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REPORTABLE   

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION  

CIVIL APPEAL NO. 2416 of 2003

THE BANGALORE TURF CLUB LTD.      ...APPELLANT VERSUS

REGIONAL DIRECTOR,  EMPLOYEES STATE INSURANCE CORPORTION  ...RESPONDENT

W I T H  

CIVIL APPEAL NO. 49 of 2006 THE ROYAL WESTERN INDIA TURF CLUB LTD.

    ...APPELLANT VERSUS

EMPLOYEES STATE INSURANCE CORPORTION  & ORS.       ...RESPONDENT

W I T H CIVIL APPEAL NO. 1575 of 2006

THE EMPLOYEES STATE INSURANCE CORPORTION  & ORS.      ...APPELLANT

VERSUS ROYAL WESTERN INDIA TURF CLUB LTD. & ANR.       

...RESPONDENT

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W I T H CIVIL APPEAL NO. 3421 of 2012

ROYAL WESTERN INDIA TURF CLUB LTD. ...APPELLANT VERSUS

THE EMPLOYEES STATE INSURANCE CORPORTION & ORS.   ...RESPONDENT

W I T H CIVIL APPEAL NO. 3422 of 2012

ROYAL WESTERN INDIA TURF CLUB LTD. ...APPELLANT VERSUS

THE EMPLOYEES STATE INSURANCE CORPORTION & ANR.   ...RESPONDENT

AND W I T H

CIVIL APPEAL NO. 6212 of 2012

SRI VISALAM CHIT FUNDS LIMITED      ...APPELLANT VERSUS

DEPUTY DIRECTOR,  SUB REGIONAL OFFICE, MADURAI  ...RESPONDENT

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J U D G M E N T CIVIL APPEAL NO. 2416 OF 2003, CIVIL APPEAL NO. 49 OF  2006, CIVIL APPEAL NO. 1575 OF 2006, CIVIL APPEAL NO.  3421 OF 2012 AND CIVIL APPEAL NO. 3422 OF 2012

H.L. DATTU, J.

1. The issue that arises for our consideration and  decision is, whether a 'race-club' would fall under the  scope  of  the  definition  of  the  word  'shop',  for  the  purposes of notification issued under sub-section (5) of  section 1 of the Employees’ State Insurance Act, 1948  (for short, “the ESI Act”).

2. The matter is referred to three-Judge Bench of  this Court as two-Judge Bench of this Court is of the  view that the decision of two-Judge Bench of this Court  in the case of Employees State Insurance Corporation v.  Hyderabad  Race  Club  (2004)  6  SCC  191  may  require  reconsideration.  By  the  aforesaid  judgment,  it  was  observed  by  this  Court  that     `race-club'  is  an  'establishment' within the meaning of the said expression  as used under Section 1(5) of the ESI Act. The order of  reference reads as under:

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“   O R D E R

Heard learned counsel for the parties.  

The short question involved in these cases is  whether the appellant Turf Clubs are covered by  the  Employees’  State  Insurance  Act,  1948  (for  short ‘ESI Act’).

Under Section 1 sub-section (5) of the ESI Act  all establishments are not automatically covered  by the said Act but only such establishments as  are mentioned in the notification issued by the  appropriate Government under Section 1(5).  This  provision is not like sub-section (4) of Section  1  by  which  all  factories  are  automatically  covered  by  the  ESI  Act.   The  notifications  issued under Section 1(5) in these cases use the  word ‘shop’ and it has been held by the impugned  judgments in these cases that the turf clubs are  shops.  Reliance in this behalf has been placed  on the judgment of this Court in the case of  Employees State Insurance Corpn. vs.  Hyderabad  Race Club 2004 (6) SCC, 191.

With great respect to the aforesaid decision  in the case of  Hyderabad Race Club (supra), we  think  that  the  said  decisions  requires  reconsideration.  In common parlance a club is

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not a shop.   

The word ‘shop’ has not been defined either in  the ESI Act nor in the notification issued by  the appropriate government under Section 1(5).  Hence,  in  our  opinion,  the  meaning  of  ‘shop’  will be that used in common parlance.  In common  parlance when we go for shopping to a market, we  do  not  mean  going  to  a  racing  club.   Hence,  prima  facie,  we  are  of  the  opinion  that  the  appellant-club is not a shop within the meaning  of the  Act or  the notification  issued by  the  appropriate government.   

In our opinion, the error in the judgment in  the case of Hyderabad Race Club (supra) is that  it  has  been  presumed  therein  that  all  establishments are covered by the Act.  That is  not  correct.   Only  such  establishments  are  covered as are notified under Section 1(5) in  the official gazette.   

The High Court in the impugned judgment has  placed reliance on the judgment of this Court in  the case of  Bangalore Water Supply & Sewerage  Board vs. A. Rajappa & Ors. 1978 (2) SCC, 213.  In  our  opinion,  reliance  on  the  aforesaid  decision is wholly misplaced.  The definition of  ‘industry’  in  the  Industrial  Disputes  Act  is  very  wide  as  interpreted  in  the  aforesaid

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decision.  We cannot apply the judgment given  under a different Act to a case which is covered  by  the  ESI  Act.   Under  various  labour  laws  different  definitions  have  been  given  to  the  words ‘industry’ or ‘factory’ etc. and we cannot  apply  the  definition  in  one  Act  to  that  in  another  Act  (unless  the  statute  specifically  says so).  It is only where the language used in  the definition is in pari material that this may  be possible.   

Hence, we are of the opinion that the decision  of this Court in the case of Hyderabad Race Club  (supra)  should  be  reconsidered  by  a  larger  Bench.  In the meantime, the respondents shall  not  raise  any  demand  against  the  appellant- clubs.   

Let the papers of these cases be placed before  Hon’ble  The  Chief  Justice  of  India  for  constituting an appropriate Bench.”

3. By the said referral order dated 28.04.2009, it  is the view of the two-Judge Bench of this Court that in  view of the meaning as used in common parlance, the term  'shop' may not include racing clubs as stated by this  Court in the Hyderabad Race Club case (supra). Therefore,

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prima  facie,  the  view  of  this  Court  is  that  the  Appellant-Turf Clubs would not be a shop for the purpose  of the ESI Act or notifications issued thereunder. It is  further observed that the meaning of 'shop' will be that  as would be used in common parlance.

ISSUES:-

4. The issues that arise for our consideration and  decision  are  firstly,  whether  the  judgment  in  the  Hyderabad Race Club case (supra) was correct in holding  that a 'race-club' is an “establishment” for the purposes  of the ESI Act, and secondly, whether the Appellant-Turf  Clubs fall within the scope of the definition of the word  'shop' as categorised in the notifications.

RELEVANT PROVISIONS:-

5. To  appreciate  the  view  points  of  the  learned  counsel, we require to notice certain provisions of the  ESI Act. The relevant sections are sub section (4) and  sub section (5) of Section 1 of the ESI Act, and further

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the respective impugned notifications in the present set  of appeals. The relevant provisions are reproduced:

“1.  Short  title,  extent,  commencement  and   application.-

.... (4) It shall apply, in the first instance, to  all factories (including factories belonging to  the Government) other than seasonal factories. .... (5)  The  appropriate  Government  may,  in  consultation with the Corporation and where the  appropriate  Government  is  a  State  Government,  with  the  approval  of  the  Central  Government,  after giving one month's notice of its intention  of  so  doing  by  notification  in  the  Official  Gazette, extend the provisions of this Act or  any of them, to any other establishment or class  of  establishments,  industrial,  commercial,  agricultural or otherwise. ....”

6. Sub-section (4) of Section 1 provides that the  ESI Act shall apply to all factories including factories  belonging  to  the  Government  other  than  seasonal  factories.   Sub-section  (5)  of  Section  1  enables  the

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appropriate Government to extend the provisions of the  ESI  Act  to  any  other  establishment  or  class  of  establishments- industrial, commercial, agricultural or  otherwise. The State Government is empowered, subject to  the conditions specified in the aforementioned provision,  to extend the provisions of the ESI Act, by issuing a  notification  in  the  official  gazette,  to  any  establishment  or  class  of  establishments  as  specified  therein.  This Sub Section is an enabling conditional  legislation.  

