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CASE NO.: Appeal (civil)  37 of 1998

PETITIONER: The Management of the Tata Iron & Steel Co.Ltd.                                                

RESPONDENT: Chief Inspecting Officer & Ors.

DATE OF JUDGMENT: 17/12/2004

BENCH: Ashok Bhan & A.K. Mathur

JUDGMENT: J U D G M E N T  

WITH

Civil Appeal No.2309 of 1999

Tata Iron & Steel Co.Ltd.                                           Appellant

                                                                                        Versus

Labour Court, Jamshedpur & Anr.                    Respondents

A.K. MATHUR, J.

       Both  these appeals raise  common question of law, therefore  they are disposed off by this common order.          

       CIVIL APPEAL NO. 37 OF 1998

       This appeal is directed against an order passed by the Division  Bench of the Patna High Court  dated February 14, 1997  whereby  the Division Bench of the  High Court held that the  Tata Main  Hospital at Jamshedpur (hereinafter   referred to as the ’Hospital’) is  an establishment within the meaning of Section 2(6) of the Bihar  Shops and Establishments Act, 1953 (hereinafter to be referred to as  the "Act")  and it is covered by the aforesaid Act. Aggrieved by  the  aforesaid order this appeal has been filed by the appellant.

       Brief facts which are necessary for the disposal of this appeal  are that the Hospital was established by the Management of Tata Iron  & Steel Company Ltd in the year 1908 for providing medical facilities  to the employees as well as their families and dependent of the  Company, and its associated companies namely, TELCO, Tata  Yodogawa, Tata Robin Fraser  and their employees  at Jamshedpur.   It is also alleged that apart from catering  for the employees of the  appellant and its associated industries it also caters for the  Government employees  on payment of charges about Rs.50/- per  day and from other private patients  at the rate of Rs.120/- per day. It  is alleged that 75 % of the patients treated are either employees of  the appellant or its associated companies or  family members  of the  employees of the appellant or its associated companies. 15% of the

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patients are Government employees and the rest 10% of the patients  are outsiders.  It is alleged that a letter was sent by the Labour  Superintendent, Jamshedpur to the appellant on November 7,1995   for registration of the Hospital as an establishment under the  provisions of the Act. An objection was taken by the appellant to the  effect that since it is providing medical service to its employees and   its associated industries and it is not involved in the commercial  activities, as such it is not an establishment within the meaning of the  Act and it cannot be covered by the aforesaid Act. This objection was  overruled by the authorities. Hence the present writ petition was filed.

       The Division Bench of the Patna High Court after considering  necessary provisions of the Act and the Rules framed there under  affirmed the order of the  authority and held that the establishment  is  covered by the Act. Hence the present appeal by way of special leave  before this Court.

       We have heard learned counsel for the parties. Principally two  submissions have been made; (i) that the present Hospital does not  fall within the definition of ’establishment’ as defined in Section 2(6) of  the Act and (ii)  that under section 4(2) read with Schedule 1 of item  No.2 it is a charitable hospital  and therefore it is exempted under the  aforesaid section.

       Before we advert to the facts of the case, we may mention here  that a statement of revenue and expenditure of the budget of the  Medical Division has been furnished by the appellant and it has been  pointed out that there is always deficit in the medical account under  the Hospital head. It is also  admitted position that the Hospital is one  of the Divisions of the appellant. It has also given the details as to the  numbers of patients of the appellant and its associated companies  are taken care  and  number of Government servants  and private  patients  are also being treated by the Hospital.  

       Intervenors have also filed a statement showing what are the  charges effective from April 1,2000 for non-entitled  category of  patients and it has been pointed out  that admission charge of Rs.75/-  has been revised to Rs.1000/-, charges in the general ward is  Rs.400/- per bed, VIP cabin is charged at Rs.1250/- and ICU cabin  charge is Rs.2250/- per day. Likewise, the details  for each of the  medical  speciality charges are being levied varying from Rs.100/- to  Rs.1000/-.  It is an admitted position that the Hospital is a part of the  establishment of the appellant and the Medical is one of its   Department.

                Section 2(4) defines ’employee’ which reads as under: " (4)  "employee" means a person wholly or  partially employed for hire, wages including  salary, reward, or commission in, and in  connection with any establishment and includes  ’apprentice’ but does not include member of the  employer’s family. It also includes person  employed in a factory who are not workers  within the meaning of the Factories Act, 1948(63  of 1948), and for the purpose of proceeding  under this Act, include an employee, who has  been dismissed, discharged or retrenched for  any reason whatsoever;"

Section 2(5) defines ’employer’ which reads as under: " (5) "employer" means a person who owns or  exercises ultimate control over the affairs of an  establishment and includes a manager, agent or  any other person in the immediate charge  of the

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general management or control of such  establishment;"

Section 2(6) defines ’establishment’ which reads as under:

" (6) "  establishment" means an establishment  which carries on any business, trade or  profession or any work in connection with, or  incidental or ancillary to, any business, trade or  profession and includes- (i)     administrative or clerical service appertaining to  such establishment; (ii)    a shop, restaurant, residential hotel, eating  house, theatre or any place of public  amusement or entertainment; and (iii)   such other establishment as the State  Government may, by notification, declare to be  an establishment to which the Act applies; but does not include a ’motor transport  undertaking’ as defined in clause (g) of Section  2 of the Motor Transport Workers Act, 1961 (27  of 1961);"

