Chief Commissioner, Delhi & Ors Vs.
Federation of Indian Chambers of Commerce and Industry [1974] INSC 108 (30
April 1974)
SARKARIA, RANJIT SINGH SARKARIA, RANJIT SINGH
CHANDRACHUD, Y.V.
GOSWAMI, P.K.
CITATION: 1974 AIR 1527 1975 SCR (1) 348 1975
SCC (3) 64
CITATOR INFO:
RF 1984 SC1700 (14)
ACT:
Delhi Shops and Establishments Act, (7 of
1954), s. 2 (5) and (27)-'Shop' and 'Commercial establishment' scope of.
HEADNOTE:
The respondent was required by the Chief
Inspector of Shops and Establishments to register its establishment' under the
Delhi Shops and Establishments Act, 1954. The respondent contended that it was
not an 'establishment' which is defined in s. 2(9) as meaning 'a shop or a
commercial establishment' and did not comply with the direction.
Proceedings for prosecution of its Secretary
were instituted, where-upon the respondent filed a petition in the High Court
for quashing the order of the appellant and for directing the Magistrate not to
proceed with the complaint. Before the High Court the appellant contended that
the respondent was a 'commercial establishment' because, the activity of the
respondent amounted to a 'Profession', and alternatively, that the case fell
within the latter part of the definition of 'commercial establishment' in s. 2(5),
inasmuch as its activities were connected with trade and business generally,
but, it was not urged that the activity of the respondent amounted to carrying
on any 'business or trade' in its premises.
The writ petition was allowed by the High
Court, holding that premises of the respondent were not a 'commercial
establishment'. In appeal to this Court it was contended that the activities of
the respondent amounted to a 'trade or business', that therefore it was a
'commercial establishment' and that the matter was covered by Management of the
Federation of Indian Chambers of Commerce and Industry v. Sri R. K. Mittal
[1972] 2 S.C.R. 353.
Allowing the appeal.
HELD :-(1) It is not proper to shut out the
contentions of the appellant now raised about the activity of the respondent
being a 'trade or business' merely on the ground that the point was not
properly put before the High Court.
The question is only one of drawing a correct
inference about the point in issue from the material already on record and will
not require any additional material for decision.
[354E-F] (2)A place, in order to fall within
the definition of 'commercial establishment' must, in the first instance, be
'premises'. and secondly, should be premises wherein, (a) any trade, business
or profession is carried on, or (b) any work in connection with or incidental
or ancillary thereto is carried on. [353C-D] (3) The registered office of the
respondent is 'premises'.
[353D] (4) All the activities of the
respondent are business activities and are carried on systematically. Though
the profit made by it is ploughed back for its purposes as set out in its
Memorandum of Association and is not distributed among its members. Therefore,
the decision in Mittal's case [1972] 2 S.C.R. 353 that the activity of the
respondent is in the nature of 'business or trade' is correct and that case
does not require reconsideration. [356A-E. 357D-E] (5)A systematic activity can
be a business activity even if no dividends are declared or profits shared.
[356F-G] In the matter of Incorporated Council of Law Reporting for England and
Wales [1889] 2 Q.B.D. 279, applied.
(6)The premises of the respondent, therefore,
are a 'commercial establishment. [357E] 349 (7)For the application of the Act
to the respondent it is immaterial whether its activities bring its premises
within the ambit of a 'shop' or 'commercial establishment, within the meaning
of the Act. In Mittal's case it was held that the activities of the respondent
are also in the nature of material services within the wider definition of
'industry' and, any premises where services are rendered to customers fall
within the definition of a 'shop. [356E-F]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1604 of 1967.
From the judgment and order dated the 8th
February, 1967 of Le Delhi High Court in Civil Writ No. 531-D of 1964.
P.P. Rao and R. N. Sachthey, for the
appellants.
G.P. Pai, P. C. Bhartari and O. C. Mathur,
for respondents nos. 1 & 2.
The Judgment of the Court was delivered bySARKARIA
J. Whether the Federation of Indian Chambers of Commerce and Industry, New
Delhi (Respondent 1) is a "commercial establishment" within the
meaning of s.2(5) of the Delhi Shops ,and Establishments Act, 1954 (for short
the Act) is the sale question that falls for determination in this appeal by
certificate directed against the judgment dated February 8, 1967 of the High
Court of Delhi.
The facts bearing on this question may now be
stated:
Respondent 1 (hereinafter referred to as the
Federation) is a Company registered under s. 26 of the Indian Companies Act,
1913. The primary objects of the Federation as given in the Memorandum of
Association are "(a) To promote Indian business in matters of inland and
foreign trade, transport, industry and manufactures, finance and all other economic
subjects and to encourage Indian banking, shipping and insurance.
(b) To encourage friendly feeling end
unanimity among business community and association on all subjects connected
with the common good of Indian business.
(c) To secure organised action on all
subjects mentioned above.
(d) To collect and disseminate statistical
and other information and to make effort for the spread of commercial and
economic knowledge.
(e) To take all steps by lawful means which
may be necessary for promoting supporting or opposing legislation or other
action affecting the aforesaid economic interests and in general to take the
initiative to assist and promote trade commerce and industry.
(f)To provide for arbitration in respect of
disputes arising, in the course of trade, industry or transport or other
business matters, and to secure the services 350 of expert technical and other
men to that end if necessary or desirable.
(g) To conduct, undertake the conduct of and
participate in national and international exhibitions.
(h) To set up museums or show-rooms, to
exhibit the products of India and other countries and to participate in such
activities.
(1) To secure the interests and well-being of
the Indian business communities abroad.
(k) To attain those advantages by united
action which each member may not be able to accomplish in its separate
capacity.
(m) To help in the Organisation of Chambers
of Commerce or Commercial Associations in different commercial centres of the
country.
(n) (O) (p) (q) (r) (s) (t) (u) (v) (x) (y)
To sell or dispose of the undertaking of the Federation or any part thereof for
such consideration as the Federation may think fit and in particular for
shares, debentures, or securities of any other association or company having
objects altogether or in similar to those of the Federation.
(z) To take or otherwise acquire and hold
shares in any other association or company having objects altogether or in part
similar to those of the Federation.
(zl) To establish a Trust or Trusts and/or
appoint Trustees thereof from time to time and vest the funds or the surplus
income or any property of the Federation in the Trustees who shall hold and
deal with the funds, surplus income or property in such manner as the Committee
may decide.
(z2) 351 (z3)To draw, make, accept, discount,
execute and issue bills of exchange, promissory notes, bills of lading,
warrants, debentures and other negotiable instruments or securities.
(z4) (4) The income and property of the
Federation, whence so ever derived, shall be applied solely towards the
promotion of the objects of the Federation as set forth in the Memorandum of
Association; and no portion thereof shall be paid or transferred directly or
indirectly, by way of dividend, bonus, or otherwise by way of profit to the
members of the Federation......
The Articles of Association inter alia
provide that a Chamber or an Association can become an ordinary member of the
Federation on payment of annual subscription of Rs.
1,000,/or such higher amount as may from time
to time be fixed by the Federation in addition to the admission fee of Rs.
5001-. The scales of subscription on the basis of turnover, deposits or premia
for associate members have also been prescribed.
The Chief Inspector of Shops and
Establishments, Delhi (Appellant 2 herein) called upon the Federation to
register its establishment 'he under the Act The Federation failed to comply
with the direction and contended that it was not an "establishment"
as defined in s. 2(9) of the Act. This contention did not find favour with the
Chief Inspector who, in consequence, made a complaint under the Act for
prosecution of the Secretary of the Federation (Respondent 2 herein) under the
appropriate penal provisions of the Act in the Court of the Magistrate. 1st
Class, Parliament Street, New Delhi. The Federation then moved the High Court
under Article 226 of the Constitution for bringing up and quashing the order,
dated February 4, 1964 passed by the Chief Inspector (Appellant 2). They
further prayed for a writ of Prohibition directing the Magistrate not to
proceed with the complaint.
Before the High Court, the contention of the
Federation was that the premises in which the registered office of the
Federation is located is not a "commercial establishment" within the
meaning of s. 2(5) of the Act which, in consequence had no application.
From the side of the present appellant, at
first a halfhearted attempt was made to show that the Federation is carrying on
a profession as it is "tendering advice to all businessmen and
traders". This contention was negatived in these terms :
" .... that contention overlooks the
fact that the advice in question is not tendered for any consideration. It is
done in the interest of trade and business of the country.
The 1st petitioner is not tendering any
advice or giving any assistance to any trader in particular. It deals with the
trade or business in general to secure the interest of the country. it is
predominantly a charitable organization and not a professional one." 352
It was then contended that the activities of the Federation carried on in the
premises in question amounted to "work in connection with, or incidental
or ancillary" to trade or business in general within the latter part of
the definition of "commercial establishment". This contention was
also rejected with the observation that since the earlier part of the
definition refers to "some particular business or trade carried on in a
premises" the words "any-work in connection with or incidental or
necessary thereto" obviously refer to such particular business or trade
and not to trade or business in general'. In the result, it was held that the
premises of the Federation were not a commercial establishment, and the writ
petition was allowed. A certificate, however, was granted under Article 133(1)
(c) of the Constitution that the case was fit for appeal to this Court.
Hence this appeal.
Before dealing with the contentions canvassed
before us, it will be useful to notice briefly, the scheme and the relevant
provisions of the Act.
The title of the Act is Delhi Shops and
Establishments Act, 1954. The main object of the Act as stated in its preamble
is "regulation of hours of work, payment of wages, leave, holiday, terms
of service and other conditions of work of persons employed in shop, commercial
establishment, establishments for, public entertainment or amusement and other
establishments and to provide for certain matters connected therewith."
Section 1(4) indicates its extent and application. It shall apply in the first
instance. only to the municipal areas, notified areas of Delhi and New, Delhi
etc., but Government may by notification extend or apply it to shops and
establishments in the other local area or areas. The definitions of
"commercial establishment", "establishment" and "shop"
given in sub-sections (5), (9) and (27) of section 2 are material for our
purpose. They read "Commercial establishment" means any premises
wherein any trade, business or profession or any work in connection with, or
incidental or ancillary thereto is carried on and includes a society registered
under the Societies Registration Act, 1860, and charitable or other trust,
whether registered or not, which carries on any business, trade or profession
or work in connection with or incidental or ancillary thereto,' journalistic
and printing establishments, quarries and mines not governed by the Mines Act
1952, educational or other Institutions run for private gain and premises in
which business of banking, insurance, stocks and shares, brokerage or produce
exchange is, carried on, but does not include a shop or a factory registered
under the Factories Act, 1948, or theaters, cinemas, restaurants, eating houses
residential hotels, clubs or other places of public amusement or
entertainment." "Establishment" means a shop, a commercial
establishment, residential hotel, restaurant, eating house, theatre or other
places of public amusement or entertainment to which this Act applies and
includes such other establishment as Government may by notification in the
Official Gazette, 35 3 declare to be an establishment for the purposes of the
Act. " " Shop" means any premises where goods are sold, either
by retail-or wholesale Or where services are rendered to customers, and
includes an office, a stoic-room, godown, warehouse or workhouse, or work
place, whether in the same premises or otherwise, used in or in connection with
such trade or business but does not include a factory or commercial
establishment." It will be seen that while the definition of
"establishment" includes, a 'shop' and 'commercial establishment, the
definitions of 'shop' and commercial establishment' are mutually exclusive.
Further, the definition of "commercial establishment" is wider than
that of "shop". A place in order to fall within the definition of
"commercial Establishment" must in the first instance be
"premises".
Secondly, it should be premises wherein (a)
any trade, business or profession is carried on, or (b) any work in connection
with or incidental or ancillary thereto is carried on. Sub-clause (b) is only
ancillary to (a). There is no, doubt that the registered office of the
Federation is premises. The controversy centres round the questions whether the
activity of the Federation carried on in these premises is a "trade,
business or profession" within the meaning of pari (a) of the definition.
This question is not res integra. It came up
for consideration before this Court in Management of the Federation of Indian
Chambers of Commerce and Industry v.
Their workman, Shri R. K. Mittal.(1) After
considering its Memorandum of Association, Articles of Association and other
material, which was more or less the same, as in the present case, it was held
by this Court that the activity of this Federation is in the nature of a
business or trade.
Mr. Rao, learned Counsel for the appellants
strongly relies on the aforesaid decision.
Mr. Pai, learned Counsel for the Federation
has firstly raised a preliminary objection that before the High Court, at no
stage, it was urged on behalf of the Appellants that the activity of the
Federation carried on in the premises was a business or trade. It is added that
a half-hearted argument was advanced that its activity was a 'profession' and
that, too, was soon given UP In these circumstances, it is submitted, the
appellants should not be allowed to commit a volte-face and take up in this
Court a stand which was either not taken or was given no in the High Court. In
the alternative, learned Counsel contends that even if this plea is allowed to
be raised, then also the primary activity of the Federation cannot, by any
stretch of reasoning, be called a 'trade, business of profession within the
definition of "commercial establishment" given in the Act.
According to Counsel, the activity of the
Federation is one of general utility; the only source of its income is from
subscriptions. The occasional exhibitions or , museums organised by it are
activities which are only incidental or ancillary to the primary charitable
object of the Federation. No divi(1) [1972] 2 S.C.R. 353.
354 dends are declared, no profits are shared
or divided among the Individual members, and no goods are sold or exchanged.
in support of his contentions, learned
Counsel has referred to Commissioner of Income-tax v. Andhra Chamber of
Commerce.(,) Mr. Pai further maintains that the ratio in R. K. Mittal's case
(supra) is not applicable to the instant case because the definition of
"'industry" in s. 2(j) of the Industrial Disputes Act, 1947 is far
wider than that of "commercial establishment" in s. 2(5) of the Act.
Mr. Pai further doubts the correctness of the
decision in R.K. Mittal's case (supra) inasmuch as it holds that the activity
of the Federation partakes the character of trade or business. This finding, it
is urged, is based on a misapprehension of facts and requires reconsideration.
It is pointed out that it was wrongly assumed in Mittal's case (supra) that the
Federation, was systematically assisting not only its members but also other
business-men and industrialists even if they were not its members. The fact of
the matter is that the Respondent is a Federation of Federations and not an
association of any individual traders, industrialists or businessmen.
As regards the preliminary objection, it is
true that before the High Court, it was not argued that the activity of the
Federation amounts to the carrying on of any business or trade in the premises
in question. All that was attempted to argue there was, that its activity
amounted to a 'profession'. Alternatively, it was contended that the case fell
within part (b) of the definition of "commercial establishment"
inasmuch as its activities were connected with trade and business, generally.
We do not think it proper to shut out the
contentions now raised before us about the activity of the Federation being a
trade or business, merely on the ground, that the point was not properly put
before the High Court. This point will not require any additional material for
its decision. The question is only of drawing a correct inference 'about the
point in issue from the material already on record. We, therefore, overrule the
preliminary objection.
This takes us to the merits of the case. In
R. K. Mittal's case, this Court was considering the activity of this Federation
in the context of 'industry' as defined in s.2(j) of the Industrial Disputes
Act. That definition reads:
" "Industry" means any
business, trade, undertaking, manufacture or calling of employers and includes
any calling, service, employment, handicraft or industrial occupation or
evocation of workmen." It will be seen that "any business,
trade" is an element common to the definitions of "commercial
establishment" and "industry" given in the respective statutes.
That was why the question, whether the ,activity of the Federation is abusiness
or trade activity, was directly (1) [1965] 1 S.C.R. 565.
355 and substantially in issue in R. K.
Mittal's case. therein, the Memorandum of Association, Articles of Association
and the other material placed before the court were closely examined. The
entire case law was surveyed. The contentions now canvassed were also raised
and considered in that case. Jagnmohan Reddy J. speaking for the Court,.
posed the question for decision thus :
"In our view the linch-pin of the
definition of 'industry' is to ascertain the systematic activity which the
organization is discharging namely, whether it partakes the nature of a
business or trade; or is an undertaking or manufacture or calling of
employers".
(emphasis added) The answer given to this
question has been correctly summed up, in the head-note of the Report, as
under:
"The above being the position in law the
were fact that the appellant Federation had charitable aims and objects would
not take it out of the definition of industry. An examination of the activities
of the Federation showed that the Federation carried on systematic activities
to assist its members and other businessmen and industrialists and even to
non-members as for instance in giving them the right to subscribe to their
bulletin;
in taking up their cases and solving their
difficulties and in obtaining concessions and facilities from them from the
Government.
These activities were business activities and
material services rendered to businessmen, traders and industrialists who are
members of the constituents of the Federation. There could be no doubt that the
Federation was an industry within the meaning of s.2(j) of the Act." (The
crucial words are those that have been underlined).
The case under the Income-tax Act wherein the
main object of the organization was charitable, were also considered and found
of little assistance. It was observed that:
"the object of an Organisation may be
charitable but nevertheless its activity may be commercial so as to satisfy the
definition of an industry as explained and illustrated by this Court
particularly in Safdarjang Hospital's case.(1) We could therefore envisage an
institution having its aims and objects charitable and yet its activities could
bring it within the definition of industry".