7. The meaning of the words ‘or otherwise’ after  the  words  “industrial,  commercial  or  agricultural”  establishments in Sub Section (5) of Section 1 indicate  that the Government can extend the ESI Act or any portion  thereof  to  any  other  establishment  or  class  of  establishments.  The genus lies in the words ‘any other  establishment  or  class  of  establishment’.   The  three  words industrial, commercial and agricultural represents  a specie.  Since the legislature did not want to restrict  the operation of the ESI Act to these three species has  used the catch words ‘or otherwise’.  

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8. The Notification that prompted the appellant -  Bangalore  Turf  Club  Limited  to  initiate  proceedings  before various forums read as under:

“NOTIFICATION

In exercise of the powers conferred by Sub-Section  (5) of Section 1 of the Employee's State Insurance  Act, 1948 (34 of 1948) the Government of Karnataka  having already given six months' notice as required  there  under,  vide  the  Government  of  Karnataka  Notification  No.  SWL/134/LSI/76  dated  19.12.1976  published  in  the  State  Gazette  (Extraordinary)  dated 19.12.1976 hereby appoints 27th January 1985  as the date on which all provisions of the said act  shall extend to the classes of establishments and  in  the  area  specified  in  the  schedule  annexed  hereto:-

SCHEDULE Description of  Establishment

Name of  the Centre

Area  in  which  establishments  are situated

1.

1. ... 2. ... 3.  Shops,  Road  Motor  Transport  Establishments,  Cinema including  preview theatres

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and  newspaper  Establishments  which  are  employing  or  were  employing  twenty  or  more  persons  for  wages  on  any  days  of  the  preceding twelve  months. ...”

9. In view of the aforesaid Notification issued by  the  Government  of  Karnataka,  the  ESI  Corporation  had  directed  the  appellant-Bangalore  Turf  Club  Limited  to  make contributions with regard to all its employees in  accordance with the provisions of the ESI Act, since the  race-club is covered under the term 'shop' as enumerated  in the notification.  

10. Similarly,  as  regards  the  Royal  Western  India  Turf Club Ltd., the Government of Maharashtra issued a  Notification  No.  ESI.  1677/3910/PH-15  dated  18.09.1978  whereby the State, exercising its power under sub-section

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(5) of Section 1 of the ESI Act, extended the provision  of the ESI Act to certain classes of establishments as  found  mentioned  therein.  The  relevant  portion  of  the  notification reads as under:

“... The following establishments wherein twenty or  more  employees  are  employed,  or  were  employed  for wages  on any  day of  the preceding  twelve  months, namely:-

(i)   hotels; (ii)  restaurants; (iii) shops; (iv) cinemas, including preview theatres; and (v)  newspaper  establishments  as  defined  in  section  2(d)  of  the  Working  Journalists  (Conditions  of  Service)  and  Miscellaneous  Provisions Act, 1955 (45 of 1955). ...”

SUBMISSIONS:-

11. Shri  K.K.  Venugopal,  learned  counsel  for  the  Appellant-Bangalore Turf Club Limited would submit, that,  a shop cannot be said to include a race-club within its  definition.  For  this,  he  relies  upon  the  definition

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clause  under  the  Karnataka  Shops  and  Commercial  Establishments Act, 1961 (for short ‘the Act, 1961’). He  would submit that in the absence of a definition of the  word 'shop' under the ESI Act, this Court should refer to  definitions under the Act, 1961 as the two statutes are  in pari materia with each other. It is further submitted  that the meaning of 'shop' must be understood in common  parlance, that is as per its traditional meaning. It is  submitted that the Court should not prefer a liberal or  expansive interpretation to ascertain the meaning of a  'shop', and that the literal rule of construction would  be best suited to the given case.  The learned counsel  would, in aid of his submissions rely on the view point  expressed in the case of  M/s. Hindu Jea Band v. ESIC  (1987) 2 SCC 101; M/s. Cochin Shipping Co. v. ESIC (1992)  4 SCC 245; and  Transport Corporation of India v. ESIC  (2000) 1 SCC 332.  It is further submitted that the case  of ESIC vs. R.K. Swamy & Ors (1994) 1 SCC 445 and ESIC  vs.  Hyderabad  Race  Club (2004)  6  SCC  191  requires  reconsideration.  He  further  submits  that  the  common  thread, as it would appear from the various judgments  cited in this regard, for ascertaining whether a premises

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may be called a shop, would be that such a place is  commonly used for the sale of goods or services or to  facilitate the same.

12. Shri Venugopal would further submit that a club  would  not  be  covered  under  the  scope  and  purview  of  'shop'. It is submitted that a 'shop', in its traditional  meaning, would necessarily be a building where goods are  sold or kept for sale and therefore it would require a  well-defined and enclosed premises. It is stated that a  permanent structure consisting of four-walls and a roof  would be essential for any premises or establishment to  be called a 'shop'. Pictures of the race-club in question  were displayed before this Court to show that the race- club had large open area for conducting the actual race,  that is the track, stables, etc. Shri Venugopal would  contend that the race-club in question cannot be called a  'shop' by any stretch of imagination as it lacked the  necessary enclosed space or roof.

13. Shri C.U. Singh, learned Counsel appearing for  the Royal Western India Turf Club Ltd., the appellant in  Civil  Appeal  No.  49  of  2006,  while  adopting  the

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submissions of Shri Venugopal, would make reference to  the  definition  clause  of  the  Maharashtra  Shops  and  Establishments Act, 1948 (for short “the Act,1948”) to  ascertain the meaning of the word 'shop'.  He further  submits that the decision in  R.K. Swamy’s case (supra)  may be said to be a slight aberration in the line of  cases preceding the given case. By this case, this Court  observed that an advertising agency would be a shop for  the purposes of the ESI Act. It is submitted that as  there is no sale of goods or services in such premises,  the Court should not have held it to mean a ‘shop’.  

14. Shri Singh, learned counsel, would submit that  the  impugned  notification  must  be  interpreted  in  accordance  with  the  Literal  Rule  of  construction.  He  would submit that -  firstly, where different words are  used in the same statutory scheme, in the absence of a  strong intent to the contrary, normally the courts should  ascribe different meanings to the same;  secondly, where  words are plain and admit of a plain meaning, in the  absence of a strong indication to the contrary, the plain  meaning  should  be  adopted;  thirdly,  literal

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interpretation  should  be  preferred,  unless  it  does  violence to the scheme of the statute; and fourthly, an  exact meaning should be preferred over loose meanings. He  would refer to  Principles of Statutory Interpretation,  Justice  G.P.  Singh,  13th Edition to  support  the  above  contentions.

15. Per  contra,  Shri  Krishnamani,  learned  counsel  for  the  Respondent-ESIC,  would  submit,  that,  in  the  absence of a definition under the ESI Act, dictionaries  may  be  used  as  an  external  aid  of  construction.  He  further contends that it is inappropriate to refer to the  definition of “shop” found in the Act, 1961 or the Act,  1948 as neither would be pari materia with the ESI Act.  He further contends that the ESI Act is a beneficial  legislation  aimed  at  ensuring  social  security  of  employees and in view of the same the Court must adopt an  expansive  and  liberal  interpretation  to  achieve  the  objects and purpose of the ESI Act. Reference is made to  the observations made in Cochin Shipping case (supra) and  the R.K. Swamy’s case (supra) and in Bombay Anand Bhavan  Restaurant v. ESI Corpn. (2009) 9 SCC 61. It is submitted

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that the nature of the activities of the race-clubs would  be the same as the nature of the activities of a shop.  For  the  said  purpose,  support  is  taken  from  the  Memorandum of Association of the Bangalore Turf Club and  to the impugned order of the High Court of Karnataka in  Civil Appeal No. 2416 of 2003.

16. Shri  Krishnamani,  learned  counsel  invites  our  attention  to  the  doctrine  of  stare  decisis and  would  submit that the principles utilized in interpreting and  evolving the term 'shop' by this Courts in the country,  since the year 1987, are well-established principles of  law. It is stated that the judgments rendered by this  Court in its earlier decisions whereby the word 'shop'  has been interpreted has been a binding precedent on all  the High Courts across the country, as well as upon the  ESI Court and therefore to alter such a position of law  would be against the doctrine of  stare decisis. It is  stated  that  such  an  established  principle  of  interpretation should not be deviated.  To elaborate upon  the maxim “Stare decisis et non quieta movere”, he would  refer to Krishena Kumar v. Union of India, (1990) 4 SCC

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207.  Reference is also made to the principle as laid  down in the case of Waman Rao v. Union of India (1981) 2  SCC 362 which was reiterated and explained in the case of  Raju v. Union of India (2011) 2 SCC 132.

