Case: The Management of the Tata Iron &amp; Steel Co. Ltd Vs. Chief Inspecting Officer &amp; Others

the hospital was established by the Management of Tata Iron & Steel Company Ltd. in the year 1908 for providing medical facilities to the employees as well as their families and dependent of the Company, and its associated companies namely, TELCO, Tata Yodogawa, Tata Robin Fraser and their employees at Jamshedpur. It is also alleged that apart from catering for the employees of the appellant and its associated industries it also caters for the Government employees on payment of charges about Rs. 50/- per day and from other private patients at the rate of Rs. 120/- per day. It is alleged that 75% of the patients treated are either employees of the appellant or its associated companies or family members of the employees of the appellant or its associated companies. 15% of the patients are Government employees and the rest 10% of the patients are outsiders. It is alleged that a letter was sent by the Labour Superintendent, Jamshedpur to the appellant on November 7, 1995 for registration of the Hospital as an establishment under the provisions of the Act. An objection was taken by the appellant to the effect that since it is providing medical service to its employees and its associated industries and it is not involved in the commercial activities, as such it is not an establishment within the meaning of the Act and it cannot be covered by the aforesaid Act. This objection was overruled by the authorities. Hence the present writ petition was filed4. The Division Bench of the Patna High Court after considering necessary provisions of the Act and the Rules framed thereunder affirmed the order of the authority and held that the establishment is covered by the Act. Hence the present appeal by way of special leave before this CourtIt is also admitted position that the Hospital is one of the Divisions of the appellant. It has also given the details as to the numbers of patients of the appellant and its associated companies are taken care and number of Government servants and private patients are also being treated by the Hospital7. Intervenors have also filed a statement showing what are the charges effective from April 1, 2000 for non-entitled category of patients and it has been pointed out that admission charge of Rs. 75/- has been revised to Rs. 1,000/-, charges in the general ward is Rs. 400/- per bed, VIP cabin is charged at Rs. 1,250/- and ICU cabin charge is Rs. 2,250/- per day. Likewise, the details for each of the medical speciality charges are being levied varying from Rs. 100/- to Rs. 1,000/-. It is an admitted position that the Hospital is a part of the establishment of the appellant and the Medical is one of its Department10. Under the scheme of the Act, when the Hospital did not apply for registration, then a notice was sent to the Hospital for registration. The appellant objected to the registration. The said objections were overruled and the appellant was asked to get the Hospital registered. Against this order, the present writ petition was filed before the High Court

Court's reasoning:
So far as the definition of ‘business? is concerned, it is clear from the facts that right from the beginning when the Hospital was established, it was catering to the needs of the employees and their families at TISCO and its associated companies but at the same time it was open for the Government servants and private patients also. The Government servants and private patients were charged for their treatment in the Hospital. It is not primarily meant to cater to the employees of the appellant or their associated companies but also for the private individuals also. Therefore, it cannot be said that the Hospital was only meant to cater the need of the employees of the appellantIt may also be relevant to mention here that the establishment of the present Hospital is an obligation on the part of the appellant management because otherwise they had to contribute under the Employees State Insurance Act, 1948. Under the said Act the employees as well as the employer, both have an obligation to make contribution for the medical facilities provided by the E.S.I. Hospitals. All the establishments have to get themselves registered under Section 2A of the E.S.I. Act. They have also to make necessary contribution as per the provisions of the Act. At the same time, under Section 87 of the Act, exemption can also be granted by the Government by issuing notification exempting any factory or establishment or class of establishments in any specified area from operation of this Act for a period of one year and may from time-to-time by like notification renew any such exemption for periods not exceeding one year at a time.It is admitted by learned Counsel for the appellant that the present establishment had obtained exemption up to the year 1996 but after that exemption was not granted and a petition was filed in the Court and stay order has been granted.Therefore, even if the establishment of the Hospital may be for the purpose of taking care of their employees, it is under statutory obligation of the appellant management otherwise they would have to make registration under Section 2A of the E.S.I. Act, 1948. It is admitted that the appellant sought exemption from operation of the Act which was granted upo to the year 1996. Be that as it may, the fact remains that from the materials available on record it is apparent that the Hospital is not only catering for the employees but it caters to the Government and private patients as well for which it is charging fee for the services rendered, it is irrelevant. Whether it is running for profit or loss. Profit or loss is part of the business and it is incidental to every business. Therefore, it is not decisive of the matter whether the establishment is running for profit or gain.  In the present case,from the facts as mentioned above, it is more than evident that the Hospital is not being run for the employees of the appellant management or their associated industries only but it caters to the need of the Government servants as well as private patients and fee is charged from them. Therefore, the Hospital is doing business and it is not doing charityAnother aspect that was emphasised was that since it is running in loss and it is not making any profit, therefore, it is not covered by the definition of establishment. It may be relevant to mention that the profit or loss is not decisive of the matter with regard to the, to say that the Hospital is not making any profit that is not the touchstone whereby we can judge whether they are doing the business or not. If the activity is frequent, continuous and relating to business, whether they earn profit or not that is not the crux of the matter. Profit or loss is incidental to the business. What is essential is the frequency, continuity and relating to transactions. These ingredients are present in the present activities of the Hospital that it is continuing and regularly taking care of the patients be it private patients or patients belonging to the appellant management or their associated industries. Therefore, the emphasis of the learned Counsel that it is not making profit is not relevant for the present, from the materials placed by the parties, it is more than apparent that the present Hospital is a part of the establishment of the appellant management and it caters not only for the employees of the appellant management and its associated companies but for Government servants and private patients as well from whom fee is charged. Therefore, they are doing business and they fall within the definition of establishment as defined in Section 2(6) of the Act12. The next question which has been argued by learned Senior Counsel for the appellant was that it was doing charity, therefore, it is entitled to exemption under Section 4(2) read with item No. 2 of Schedule I. We fail to understand how this activity of the present Hospital can be treated to be a charity. As pointed out above, it is under the obligation of the appellant Management to subscribe for the employees under the Employees State Insurance Act, 1948 by making contribution. Since they were not subscribing contribution because they obtained exemption under Section 87 of the E.S.I. Act, 1948 as they run the hospital for the benefit of the employees, the exemption was granted to them till 1996 but subsequently that exemption was refused. Therefore, it cannot be said that what they are doing isn the present case, thedominant purpose is to cater for the needs of the employees of the appellant Management and its associated Industries. In fact, it was established for that particular purpose only. But the services were also extended to Government servants and to the private patients not free of cost. Therefore, the dominant purpose for establishing the hospital is not charitable which is exempted under the Act and the law which has been laid down by this Court in the aforesaid case is that the principle of dominant purpose should be found out from the activities or the business. If the dominant purpose is appearing as charity then it will be admissible to the benefit of a charity and if it is incidental purpose then it will not be entitled to the benefit.In the present case,neither of the situation arises. It is established that this hospital caters as a social measure for the employees of the appellant Management and its associated industries and for the benefit of the Government servants as well as private patients, on payment of fee. Therefore, it does not qualify for any cause as charitable institution so as to be exempted under Section 4(2) of the Act read with item No. 2 of Schedule I.15. In the result, in view of our discussions made above, we find that the view taken by the High Court is correct and there is no ground to interfere with the same. The appeal is accordingly dismissed. No costsCivil Appeal No. 2309 of 1999: