Cricket Club of India Ltd. Vs. The
Bombay Labour Union & ANR [1968] INSC 182 (7 August 1968)
07/08/1968 BHARGAVA, VISHISHTHA BHARGAVA,
VISHISHTHA SHELAT, J.M.
VAIDYIALINGAM, C.A.
CITATION: 1969 AIR 276 1969 SCR (1) 600
CITATOR INFO :
RF 1970 SC1407 (18) RF 1971 SC2422 (25) R
1972 SC 763 (14,16) RF 1976 SC 145 (3) O 1978 SC 548 (141,142,159)
ACT:
Industrial Disputes Act, 1947, ss. 2(j) and
10(2)---Cricket Club of India Ltd. at Bombay--organised with the primary object
of promoting and encouraging sports and games--having various activities
bringing income including letting buildings on rent for commercial and
residential purposes--if industry within s. 2(j).
HEADNOTE:
The Deputy Commissioner of Bombay made a
reference under s. 10(2) of the Industrial Disputes Act, 1947, 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 s. 10(2) was not competent. The
Tribunal rejected this preliminary objection holding that the club came within
the definition of "industry" in s. 2(j) 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 v. The Management of the Gymkhana Club, [1968] 1 S.C.R. 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 Council 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 successfully.. 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]
CIVIL APPELLATE JURISDICTION: Civil 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.
S.D. Vimadlal, C.M. Mehta and B.R. Agarwala,
for the appellant.
S.B. Naik, K. Rajendra Chaudhuri, K.R.
Chaudhuri and C.S. 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 10(2) of the Industrial
Disputes Act (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 s. 10(2) of the Act. The Tribunal
rejected this preliminary objection holding that the Club came within the
definition of "industry" in s. 2(j) 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 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 and/or unofficial test matches and/or 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 v. The Management of the Gymkhana
Club(1), 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 Club(1),
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 S.C.R. 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 and/or unofficial test matches and/or 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
Club(2), 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 Club(1),
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 material - (1) [1968] 1 S.C.R.
742.
605 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 self serving
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. 41/2 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 Club(1) case
inapplicable.
Mr. S.B. 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 Club(1) 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 S.C.R. 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 b.y
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
C.C.I.
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 K.K. 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.C.I./68---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 and/or unofficial Test Matches and/or
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.
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