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PETITIONER: RADHU K. KAKDE OF BOMBAY INHABITANT, BOMBAY

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT11/12/1985

BENCH: ERADI, V. BALAKRISHNA (J) BENCH: ERADI, V. BALAKRISHNA (J) MISRA, R.B. (J) KHALID, V. (J)

CITATION:  1986 AIR  291            1985 SCR  Supl. (3) 822  1986 SCC  (1) 400        1985 SCALE  (2)1261

ACT:      Payment of  Bonus Act,  1965 section  32(iv), scope  of Whether the  Canteen Stores  Department  (India)  under  the Ministry of  Defence is  an "establishment"  engaged in  any industry carried  on  by  or  under  the  authority  of  any Department of  the Central Government and therefore, covered by the provisions of section 32(iv) of the Act.

HEADNOTE:      Prior to  July 1,  1942, canteen  facilities  had  been provided to  the armed  forces of  the country  by a company known as  "Canteen Contractors’ Syndicate". On June 13, 1942 the defence  department took  over the  business of the said company and  it was run by the Government of India under the title and  name "Canteen Stores Department". After partition of the  country, the  Canteen Stores Department of undivided India was wound up and its terminal profits were distributed between India  and Pakistan  and India’s  share  formed  the working capital  for the  Canteen Stores Department (India), which was  formally inaugurated  as a  "Government of  India Undertaking" for  a period  of  three  years  in  the  first instance commencing  from January  1, 1948.  The recruitment rules for  the various categories of services of the Canteen Stores Department  (India) were notified by the president by the Ministry  of Defence  letter dated  June  28,  1973.  By another letter  dated January 28, 1969, Government orders as applicable to  defence (Civilians)  were made  applicable to the Canteen  Stores Department  (India)  employees  in  toto automatically from the date of their applications to Defence (Civilians). Canteen  Stores Department  (India) was allowed to tender  military credit  notes  for  payment  of  railway freight by  the Government  of India  (Ministry of Railways) Memorandum dated February 28, 1971 addressed to the Ministry of defence.  When the  question of  applicability of section 32(iv) of  the Payment of Bonus Act, 1965 came up before the Division Bench  of the  High Court of Bombay, the High Court held  that   the  exemption  provided  in  that  section  is attracted inasmuch  as the  Canteen Stores  Department is an establishment engaged  in an industry carried on by or under the authority of a department of a Central Government. Hence the appeal by special leave.

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823      Dismissing the appeal, the Court, ^      HELD: In  the light  of all the facts pertaining to the history, organizational  structure, exercise  of  functional control by  Government authorities and the special nature of service rendered by the Canteen Stores Department (India) to the defence  forces of the country, it is an "establishment" engaged in  an industry carried on by or under the authority of a  department  of  the  Central  Government  namely,  the Ministry of Defence. [826 C-E]      Rashtriya Mill  Mazdoor  Sangh,  Nagpur  v.  The  Model Mills, Nagpur and Anr., [1985] 1 S.C.R. 751 applied.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION : Civil Appeal No. 484 of 975.      From the  Judgment and  Order dated  25.6.1973  of  the Bombay High Court in Special Civil Appln. No. 1189 of 1968.      Jitendra Sharma for the Appellant.      M.S. Gujaral,  G.D.  Gupta  and  R.N.  Poddar  for  the Respondents.      The Judgment of the Court was delivered by      BALAKRISHNA ERADI,  J. In  this appeal by special leave against the  judgment of  a Division Bench of the High Court of  Bombay,   the  only   question  raised  is  whether  the provisions of  the Payment  of Bonus  Act, 1965 (hereinafter called the  ’Act’) are  applicable to  the employees  of the Canteen Stores  Department. The answer to this question will depend upon  whether the  Canteen Stores  Department  is  an ’establishment’ engaged  in any  industry carried  on by  or under  the  authority  of  any  department  of  the  Central Government; that  is because  Section 32(iv) of the Act lays down that  "Nothing in  this Act  shall apply to - employees employed by an establishment engaged in any industry carried on by  or under  the authority  of  any  department  of  the Central  Government   or  a  State  Government  or  a  local authority." In the judgment under appeal, the High Court has held that  the exemption  provided for  in Section 32(iv) is attracted inasmuch  as the  Canteen Stores  Department is an establishment engaged in any industry carried on by or under the authority of a department of the Central Government. The correctness of  the said  conclusion recorded  by  the  High Court is assailed by the appellant in this appeal. 824      After  bestowing   our  careful  consideration  to  all aspects of  the case we are clearly of opinion that the view taken by  the High  Court is perfectly correct and that this appeal has  only to  be dismissed.  That the  Canteen Stores Department is  engaged in  an industry  is  not  in  dispute before us and the sole question is whether the said industry is carried on by or under the authority of any department of the Central  Government. For  a determination  of  the  said question one  has to  examine inter alia the history, origin and organisational structure of the establishment, which are the authorities  exercising  financial,  administrative  and executive control  over it  and the  rules that  govern  its functioning.      The High Court has in its judgment set out in elaborate detail all  the relevant  facts pertaining to the origin and development of  this Department  right from  the  period  of Second World War up till the present time. It is unnecessary for us  to recapitulate in this judgment all those materials