DISCUSSION:-

17. The primary rule of interpretation of statutes  may  be  the  literal  rule,  however,  in  the  case  of  beneficial legislations and legislations enacted for the  welfare of employees, workmen, this Court has on numerous  occasions adopted the liberal rule of interpretation to  ensure that the benefits extend to those workers who need  to be covered based on the intention of the Legislature.

18. The ESI Act is a welfare legislation enacted by  the Central Government as a consequence of the urgent  need for a scheme of health insurance for workers. It  would be beneficial to reproduce the preamble of the ESI  Act in this context. It is as under:

“An  Act  to  provide  for  certain  benefits  to  employees  in  case  of  sickness,  maternity  and  employment  injury  and  to  make  provision  for  certain other matters in relation thereto.”

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19. In the case of Regional Director, ESI Corpn. v.  Francis De Costa,  1993 Supp (4) SCC 100 (at page 105),  this Court, held that:

“5. The Act seeks to cover sickness, maternity,  employment  injury,  occupational  disease,  etc.  The Act is a social security legislation. It is  settled  law  that  to  prevent  injustice  or  to  promote justice and to effectuate the object and  purpose  of  the  welfare  legislation,  broad  interpretation  should  be  given,  even  if  it  requires a departure from literal construction.  The court must seek light from loadstar Articles  38 and 39 and the economic and social justice  envisaged  in  the  Preamble  of  the  Constitution  which would enliven meaningful right to life of  the  worker  under  Article  21.  The  State  is  enjoined  under  Article  39(e)  to  protect  the  health  of  the  workers,  under  Article  41  to  secure  sickness  and  disablement  benefits  and  Article  43  accords  decent  standard  of  life.  Right  to  medical  and  disability  benefits  are  fundamental human rights under Article 25(2) of  Universal  Declaration  of  Human  Rights  and  Article  7(b)  of  International  Convention  on  Economic, Social and Cultural Rights. Right to  health,  a  fundamental  human  right  stands  enshrined  in  socio-economic  justice  of  our

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Constitution  and  the  Universal  Declaration  of  Human  Rights.  Concomitantly  right  to  medical  benefit  to  a  workman  is  his/her  fundamental  right. The Act seeks to succour the maintenance  of  health  of  an  insured  workman.  The  interpretative endeavour should be to effectuate  the above. Right to medical benefit is, thus, a  fundamental right to the workman.

6. Moreover, even in the realm of interpretation  of Statutes, Rule of Law is a dynamic concept of  expansion  and  fulfilment  for  which  the  interpretation would be so given as to subserve  the  social  and  economic  justice  envisioned  in  the  Constitution.  Legislation  is  a  conscious  attempt, as a social direction, in the process  of change. The fusion between the law and social  change  would  be  effected  only  when  law  is  introspected in the context of ordinary social  life. Life of the law has not been logic but has  been experience. It is a means to serve social  purpose and felt necessities of the people. In  times  of  stress,  disability,  injury,  etc.  the  workman  needs  statutory  protection  and  assistance.  The  Act  fastens  in  an  insured  employment, statutory obligation on the employer  and the employee to contribute in the prescribed  proportion and manner towards the welfare fund  constituted under the Act (Sections 38 to 51 of

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the Act) to provide sustenance to the workmen in  their  hours  of  need,  particularly  when  they  become economically inactive because of a cause  attributable to their employment or disability  or death occurred while in employment. The fact  that the employee contributed to the fund out of  his/her  hard-earned  wages  cannot  but  have  a  vital bearing in adjudicating whether the injury  or  occupational  disease  suffered/contracted  by  an  employee  is  an  employment  injury.  The  liability is based neither on any contract nor  upon any  act or  omission by  the employer  but  upon  the  existence  of  the  relationship  which  employer  bears  to  the  employment  during  the  course of which the employee had been injured.  The Act supplants the action at law, based not  upon  the  fault  but  as  an  aspect  of  social  welfare,  to  rehabilitate  a  physically  and  economically  handicapped  workman  who  is  adversely  affected  by  sickness,  injury  or  livelihood of dependents by death of a workman.”  (emphasis supplied)

20. A three-Judge Bench of this Court, in reference  to the ESI Act, in the case of Transport Corpn. of India  v. ESI Corpn. (2000) 1 SCC 332 (at page 357), held that:

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“27. Before parting with the discussion on this  point,  it  is  necessary  to  keep  in  view  the  salient fact that the Act is a beneficial piece  of legislation intended to provide benefits to  employees  in  case  of  sickness,  maternity,  employment injury and for certain other matters  in relation thereto. It is enacted with a view  to  ensuring  social  welfare  and  for  providing  safe  insurance  cover  to  employees  who  were  likely to suffer from various physical illnesses  during the course of their employment.  Such a  beneficial  piece  of  legislation  has  to  be  construed in its correct perspective so as to  fructify  the  legislative  intention  underlying  its enactment. When two views are possible on  its applicability to a given set of employees,  that  view  which  furthers  the  legislative  intention should be preferred to the one which  would frustrate it. ...”

28. Dealing with this very Act, a three-Judge  Bench of this Court in the case of  Buckingham  and Carnatic Co. Ltd. v.  Venkatiah AIR 1964 SC  1272 speaking through Gajendragadkar, J., (as he  then was) held, accepting the contention of the  learned counsel, Mr. Dolia that:

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“It is a piece of social legislation intended to  confer specified benefits on workmen to whom it  applies, and so, it would be inappropriate to  attempt to construe the relevant provisions in a  technical  or  a  narrow  sense.  This  position  cannot be disputed. But in dealing with the plea  raised by Mr Dolia that the section should be  liberally construed, we cannot overlook the fact  that  the  liberal  construction  must  ultimately  flow from the words used in the section. If the  words used  in the  section are  capable of  two  constructions one of which is shown patently to  assist the achievement of the object of the Act,  courts  would  be  justified  in  preferring  that  construction to the other which may not be able  to further the object of the Act.”  

(emphasis supplied)

21. In the case of Bombay Anand Bhavan Restaurant v.  ESI Corpn. (2009) 9 SCC 61 (at page 66), it was observed  that:

“20. The  Employees’  State  Insurance  Act  is  a  beneficial legislation. The main purpose of the  enactment  as  the  Preamble  suggests,  is  to  provide for certain benefits to employees of a  factory  in  case  of  sickness,  maternity  and  employment  injury  and  to  make  provision  for

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certain other matters in relation thereto.  The  Employees’  State  Insurance  Act  is  a  social  security  legislation  and  the  canons  of  interpreting a social legislation are different  from  the  canons  of  interpretation  of  taxation  law.  The  courts  must  not  countenance  any  subterfuge which would defeat the provisions of  social legislation and the courts must even, if  necessary,  strain  the  language  of  the  Act  in  order  to  achieve  the  purpose  which  the  legislature had in placing this legislation on  the  statute  book.  The  Act,  therefore,  must  receive a liberal construction so as to promote  its objects.” (emphasis supplied)

22. The legislature enacted the ESI Act to provide  certain  benefits  to  employees  in  case  of  sickness,  maternity in case of female employees, employment injury  and  to  make  provision  in  certain  other  matters  in  relation thereto.  The provision of the ESI Act apply to  all the factories other than seasonal factories.  The  State  Government  with  the  approval  of  the  Central  Government is authorised to make the provisions of the  ESI  Act  applicable  to  any  other  establishment  or  establishments.  The provisions of the ESI Act provides  that  all  employees  in  factories  or  establishments  to

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which the ESI Act applies shall be insured in the manner  provided under the ESI Act.  Since the ESI Act is passed  for conferring certain benefits to employees in case of  sickness,  maternity  and  employment  injury,  it  is  necessary that the ESI Act should receive a liberal and  beneficial  construction  so  as  to  achieve  legislative  purpose without doing violence to the language of the  enactment.

23. As regards the principles to be followed in the  event a particular word or phrase has not been defined by  the Statute, whether the Courts would be justified in  placing reliance upon the meanings as provided for by  dictionaries, and if so whether such reliance would be  guided  by  any  principles.  The  position  as  regards  to  using dictionaries as an external aid of construction is  reflected in the following decisions of this Court. 24. In the case of Raja Benoy Kumar Sahas Roy [1957]  32 ITR 466 (SC), this Court pointed out that meanings of  words used in Acts of Parliament are not necessarily to  be gathered from dictionaries which are not authorities  on  what  Parliament  must  have  meant.   It  was  also  indicated that, where there is nothing better to rely

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upon, dictionaries may be used as an aid to resolve an  ambiguity.  The  ordinary  dictionary  meaning  cannot  be  discarded simply because it is given in a dictionary. To  do  that  would  be  to  destroy  the  literal  rule  of  interpretation. It was observed in the given case that it  would  be  a  basic  rule  to  rely  upon  the  ordinary  dictionary meaning of a word which, in the absence of  some  overriding  or  special  reasons  to  justify  a  departure, must prevail.

25. In the case of State of Orissa v. Titaghur Paper  Mills  Co.  Ltd.,  1985  Supp  SCC  280,  this  Court  was  concerned  with  determining  the  meaning  of  the  terms  'timber' and 'logs' for the purpose of levying purchase  tax. It was the contention of the State that the meaning  of the said terms must be ascertained in common parlance.  In this context it was held that (at page 374):

“.... (9) The dictionary meaning of a word cannot be  looked at where that word has been statutorily  defined  or  judicially  interpreted  but  where  there is no such definition or interpretation,  the court may take the aid of dictionaries to  ascertain  the  meaning  of  a  word  in  common

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parlance, bearing in mind that a word is used in  different senses according to its context and a  dictionary gives all the meanings of a word, and  the  court  has,  therefore,  to  select  the  particular  meaning  which  is  relevant  to  the  context in which it has to interpret that word.”

26. In the case of State of U.P. v. Hari Ram, (2013)  4 SCC 280, this Court was faced with the question of  ascertaining the meaning of 'acquired' and 'vested' for  the purpose of Section 10 of the Urban Land (Ceiling and  Regulation) Act, 1976. This Court not only referred to  the dictionary meanings assigned to these terms, but also  placed heavy reliance to the context in which the words  were used. This Court observed that:

“21. ... Each word, phrase or sentence that we  get in a statutory provision, if not defined in  the Act, then is to be construed in the light of  the general purpose of the Act. As held by this  Court in Organo Chemical Industries v. Union of  India  (1979) 4 SCC 573 that a bare mechanical  interpretation of the words and application of a  legislative intent devoid of concept of purpose  will reduce most of the remedial and beneficial  legislation to futility. Reference may also be  made  to  the  judgment  of  this  Court  in

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Directorate  of  Enforcement v.  Deepak  Mahajan  (1994) 3 SCC 440. Words and phrases, therefore,  occurring in the statute are to be taken not in  an  isolated  or  detached  manner,  they  are  associated on the context but are read together  and construed in the light of the purpose and  object of the Act.”

27. In  the  aforementioned  context,  this  Court  further referred to the case of S. Gopal Reddy v. State  of A.P. (1996) 4 SCC 596, wherein it was held that:  

“12. It is a well-known rule of interpretation  of statutes that the text and the context of the  entire  Act  must  be  looked  into  while  interpreting any of the expressions used in a  statute.  The  courts  must  look  to  the  object  which  the  statute  seeks  to  achieve  while  interpreting any of the provisions of the Act. A  purposive approach for interpreting the Act is  necessary.”

28. As regards the question as to whether the Court  should rely upon the meaning of the word ‘shop’ in common  parlance or in its traditional sense, or should the Court  refer to the dictionary meaning, it would be appropriate  to consider the following cases.

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29. In the decision rendered by the Queen’s Bench in  Lyons v. Tucker, (1880) 6 QBD 664, it was observed that a  statute consists of two parts, the letter and the sense.  In this regard it was noticed that it was the internal  sense of the law that would make the law, and not the  mere letter of the law. In the case of Caledonian Railway  v. North British Railway, (1881) 6 AC 114, it was held as  under:

“The mere literal construction of statute ought  not to prevail if it is opposed to the inten- tions  of  the  Legislature  as  apparent  by  the  statute and if the words are sufficiently flexi- ble to admit of some other construction by which  that intention can be better effectuated.”

30. In the case of Sheikh Gulfan v. Sanat Kumar Gan- guli, (1965) 3 SCR 364, it was held that:

“…Normally, the words used in a statute have to  be construed in their ordinary meaning; but in  many  cases,  judicial  approach  finds  that  the  simple device of adopting the ordinary meaning  of words does not meet the ends of a fair and a  reasonable  construction.  Exclusive  reliance  on

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the  bare  dictionary  meaning  of  words  may  not  necessarily assist a proper construction of the  statutory  provision  in  which  the  words  occur.  Often enough, in interpreting a statutory provi- sion, it becomes necessary to have regard to the  subject-matter  of  the  statute  and  the  object  which it is intended to achieve. That is why in  deciding the true scope and effect of the rele- vant words in any statutory provision, the con- text in which the words occur, the object of the  statute in which the provision is included, and  the policy underlying the statute assume rele- vance and become material. As Halsbury has ob- served, the words “should be construed in the  light of their context rather than what may be  either their strict etymological sense or their  popular  meaning  apart  from  that  context  (See  Halsbury’s  Laws  of  England,  Vol.  36,  p.396,  para. 593).”

31. We may safely conclude that the literal rule of  construction may be the primary approach to be utilized  for interpretation of a statute and that words in the  statute should in the first instance be given their mean- ing as understood in common parlance. However, the ESI  Act is a beneficial legislation. It seeks to provide so-

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cial  security  to  those  workers  as  it  encompasses.  In  light of the cases referred above, it may be seen that  the traditional approach can be substituted. A dictionary  meaning may be attached to words in a statute in prefer- ence over the traditional meaning. However, for this pur- pose as well, the scheme, context and objects of the leg- islature must be taken into consideration. Taking into  due consideration the nature and purpose of the ESI Act,  the dictionary meaning as understood in the context of  the said Act, would be preferable to achieve the objects  of the legislature.  

32. Having glanced through the relevant provisions  and  the  settled  legal  principles  of  interpretation  of  statutes, let us revert back to the factual matrix as  present in the given set of appeals.

33. The  first  point  for  consideration  in  this  reference is, whether there is any flaw in the judgment  and order passed by this Court in the case of Hyderabad  Race Club (supra).  In the said decision this Court has  concluded  that  “race-club”  is  an  establishment.  Therefore,  what  then  is  an  'establishment'  for  the

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purpose of the ESI Act.  

34. In the absence of any definition as provided in  the ESI Act, this Court may look into its dictionary  meaning for guidance or as an aid of construction of the  term 'establishment'. Dictionaries do define the meaning  of a word as understood in common parlance.

35. According to Black's Law Dictionary, 7th Edition  (1999), the term 'establishment' means, inter alia:

“Establishment, n. 2. An institution or place of  business.”

36. According  to  the  Words  and  Phrases,  Permanent  Edition,  Volume  15,  the  term  'establishment'  has  been  held to mean, inter alia, the following:

“An establishment means a permanent commercial  organisation  or  a  manufacturing  establishment.  Spielman v. Industrial Commission, 295 N.W. 1,  4, 236 Wis. 240.”;

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“An  establishment  is  the  place  where  one  is  permanently fixed for residence or business such  as  an  office  or  place  of  business  with  its  fixtures.  Lorenzetti  v.  American  Trust  Co.,  D.C.Cal., 45 F.Supp. 128, 139.”

37. According to Corpus Juris Secundum, Volume LXXX,  the term 'establishment' has been explained as follows:

“ESTABLISHMENT

...  More  specifically,  a  fixed  place  where  business  is  conducted,  or  a  place  where  the  public  is  invited  to  come  and  have  its  work  done; an institution or place of business with  its fixtures and organised staff; any office or  place of business, with its fixtures, the place  in which one is permanently fixed for residence  or  business;  a  permanent  commercial  organisation, as a manufacturing establishment;  the place of business or residence with grounds,  fixtures,  equipage,  etc.,  with  which  one  is  fitted  out;  also  that  which  serves  for  the  carrying on of a business. ...”

38. Therefore,  it  can  be  simply  stated  that  an  'establishment' is a term which can have a wide meaning.  It would be any place where business is conducted, or in  other words, it would be any place of business. Now the

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question arises whether a 'race-club' is in the nature of  a place where business is conducted. To answer the same,  the activities that are undertaken by the Appellant-Turf  Club  requires  to  be  noticed.  The  Bangalore  Turf  Club  Limited and the Royal Western India Turf Club are two of  the five ‘Turf Authorities of India’.  The activities of  these two turf clubs are more or less the same as of the  Madras Race Club.  Therefore, we may usefully refer to  the observations made by this Court in the case of  Dr.  K.R. Lakshmanan v. State of Tamil Nadu (1996) 2 SCC 224,  which is as follows:

“17. We may at this stage notice the manner in  which the Club operates and conducts the horse- races.  Race meetings are held in the Club- race  courses at Madras and Ooty for which the bets  are  made  inside  the  racecourse  premises.  Admission  to  the  racecourse  is  by  tickets  (entrance fee) prescribed by the Club.  Separate  entrance  fee  is  prescribed  for  the  first  enclosure and the second enclosure.  About 1½ of  the  entrance  fee  represents  the  entertainment  tax payable to the Commercial Tax Department of  the State Government.  The balance goes to the  Club’s  account.   Betting  on  the  horses,

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participating in the races, may be made either  at  the  Club’s  totalizators  (the  totes)  by  purchasing tickets of Rs.5 denomination or with  the bookmakers (bookies) who are licensed by the  Club  and  operate  within  the  first  enclosure.  The  totalizator  is  an  electronically  operated  device  which  pools  all  the  bets  and  after  deducting  betting  tax  and  the  Club  charges,  works out a dividend to be paid out as winnings  to those who have backed the successful horses  in the  race.  Bookmakers, on  the other  hand,  operate  on  their  own  account  by  directly  entering  into  contracts  with  the  individual  punters  who  come  to  them  and  place  bets  on  horses on the odds specified by the bookmakers.  The  bookmakers  issue  to  the  punters  printed  betting  cards  on  which  are  entered  the  bookmaker’s name, the name of the horse backed,  the amount of bet and the amount of prize money  payable if the horse wins.  The winning punters  collect their money directly from the bookmaker  concerned.  The net result is that 75% of the  tote collections of each race are distributed as  prize money for winning tickets, 20% is paid as  betting tax to the State and 5% payable to the  Club as its commission.  It is thus obvious that  the Club is entitled to only 5% as commission  from  the  tote  collections  and  also  from  the  total receipts of the bookmakers.  According to

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the  appellant  the  punters  who  bet  at  the  totalizator  or  with  the  bookmakers  have  no  direct contract with the Club.  

18. The Club pays from its own funds the prize  money (stake money) to the winning horses.  The  horses which win the first, second, third and up  to 5th or 6th places are given prizes by the Club.  The  Club  income  consists  of  entrance  fee,  5%  commission  paid  by  the  bookmakers  and  the  totalizators, horse entry fee paid by the owners  of the horses participating in the race and the  licence  fee  charges  by  the  Club  from  the  bookmakers.     ”

39. The  term  `establishment’  would  mean  the  place  for transacting any business, trade or      profession or  work connected with or incidental or ancillary thereto.  It is true that the definition in dictionaries is the  conventional definition attributed to trade or commerce,  but  it  cannot  be  wholly  valid  for  the  purpose  of  constructing              social welfare legislation in a  modern welfare State.  The test of finding out whether  professional  activity  falls  within  the  meaning  of  the  expression  `establishment’  is  whether  the  activity  is  systematically  and  habitually  undertaken  for

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production or distribution of the goods or services to  the community with the help of employees in the manner of  a  trade  or  business  in  such  an  undertaking.  If  a  systematic economic or commercial activity is carried on  in the premises, it would follow that the establishment  at which such an activity is carried on is a ‘shop’.  This Court, in Hyderabad Race Club case (supra), keeping  in view the systematic commercial activity carried on by  the Club has held that the Race-Club is an establishment  within the meaning of the said expression as used in the  notification issued under Section 1(5) of the ESI Act.  Therefore, in our considered view, the view expressed by  this Court is in consonance with the provisions of the  ESI Act and also settled legal principles.  Therefore,  the said decision does not require re-consideration.

40.    The next point to be considered by this Court, in  accordance with the reference order, would be whether a  'race-club' would be covered under the definition of a  'shop'. The term 'shop', again, has not been defined in  the ESI Act. Therefore the meaning assigned to this word  in dictionaries may be noticed.  

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41. As  per  the  Concise  Oxford  English  Dictionary,  Eleventh Edition (Revised), the term shop has been given  the following meaning:

“shop n. 1.  a building or part of a building  where goods or services are sold.”

According to Wharton's Law Lexicon, 14th Edition  (2003), a shop has been said to mean:

“Shop,  a place where things are kept for sale,  usually  in  small  quantities,  to  the  actual  consumer.”

According to Black's Law Dictionary, 7th Edition  (1999), the term 'shop' has been stated to mean:

“Shop,  n. A business establishment or place of  employment; a factory, office, or other place of  business.”

According  to  the  Words  and  Phrases,  Permanent  Edition, Volume 39, the term 'shop' has been stated to  mean, inter alia, the following:

“The word shop means a room or building in which

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the  making,  preparing,  or  repairing  of  any  article is carried on, or in which any industry  is pursued; the place where anything is made;  the producing place or source. State v. Sabo,  140 N.E. 499, 500, 108 Ohio St. 200.”;

“Worcester defines a shop as a place, building,  or  room  in  which  things  are  sold;  a  store.  Salomon  v.  Pioneer  Co-operative  Co.,  21  Fla.  374, 384, 58 Am.Rep. 667.”;

“Webster defines the word shop as follows: (1) A  building in which goods, wares, drugs, etc. are  sold  at  retail;  (2)  a  building  in  which  mechanics  work,  and  where  they  keep  their  manufacturers for sale. State v. O'Connell, 26  Ind. 266, 267; Salomon v. Pioneer Co-operative  Co., 21 Fla. 374, 384, 58 Am.Rep. 667.”

According to Corpus Juris Secundum, Volume LXXX,  the term shop has been explained as follows:

“SHOP As a noun. The word shop appears to be derived  from  the  old  high  German  'schopf'  or  'scopf'  which meant a building without a front wall. It  is a term of various significance, and has many  definitions, and it may have different meanings  when used with different texts. In its popular

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sense, as well as its legal, meaning, the term  shop  is  not  confined  to  a  store,  and  it  may  include both a store and a workshop.

....

The word shop may denote a place where goods are  sold, a place, building, or room in which things  are sold; and, expressing this concept, the term  is defined as meaning a place kept and used for  the sale of goods; a place where goods are sold  for retail; ...”

 42. From the above, it can be said that a 'shop' is  a place of business or an establishment where goods are  sold  for  retail.  However,  it  may  be  noted  that  the  definitions as given in the dictionaries are very old and  may not reflect, with complete accuracy, what a shop may  be referred as in the present day. Therefore, it may be  pertinent to consider the manner in which this Court has  dealt with the word 'shop' in its judicial decisions.  

43. The term 'shop', in regard to the ESI Act, has  been discussed in earlier cases by this Court. In the  case of  Hindu Jea Band  (supra) it is observed that a

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'shop' would be a place where services are sold on a  retail basis. In  International Iron Ore and Fertilizers  (India) Pvt. Ltd. v. ESIC (1987)    4 SCC 203, this Court  stated  that  a  'shop'  would  be  a  place  where  the  activities connected with buying and selling of goods is  carried  on.  In  the  case  of  Cochin  Shipping  Company  (supra) the Court observed that a 'shop' must be held to  be  a  place  where  commercial  activity  of  buying  and  selling of merchandise takes place. In R.K. Swamy’s case  (supra) the Court extended the meaning of a 'shop' to  include even sale of services.

44. Therefore,  certain  basic  features  of  a  'shop'  may be culled out from the above. It can be said that a  'shop' is a business establishment where a systematic or  organised commercial activity takes place with regard to  the sale or purchase of goods or services, and includes  an establishment that facilitates the above transaction  as well.

