering service.38. We can safely conclude that second respondent was a genuine club. There were three different class of members. The club was a private premise. Entry to the club premises was restricted to the members and their families and other persons permitted by the governing body. The club did indeed provide various facilities to be availed by the members and others permitted to come to the club. It is to cater to their needs by way of food that apparently the catering contract was entered into. The appellate authority finds that identity cards were issued to the appellants in the year 1996. No doubt the dates of issue as already noted precede the day 05.09.1996, the date on which the catering contract is seen issued. The witness for the appellants has stated in his evidence that the club invites Shiva Caters for party and give contract to him and like this every year any one comes on contract. They arrange parties and we used to work with them. No outsider come to the steel club for taking tea, whiskey or eating samosa but he can come as a guest of the member is the further deposition of the witness for the appellants.39. In the light of this state of facts and the definition of the word restaurant and eating place the conclusion appears to be inevitable that the respondent club cannot be characterized as premises which was wholly or principally used for the business of supply of meals and refreshment to the public. In the first place as already noticed, the members of the Club and their guests and family members cannot be described as the public. Even proceeding on the basis that the members of the club and their family members and the guests whom they would bring would constitute a class of the public, the fact remains that the Court must turn a blind eye to the multifarious activities which are both contemplated in the bye-laws and which were admittedly being carried out in the premises by way of indoor or outdoor games, gatherings to find that the premises was being used wholly or principally for the business of supply of meals or refreshment. The fact that by catering services, food and refreshment and even liquor as are permitted in Clubs under law was being provided would not make it a case where the club became premises in which the supply of meals and refreshments was wholly or principally what was carried out.40. The Appellate Authority proceeds on the basis that providing food, refreshment and drink are not contemplated in the bye-laws and therefore, it would attract Section 2(23) of the Act. We notice in this regard that bye-law No.2 (See para 15 of this judgment) does provide that the aims and objectives of the club was to provide to the members and their families the facilities usually obtainable in a club of this nature and including the various facilities like indoor and outdoor games etc. Therefore, providing of food and refreshment cannot be described as falling outside the scope of the bye-laws. In other words, a proper interpretation of bye-law No.2 would mean that the specifically enumerated facilities in bye-law No.2 are not exhaustive.41. The bye-laws do not reveal provision for lodging. There is no finding also that the club was providing lodging. In such circumstances, the question that should have been asked was, whether, being a club, which was not residential in nature, it stood exempted. This was not done.