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in full. However, we shall refer to certain salient features emerging  from   the  record  produced  in  the  case  which according to  us conclusively  go to  show that  the Canteen Stores Department is an establishment engaged in an industry carried on  by or under the authority of a department of the Central Government.      Prior to  July 1,  1942, canteen  facilities  had  been provided to  the armed  forces of  the country  by a company known as "Canteen Contractors’ Syndicate." By a Notification (Annexure ’A’)  dated June 13, 1942 published by the Defence Department in the Gazette of India, the business of the said company was taken over by the Government of India and it was to be  run by  the Government  under the  name "The  Canteen Stores Department." As and from the date of taking over i.e. July  1,   1942,  the  Government  assumed  control  of  the company’s business  and undertook to meet all liabilities of the company  as existed on the date of the taking over. This was how the Canteen Stores Department came into being and it was continuing  to function  as such up till the date of the partition of  the country.  After partition  of the country, the Canteen  Stores Department  of undivided India was wound up and  its terminal  profits were distributed between India and Pakistan  and India’s  share formed  the working capital for the Canteen Stores Department (India). By a letter dated December  19,  1947  issued  by  the  Ministry  of  Defence, Government of  India to  the Quartermaster  General  (India) sanction  of  the  Governor  General  was  conveyed  to  the inauguration of  Canteen  Stores  Department  (India)  as  a ’Government Undertaking’  for a period of three years in the first instance commencing from January 1, 1948. The Services were to comprise:- 825            (i) Canteen Services (India) Board of Control.           (ii) Canteen Section as a part of Q/Coord in QMG’s                Branch Army Headquarters (India).          (iii) Canteen Stores Department (India). The duties  and functions  of the three bodies were to be as set out in the Annexure to the said letter. Subsequently, by another letter  dated October  27, 1950, the sanction of the President  was   conveyed  to  the  continuance  of  Canteen Services (India)  inclusive the  Canteen  Stores  Department (India) as  a Government  of India  Undertaking to  function under the control of the Ministry of Defence.      A Study  Group appears  to  have  been  constituted  to examine the  organisational set  up of  the  Canteen  Stores Department (India)  and based  on the recommendations of the said Study  Group, Canteen  Services (India) was reorganized and besides  the three  wings mentioned earlier an Executive Committee of  the Board  of Control  was also  set up by the letter dated  April 17,  1969 issued  by the  Government  of India, Ministry  of Defence  to the Chief of the Army Staff. Detailed instructions  regarding the policy to be pursued in regard to  procurement, storage,  distribution, disposal  of stores and  fixation of  wholesale and  retail  prices  were issued by  the Government  of India to the Chief of the Army Staff by  the letter  (Annexure ’E’),  dated August 29, 1969 and it was as per these instructions that the Canteen Stores Department was  carrying on its activities. It is noteworthy that this  letter was  issued with  the concurrence  of  the Ministry of  Finance  (Defence)  and  this  is  specifically stated in the last paragraph thereof.      By the  notification (Annexure  ’F’) dated  February 1, 1966, issued  by the  Ministry of  Law in  exercise  of  the powers conferred  by  clause  (1)  of  Article  299  of  the Constitution,  various   Officers  of   the  Canteen  Stores

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Department (India)  designated therein  were  authorised  to enter into  contracts on  behalf of  the President of India. The Notification  states that  contracts for local purchases could  be   entered  into   by   the   Chairman   Board   of Administration and  that contracts  and  deeds  relating  to supply or purchase for the Canteen Stores Department (India) and leases  of lands and buildings belonging to a department could  also   be  executed   by  the   Chairman   Board   of Administration.      The recruitment  rules for  the various  categories  of services of  the  Canteen  Stores  Department  (India)  were notified 826 by the  President by  the Ministry  of Defence  letter dated June 28,  1973 -  Annexure ’G’.  By the letter dated January 28,  1969,   addressed  by  the  Army  Headquarters  to  the Chairman, Board of Administration, Canteen Stores Department (India),  it   was  intimated   that  Government  orders  as applicable to  Defence (Civilians) should be made applicable to  the  Canteen  Stores  Department  (India)  employees  in automatically from the date of their applications to Defence (Civilians). That  the Government  had complete control over the surplus generated by the department and that it could be distributed only with the sanction of the President is clear from the  letter dated January 9, 1975 - Annexure ’I’ issued by the  Ministry of  Defence to the Chief of the Army Staff. The canteen  Stores Department (India) was allowed to tender military credit  notes for payment of railway freight by the Government of  India (Ministry of Railways) Memorandum dated February 20, 1971 addressed to the Ministry of Defence.      In the  light of  all these  facts  pertaining  to  the history, organisational  structure, exercise  of  functional control by  Governmental authorities  and the special nature of service  rendered by  it to  the Defence  forces  of  the country, we  have no  hesitation to hold that the High Court was  clearly  right  in  holding  that  the  Canteen  Stores Department (India)  is  an  ’establishment’  engaged  in  an industry  carried   on  by  or  under  the  authority  of  a department of the Central Government namely, the Ministry of Defence.      The scope  of the  expression "establishment engaged in any industry  carried on  by or  under the  authority of any department of  the Central Government or State Government or local  authority"  occurring  in  Section  32(iv)  has  been explained in  a recent  decision of  this Court in Rashtriya Mill Mazdoor  Sangh, Nagpur  v. The  Model Mills, Nagpur and Anr., [1985]  1 S.C.R.  751, to  which judgment  two  of  us (Eradi J.  and Khalid J.) were parties. On an application of the interpretation given to the expression in that judgment, the present  case clearly  falls within the scope of Section 32 (iv)  of the  Act in  view of  the special  and exclusive nature  of  the  service  rendered  by  the  Canteen  Stores Department  (India)  to  the  defence  personnel  for  which purpose alone  the "Industry"  is being  carried on  by  the establishment.      We accordingly,  confirm the judgment of the High Court and dismiss this appeal. There will be no order as to costs. S.R.                                       Appeal dismissed. 827