45. The word ‘shop’ is not defined either in the ESI  Act or in the notification.  The ESI Act being a Social  Welfare  Legislation  intended  to  benefit  as  far  as

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possible workers belonging to all categories, one has to  be liberal in interpreting the words in such a welfare  legislation.  The definition of a shop which meant a  house or building where goods are sold or purchased has  now undergone a great change.  The word `shop’ occurring  in the notification is used in the larger sense than its  ordinary meaning.  What is now required is a systematic  economic or commercial activity and that is sufficient to  bring that place within the sphere of a `shop’.     

46. In view of the fact that an `establishment' has  been found to be a place of business and further that a  'shop' is a business establishment, it can be said that a  'shop' is indeed covered under, and may be called a sub- set of, the term 'establishment'.

47. The next point for our consideration is whether  the activities of a race-club are 'entertainment'. The  said meaning is sought to be ascertained in order to  determine whether the Appellant-Turf Clubs are engaged in  providing  entertainment  to  those  who  come  to  their  premises. Again, in the absence of any definition to that  effect in the ESI Act, it may be relevant to understand

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its meaning in common parlance.

48. As  per  Concise  Oxford  English  Dictionary,  Eleventh Edition (Revised), the word entertainment has  been assigned the following meaning:

“entertainment  n.  The  action  of  providing  or  being provided with amusement or enjoyment; an  event or performance designed to entertain.”

According  to  Black's  Law  Dictionary,  7th Edition  (1999), the term 'entertain' means, inter alia:

“Entertain, vb. 2. To amuse or please.”

According  to  the  Words  and  Phrases,  Permanent  Edition, Volume 14A, the term 'entertainment' has been  held to mean, inter alia, the following:

“Entertainment  denotes  that  which  serves  for  amusement,  and  'amusement'  is  defined  as  a  pleasurable  occupation  of  the  senses,  or  that  which  furnishes  it,  as  dancing,  sports,  or  music. Young v. Board of Trustees of Broadwater  County High School. 4 P. 2D 725, 726, 90 Mont.  576.”

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According to Corpus Juris Secundum, Volume XXX, the  term 'entertainment' has been explained as follows:

“ENTERTAINMENT ... The second meaning of the term is a diverting  performance, especially a public performance, as  a concert, drama, or the like; a source or means  of amusement; instruction or amusement afforded  by anything  seen or  heard, as  a spectacle,  a  play,  etc.;  mental  enjoyment,  or  that  which  amuses  or  diverts;  that  which  serves  for  amusement;  also  the  act  of  providing  gratification  or  diversion.  The  term  has  been  held to include recreational activities, such as  games, sports, plays and dancing.”

49. Therefore  it  can  be  safely  concluded  that  'entertainment'  is  an  activity  that  provides  with  amusement  or  gratification.  Further,  it  would  include  public performances, including games and sports.  

50. As observed in the case of  Dr. K.R. Lakshmanan  (supra) (at para 24), that, “Horse racing is an organised  institution. Apart from a sport, it has become a huge

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public entertainment business ...”.  Therefore, it can be  said that horse racing is indeed a form of entertainment.  Such an entertainment is provided not only to the members  of the Appellant-Clubs, but also to the general public on  the payment of a certain admission fee.  

51. Further,  the  said  race-clubs  also  provide  the  viewers  with  the  facilities  to  indulge  in  betting  activities, which may even be said to be an integral part  of the sport. The race-clubs further even charge a fixed  commission on the said betting. “Commission” in common  parlance has duly been understood to mean a fixed charge  payable to an agent or a broker for providing services  for facilitating a transaction.  

52. The next question is whether the appellant-Turf  Clubs fall under the definition of the term 'shop' for  the purposes of the ESI Act.

53. It is not the case of the appellants that the  Club does not provide services. It may be gainsaid that  the said services, apart from providing the viewers with  a form of entertainment, is available to all members of  the public at a mere payment of an admission or entrance

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fee. The only question, therefore, would be whether such  services may be construed to be along the same lines as  those provided for by a shop. If the answer is in the  affirmative,  then  such  race-clubs  would  surely  fall  within the definition of the term 'shop', and thereby  under the ESI Act as well.

54. We  have  already  noticed  that  a  'shop'  is  a  business establishment where a systematic or organised  commercial activity takes place with regard to the sale  or  purchase  of  goods  or  services,  and  includes  an  establishment that facilitates the above transaction as  well.

55. We have also noticed that the modus operendi of  the Appellant-Bangalore Turf Club is the same as that as  has been mentioned in the case of  Dr. K.R. Lakshmanan  (supra), with a difference only in the percentages of tax  and commission collected. The Appellant- Turf Club, in  essence, takes money from viewers, members as well as the  general public, as admission fee and in return provides  them  with  certain  services,  those  being  the  actual

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viewing of the race and facilitating placing of bets.  Some features of the mode of conducting horse races by  the Appellant-Turf Club may be listed as follows:

i.   That the bets are made inside the race  course premises;  ii. That  admission of  the race  is by  tickets  (entrance  fee)  as  prescribed  by  the  Club.  Separate  entrance  fee  is  prescribed  for  the  first enclosure and the second enclosure;  

iii. That betting on the horse, participating in  the  races  may  be  made  at  either  the  club's  totalizators (the totes) by purchasing tickets  or  with  the  Book  Makers  (Bookies)  who  are  licensed  by  the  club  and  operate  within  the  first enclosure;  

iv. That  5%  of  the  tote-collections  of  each  race is retained by the club as commission.

56. It may also be relevant to make a reference to  the Memorandum of Association of the appellant in Civil

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Appeal No. 2416 of 2003, being the Bangalore Turf Club  Limited. The objects of the said appellant include, inter  alia, the following:

“(a) to carry on the business of a race-club in  all its branches and in particular to lay out  and  prepare  lands  for  the  running  of  horse  races,  steeplechases  or  races  of  any  other  kind.... ... (d)  to  establish  any  Clubs,  Hotels  or  other  conveniences  in  connection  with  the  Company's  property;

(e) to carry on the business of hotel-keepers,  licensed victualler, refreshment purveyors;

(f) to buy, maintain and sell horses and ponies  for  racing,  breeding  and  training  either  directly or through riding clubs, studs or other  agencies; ... (j)  to  establish  institutions,  schools,  funds  and other conveniences for training jockeys and  riders, both professional and amateur; ....”

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The above objects are reproduced, solely with the  intention to establish that the appellant cannot claim  that the Turf Club is established for the limited purpose  of conducting races. This does not imply that this Court  is of the opinion that if the Turf Club were to merely  conduct horse races, it would surely fall out of the  purview of a shop. Further, it would not be relevant as  to  whether  the  said  activities  as  enlisted  above  are  being conducted as on date. One cannot argue that a given  premises may not be a shop based on the grounds that  certain contentious activities have been discontinued for  the time being. These activities are provided for in the  Memorandum of Association and therefore, the Turf Clubs  may, legally and as a matter of right, resume them on a  future date.

57. It can be safely concluded that, the Appellant- Turf Clubs conduct the activity of horse racing, which is  an  entertainment.  The  Appellant-Turf  Clubs  provide  various services to the viewers, ranging from providing  facilities to enjoy viewership of the said entertainment,  to the facilitating of betting activities, and that too  for a consideration- either in the form of admission fee

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or as commission. An argument may be advanced that not  all persons who come to the race would avail the services  as provided by the Appellant-Turf Clubs, however the same  would  fail  as  even  in  the  case  of  a  shop  in  the  traditional meaning, that is to say, one where tangible  goods  are  put  for  sale,  a  customer  may  or  may  not  purchase the said goods. What is relevant is that the  establishment must only offer the clients or customers  with goods or services. In this light, it is found that a  race-club, of the nature of the Appellants, would fall  under  the  scope  of  the  term  'shop'  and  thereby  the  provisions  of  the  ESI  Act  would  extend  upon  them  by  virtue of the respective impugned notifications issued  under sub-section (5) of Section 1 of the ESI Act.