The above observations were made in the
context of the definition of industry' but they are equally applicable in the
present case. The very definition of "commercial establishment"
indicates that the activity of a registered society, charitable or other trust
will not take it out of the definition if the activity carried on by it amounts
to a business (1)[1971] 1, S.C.R. 177.
356, trade or profession or any work in
connection therewith or incidental thereto.
No doubt, the effective membership-as
distinguished from Honorary membership-of the Federation is open only to
Chambers of Commerce or Commercial Associations of requisite strength and
standing, but the fact remains that it carries on systematic activities not
only to assist its members but also other traders or businessmen members of the
constituents of the Federation. It has set up Tribunals for arbitration in
disputes arising between individual traders or business concerns in the course
of trade, industry or other business matters. It takes up with the concerned
authorities the specific difficulties experienced by the trade in the day today
business and endeavours to attain for the traders and industrialists those
material advantages by unified action which they may not be able to achieve in
their individual capacity. It helps businessmen and industrialists by securing
for them the services of expert technical men (vide clauses (f) and (k) of the
Memorandum of Association). It undertakes regular publication of periodicals,
bulletins, Reviews etc. for the benefit of businessmen, big or small and whether
or not they are members of the Federation. These publications are available on
payment of subscription or price even to individual businessmen or traders who
are not members of the Federation. All these are business activities are
carried on systematically. We therefore do not think that R. K. Mittal's case
(supra) was incorrectly decided and needs reconsideration.
It is true that in R. K. Mittal's case
(supra) it was held that these activities of the Federation are also in the
nature of material services within the wider definition of 'industry'. Though
the rendering or services is not specifically mentioned as an element of the
definition of "commercial establishment", yet this very element
appears in the definition of 'shop' in s. 2(27) of the Act. Any premises where
services are rendered to customers fall within the definition of a
"shop". These services are material services. For the application of
the Act to the Federation, it is immaterial whether its activities bring its
premises within the ambit of a "shop" or a "commercial establishment'.
It is well settled that a systematic activity
can be a business activity even if no dividends are declared or profits shared.
In the matter. of Incorporated Council of Law
Reporting for England and Wales, (1) the Queens Bench was considering the
interpretation of the expression "trade or business" in s.11 of the
English Customs and Inland Revenue Act 1885 with reference to the activity of
the Incorporated Council of Law Reporting for England and Wales. The
association was established for the objects of preparing and publishing under
gratuitous professional control, reports of judicial decisions; of issuing
digests and other publications relating to legal subjects. In carrying them out
the association employed editors, reporters, printers, and publishers and
supplied its publications to subscribers and others for payment. It was
condended that the activity of the Association was not "a business or
trade" because by the Memorandum of Association (1) [1889] 2 Q. B. D. 279.
357 all the property and income of the
association were applicable solely to the promotion of the above objects, and
no part thereof could be paid as dividend or otherwise, to any member.
Holding that the association was established
for a "trade or business", Lord Coleridge C. J. repelled the
contention in these terms:
"Though it may be true that in the great
majority of cases the carrying on of a trade does, in fact, include the idea of
profit, yet the definition of the mere word 'trade' does not necessarily mean
something by which a profit is made. But putting aside the question whether
they carry on a trade, how can it be denied that the Council carry on a
business? They are incorporated; they have a secretary; they employ editors,
reporters, and printers; they print books, they sell those books, they do all
that is ordinarily done in carrying on the business of a bookseller." The
above observations apply mutatis mutandis to the activity of the Federation. It
will bear repetition that the Federation also publishes periodicals, bulletins
etc.
and issues the same to member free of this
Court in R. K.Mittal's case (supra) we would hold that the commercial or
industrial exhibitions, runs museums and makes profits. Of course, that profit
is ploughed back for the purposes of the Federation as set out in its
Memorandum of Association, and is not distributed among its members. But that
does not alter the 'fact that its activity is a trading or business activity.
For all the foregoing reasons, particularly
in view of the decision of this Court in R. K. Mittals case, (supra) we would
hold that the pre-premises of the Federation are a "commercial
establishment" within the meaning of s. 2(5) of the Act.
In the result we allow this appeal, set aside
the judgment of the High Court and dismiss the writ petition. In the
circumstances of the case we make no order as to costs.
V.P.S. Appeal allowed.
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