58. An argument raised by the Appellants-herein is  the issue relating to the `doctrine of pari materia’. It  is contended that since the ESI Act does not define the  term 'shop', the said definition may be ascertained in  light of the definitions under the relevant Shops and  Commercial  Establishments  Act  as  enacted  by  the  respective  State  Legislatures,  since  the  purpose  and

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object of both the enactments are one and the same.  

59. For the above purpose, it would be necessary to  look into the concept of “doctrine of pari materia” and  further ascertain whether the given statutes are in fact  pari materia with the ESI Act. It is settled law that two  statutes are said to be in pari materia with each other  when  they  deal  with  the  same  subject-matter.  The  rationale behind this rule is based on the interpretative  assumption that words employed in legislations are used  in  an  identical  sense.  However,  this  assumption  is  rebuttable by the context of the statutes. According to  Sutherland in  Statutes and Statutory Construction, Vol.  2, Third Edition:

“Statutes are considered to be in pari materia  to pertain to the same subject-matter when they  relate to the same person or things, or to the  same class  of persons  or things,  or have  the  same purpose or object.”

60. The  preamble  of  the  Maharashtra  Shops  and  Establishments  Act,  1948  (for  short,  “the  Act,  1948”)  reads as follows:

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“An  Act  to  consolidate  and  amend  the  law  relating to the regulation of conditions of work  and  employment  of  shops,  commercial  establishments, residential hotels, restaurants,  eating houses, theatres, other places of public  amusement  or  entertainment  and  other  establishments.”

The preamble of the Karnataka Shops and Commercial  Establishments  Act,  1961  (for  short,  “the  Act,  1961”)  reads as follows:

“An  Act  to  provide  for  the  regulation  of  conditions of work and employment in shops and  commercial establishments.”

61.  On a perusal of the above, it may be said that  the  said  Acts,  though  they  may  relate  to  labour  and  workmen, is in essence intended to be regulatory.  The  Acts require mandatory registration of the establishments  covered by the respective statutes, sets out provisions  relating to working hours, wages, annual leave, etc. and  further prescribe penalties for non-compliance with the  said  provisions.  The  Acts  further  enable  the  local  authorities  to  appoint  local  inspectors  who  are  given  certain powers to ensure the compliance of the provisions

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of the Acts. Under sub-section (4) of Section 48 of the  Act, 1948 such inspectors would also be deemed to be  inspectors under the Minimum Wages Act, 1948. Further,  the Act, 1961 under Chapter V makes an express reference  to the applicability of the Payment of Wages Act, 1936  and  the  Workmen's  Compensation  Act,  1923.  There  is  a  clear absence of reference to any other legislation in  the  aforesaid  provisions,  thereby  indicating  that  the  legislature intended to exclude the applicability of the  ESI Act.   

62. The  ESI  Act,  on  the  other  hand,  as  has  been  noticed in the preamble quoted earlier, is an Act that  provides for certain benefits to employees in case of  sickness,  maternity  and  employment  injuries.  It  establishes  the  Employees'  State  Insurance  Corporation  for the administration of the scheme of Employees' State  Insurance and sets up an Employees' State Insurance Fund  in which all contributions paid under the ESI Act are  held  and  accordingly  administered.  The  ESI  Act  also  establishes a Special Court for adjudication of disputes  and claims under the same.

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   63. It can be concluded that though the ESI Act, the  Act, 1948 and the Act, 1961 deal with labour and workmen,  in essence and spirit they have a different scope and  application. The acts do not appear to have any overlap  in their fields of operation and have mutually exclusive  schemes. Therefore, the argument that the acts are pari  materia with each other, must fail.

64. This  Court  must  also  address  the  issue  that  arose in the course of the arguments that the word 'shop'  has been used in the impugned notifications as well as  the Act, 1948 and the Act, 1961 and therefore assistance  may be taken from the latter statutes to interpret the  notification.  This  argument,  in  light  of  the  above  discussion,  does  not  appeal  to  us.  In  the  case  of  Directorate of Enforcement v. Deepak Mahajan (1994) 3 SCC  440, this Court referred to the book titled “The Loom of  Language”, wherein it has been stated as follows:  

“Words are not passive agents meaning the same  thing and carrying the same value at all times  and  in  all  contexts.  They  do  not  come  in  standard shapes and sizes like coins from the

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mint, nor do they go forth with a decree to all  the world that they shall mean only so much, no  more  and  no  less.  Through  its  own  particular  personality, each word has a penumbra of meaning  which  no  draftsman  can  entirely  cut  away.  It  refuses to be used as a mathematical symbol.”

65. Furthermore,  in  the  case  of  Deepak  Mahajan  (supra), at paragraph 24 quotes Maxwell on Interpretation  of  Statutes,  Tenth  Edn.  at  page  229,  wherein  the  following passage is found:

“Where  the  language  of  a  statute,  in  its  ordinary  meaning  and  grammatical  construction,  leads  to  a  manifest  contradiction  of  the  apparent purpose of the enactment, or to some  inconvenience  or  absurdity,  hardship  or  injustice,  presumably  not  intended,  a  construction may be put upon it which modifies  the meaning of the words, and even the structure  of the sentence. ... Where the main object and  intention of a statute are clear, it must not be  reduced  to  a  nullity  by  the  draftsman's  unskilfulness or ignorance of the law, except in  a  case  of  necessity,  or  the  absolute  intractability of the language used.”

66. It  is  to  be  noticed  that  every  word  of  a

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language is flexible to connote different meanings when  used in different contexts. That is why it is said that  words are not static, but dynamic and the Court should  adopt the dynamic meaning which upholds the validity or  scheme of any legislation. It is settled law that the  words used in a particular statute cannot be used to  interpret the same word in a different statute especially  in light of the fact that the two statutes are not pari  materia with  each  other  and  have  a  wholly  different  scheme from one another.

67. The  learned  counsel  Shri  Singh  would  contend  that  the  notification  dated  18.09.1978  uses  the  term  'namely' followed by description of goods.  Therefore, it  is exhaustive and by interpretation it is impermissible  to  add  any  other  business  or  trading  or  commercial  activity to come under the notification.    

68. In this regard, it may be useful to refer to the  decision of this Court in the case of  Cochin Shipping  Company  (supra), which is a three-Judge Bench decision.  In the aforesaid case the impugned notification used the  term 'namely' and on a bare perusal the same is similar

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to the notification impugned in the present case by the  Royal Western India Turf Club Limited. In the said case,  the Court went on to observe, that, the term 'shop' be  given an expansive interpretation and would include the  Appellant-therein. The argument raised by the Appellant- therein was that as per the impugned notification, the  term  'shop'  would  take  within  it  sweep  the  other  establishment enumerated as well. Therefore, the meaning  of the word 'shop' must be ascertained in a manner that  the other terms do not become meaningless. However, this  Court found favour with the arguments of the respondents- therein and observed that merely because of enumeration  of other establishments which are akin to a shop, the  same  does  not  place  an  obligation  on  this  Court  to  interpret 'shop' in a narrow manner. It was observed that  the  object  was  to  cover  as  many  establishments  as  possible without leaving any room for doubt. The Court  further observed that the ESI Act is a social security  legislation and the same was an outcome of a policy to  provide remedy for the widespread evils arising from the  consequences of national poverty.  In the words of the  Court:-

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“In this case, the argument advanced on behalf  of the appellant is slightly different, namely,  other kinds of establishments which can easily  fall within the definition of "shop" have been  enumerated. Hence, a specific enumeration, so as  to include the appellant's business activity, is  to  be  insisted  upon.  In  our  considered  view,  this argument cannot be accepted. First of all,  merely  because  other  establishments  which  are  akin to shop are enumerated, it does not, in any  manner, oblige us to give a narrow meaning to  the word "shop" nor does it any way dilute the  meaning of ‘shop’. As rightly contended by the  learned counsel for the respondent, the object  is  to  envelope  as  many  establishments  as  possible  without  leaving  any  room  for  doubt.  That is precisely what the notification intends  to do.”

69. We are in agreement with the view expressed in  the aforesaid decision.

70. We are of the view that, in the present case,  the use of the word 'namely' and a consequent enumeration  would simply imply that the notification seeks to enlist  the classes of establishment or establishments that fall

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within the purview of the ESI Act.

71. It  has  consistently  been  the  stand  of  the  Appellants-herein that the term 'shop' must be understood  in its 'traditional sense'. However, as has been observed  by  this  Court  in  the  case  of  Bombay  Anand  Bhavan  Restaurant (supra), the language of the ESI Act may also  be strained by this Court, if necessary.  The scheme and  context of the ESI Act must be given due consideration by  this Court. A narrow meaning should not be attached to  the words used in the ESI Act. This Court should bear in  mind that the ESI Act seeks to insure the employees of  covered  establishments  against  various  risks  to  their  life, health and well-being and places the said charge  upon the employer.  

72. We  find  that  the  term  'shop'  as  urged  to  be  understood and interpreted in its traditional sense would  not serve the purpose of the ESI Act. Further in light of  the  judgments  discussed  above  and  in  particular  the  Cochin Shipping Case (supra) and the Bombay Anand Bhavan  Case (supra),  this  Court  is  of  the  opinion  that  an  expansive meaning may be assigned to the word 'shop' for

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the purposes of the ESI Act. As has been found above, the  activities of the Appellant-Turf Clubs is in the nature  of  organised  and  systematic  transactions,  and  further  that the said Turf Clubs provide services to members as  well as public in lieu of consideration. Therefore, the  Appellant-Turf  Clubs  are  a  ‘shop’  for  the  purpose  of  extending the benefits under the ESI Act.   73. In light of the above discussions, the reference  is answered in the following terms:

i. A 'race-club' is an 'establishment' as rightly  held  in  the  case  of  Employees  State  Insurance  Corporation v. Hyderabad Race Club  (2004) 6 SCC

191;

ii.  The  Appellant-Turf  Clubs  are  duly  covered  under the term 'shop' for the purposes of the ESI  Act and notifications issued thereunder.

74. The aforementioned are the only two issues that  arise in the matter pertaining to the Bangalore Turf Club  Ltd., and as a consequence are the only issues dealt with  in the present reference.

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75. In the matters regarding the Royal Western India  Turf Club Ltd., it is brought to our notice by Shri J.P.  Cama,  learned  counsel,  that  there  are  other  issues  involved  as  well.  Therefore,  we  now  send  back  the  matters,  i.e.  C.A.Nos.49/2006,  1575/2006,  3421  and  3422/2012  insofar  as  Royal  Western  India  Turf  Club  Limited to an appropriate two-Judge Bench of this Court  for adjudication and decision on the issues not addressed  herein.  

76. In our view, the interim order granted earlier  need not be continued further.  Accordingly, we vacate  the same.  

77. The  Civil  Appeal  No.2416/2003  is  disposed  of  accordingly.   

CIVIL APPEAL NO. 6212 OF 2012

1. This appeal is directed against the judgment and  order dated 29.03.2012 of the Madurai Bench of the Madras  High Court in Civil Miscellaneous Appeal (MD) No. 1231 of

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2011.  The  matter  had  reached  before  the  High  Court  against  the  order  of  the  Labour  Court,  Tirunelveli,  whereby the Appellant was held to be a 'shop' under a  Notification extending the provisions of the ESI Act to a  certain class of establishments as mentioned under the  said Notification. The High Court of Madras, by the said  impugned judgment, upheld the order passed by the Labour  Court. It was observed in the impugned judgment that the  object of the ESI Act is beneficial in nature and the  object  of  the  legislature  could  not  be  defeated  by  adopting a narrow definition of the term 'shop'.

2. The  given appeal  is not  a consequence  of the  aforementioned reference order. However, this appeal has  been tagged with the above appeals since it involves the  same  question  of  law.   The  issue  in  this  appeal  is  whether the business of a Chit Fund can be said to be a  'shop' for the purposes of the ESI Act.

3. The short facts leading to the dispute are that  the Government of Tamil Nadu issued a Notification No.  II(2)/LE/1859/76  dated  03.04.1976  as  published  on

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21.04.1976.  By  the  said  impugned  notification,  the  Government of Tamil Nadu sought to extend the provisions  of the ESI Act over a given class of establishments as  mentioned therein. Item 3 of the impugned notification  enumerated  six  classes  of  establishments,  one  being  'shops'.  As  a  consequence  of  the  said  impugned  notification, the respondent informed the appellant-chit  fund requiring them to comply with the provisions of the  ESI Act. Hence the dispute.

4. Shri V. Giri, learned counsel appearing for the  Appellant-Chit Fund, in the first instance, would adopt  the arguments of the learned counsels appearing for the  Appellant-Turf Clubs in Civil Appeal No. 2416 of 2003 and  Civil Appeal No. 49 of 2006, as regards the contention  put forth that other statutes may be referred to in aid  of interpreting the word 'shop'. As 'shops' has not been  defined under the ESI Act, learned counsel would argue  that the Tamil Nadu Shops and Establishments Act, 1947  may be referred to for guidance. This line of arguments  has  already  been  negated  by  us  while  answering  the  referral order dated 28.04.2009.

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5. Shri Giri, learned counsel draw our attention to  the nature of activities of a chit fund, in an attempt to  differentiate the same from the activities of a shop. A  reference is made to a three-Judge Bench decision in the  case of Sriram Chits and Investments (P) Ltd. v. Union of  India 1993 Suppl (4) SCC 226, wherein while considering  the vires of the Chit Funds Act, 1982 (for short 'the  Chit Funds Act”) the Court went into the concept of,  inter alia, what may be a 'chit', 'chit fund' and the  nature of a chit fund.

6. On the basis of the submissions of the learned  counsel for the Appellant-Chit Fund, and in light of the  ratio in the Sriram Chits and Investments case (supra),  this Court may enumerate a few features of a Chit Fund as  follows:

i. Chit  Funds are  a special  form of  contract  contemplated by Entry 7, List III of Schedule  VII to the Constitution of India;

ii. The foreman acts as person to bring together  the subscribers;

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iii. The amounts are paid to the subscribers as  per  the  chit  and  in  accordance  with  the  provisions of the Chit Funds Act;

iv. The agreement between the parties that is  entered as per Section 6 of the Chit Funds Act,  only  provides  for  distribution  of  the  chit  amount.  This  agreement  is  treated  as  contract  between the subscribers and the foreman, and it  is  the  foreman  who  brings  the  subscribers  together;

v. The foreman is paid commission, in accordance  with  the  Chit  Funds  Act,  for  the  services  rendered  by  the  foreman  as  he  does  not  lend  money belonging to him;

iv.  There  is  no  debtor-creditor  relationship,  per se. There is no promise to repay an existing  debt, but to pay in discharge of a contractual  obligation. The prize amount is not received as  a loan, but as of right by virtue of the terms  of the contract between the parties.

7. Further, learned counsel for the Appellant-Chit  Fund would contend that the office of the Chit Fund is  merely to facilitate such transactions. There may be a  business, but the same would be governed by a contract.

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There is no buying or selling of goods, as contemplated  by  the  dictionary  or  traditional  meaning  of  a  shop.  Further,  it  is  accepted  that  the  foreman  receives  a  commission for rendering of the service, however the same  is as per the contract and the Chit Funds Act.

8. In  fairness to the learned Senior Counsel, he  conceded that the ratio of the case of ESIC v. R.K. Swamy  (1994) 1 SCC 445, wherein an advertising agency was held  to be a shop for the purposes of the ESI Act by virtue of  there  existing  a  systematic  commercial  activity  and  a  rendering of services taking place, was indeed against  the contentions raised herein. It would further be argued  that in the given factual matrix, there does not exist  any customer-seller relationship, as would be existent in  the case of a shop.

9. In  light  of  the  fact  that  the  Appellant-Chit  Fund  provides  for  services  and  in  return  the  foreman  receives a commission, this Court is of the considered  opinion that the activities of the Chit Fund would be  those as would fall under the definition of a shop as  evolved by this Court.

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10. Therefore, in accordance with the reasoning of  this Court in Civil Appeal No.2416 of 2003 and other  connected  appeals,  we  hold  that  the  Appellant-herein  would  fall  within  the  meaning  of  the  word  'shop'  as  mentioned in the notification issued under the ESI Act.  Therefore, the provisions of the ESI Act would extend to  the appellant also.

11. The Civil Appeal is disposed of accordingly.  

.....................J. [ H.L. DATTU ]

.....................J. [ R.K. AGRAWAL ]

.....................J. [ ARUN MISHRA ]

NEW DELHI JULY 31, 2014