Section 2(16) defines ’shop’ which reads as under :

"(16) "Shop" means any premises where goods  are sold, either by retail or wholesale or where  services are rendered to customers and includes  an office, store-room, godown, warehouse and  work place, whether in the same premises or  elsewhere, used in connection with such sales  or services, but does not include a restaurant, a  residential hotel, eating-house, theatre or other  place of public amusement or entertainment;"

Section 4 deals with exceptions which reads as under :

       " 4.Exceptions-(1) The provisions of this Act  shall not apply to any precinct or premises of a  mine as defined in clause (f) of Section 2 of the  Mines Act, 1952 (XXV of 1952).         (2) Notwithstanding anything contained in this  Act, the provisions thereof specified in the third  column of the Schedule shall not apply to the  establishment, employees and other persons  referred to in the corresponding entry in the  second column;         Provided that the State Government may, by  notification, add to, omit or alter any of the  entries in the Schedule in respect of one or more  areas of the State and on the publication of such  notification, the entries in either column of the  Schedule shall be deemed to be amended  accordingly."

Item No.2 of Sehedule I which is relevant for our purpose reads as  under :                         " SCHEDULE I -------------------------------------------------------------------------------------------- Serial    Establishments, employees or other        Provisions of the No.         persons                                                   Act --------------------------------------------------------------------------------------------

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 xx            xx                                                      xx

2.          Establishments for the treatment or the     All provisions             care of the infirm, sick, destitute or the             mentally unfit, which are not run for             the profits but for charitable, philanthropic,             religious or educational object. "

Section 6 deals with registration and renewal of the establishment.  It  reads as under :

"6. Registration of establishments and renewal  thereof- The State Government may make rules  requiring the registration of establishment or any  class of establishments or renewal thereof and  prescribing manner and the fees payable for  such registration or renewal."

Rest of the provisions deal with hours of work, weekly holidays, other  service conditions and removal of the employees  and with necessary  provisions for implementation of the provisions of the Act.  

       Rules have been framed under this Act in exercise of the  powers conferred under Section 40, they are known as the Bihar  Shops & Establishment Rules,1955 (hereinafter to be referred to as  the ’Rules’). Rule 3 lays down that within thirty days of coming into  force of the aforesaid Rules, an employer shall make application for  registration of the establishment. Rule 3-A deals with renewal of  certificate of registration. Other provisions with regard to the service  conditions have been dealt with under the Rules.

       Under the scheme of the Act, when the Hospital did not apply  for registration, then a notice was sent to the Hospital for registration.  The appellant objected to the registration. The said objections were  overruled and the appellant was asked to get  the Hospital registered.  Against this order, the present writ petition was filed before the High  Court. The question is whether the present Hospital is an  establishment or not. If it is an establishment, then it is under  obligation to apply for registration. It is an admitted position that the  Hospital is a part of the appellant management and as is more than  evident that it is one of the Divisions of the appellant, as per the  budgetary provisions pointed out above.  Therefore, there is no two  opinion in the matter that the Hospital is a part of the appellant- Management. But the question is whether this Hospital is covered by  the definition of the ’establishment’ or not.  The definition of  ’establishment’ as reproduced above, clearly shows that any  establishment which carries on any business, trade or provisions or  any work connected with or incidental or ancillary to, any business,  trade or profession and it includes shop, restaurant and other place of  amusement and it further says that the State Government by  notification may declare such other establishment to be an  establishment to which this Act applies. The only exception is the  motor transport undertaking as defined in clause (g) of the Motor  Transport Workers Act, 1961.  The question is whether this Hospital  is engaged in business or not. In this connection, Mr. T. R.  Andhyarujina,  learned senior counsel for the appellant has submitted  that the definition of ’business is too wide and normally business or  trade is for some profit or gain. But this Hospital is not working for any  profit or gain and he emphasized with reference to the particulars  given by him, that the Hospital is running in loss.  Therefore, the  question is what are the attributes of the business.  In this connection,  learned counsel has invited our attention to the dictionary meaning of  the word, ’business’ as given in Black’s Law Dictionary, which reads

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as under:

       " "business". A commercial enterprise carried  on for profit; a particular occupation or  employment habitually engaged in for livelihood  or gain."

So far as the definition of ’business’ is concerned, it is clear from the  facts that right from the beginning when the Hospital was established,  it was catering to the needs of the employees and their families  at  TISCO and  its associated companies but at the same time it was  open for the Government servants and private patients also.  The  Government servants and private patients were charged  for their  treatment in the Hospital. It is not primarily meant to cater to the  employees of the appellant or their associated companies but also for  the private individuals also.  Therefore, it cannot be said that the  Hospital was only meant to cater the need of the employees of the  appellant.  It had the business activities by charging fees from the  Government servants as well as private  patients for their treatment in  the Hospital. It may also be relevant to mention here that the  establishment of the present Hospital is an obligation on the part of  the appellant management  because otherwise they had to contribute  under the Employees State Insurance Act,1948. Under the said Act  the employees as well as the employer , both have an obligation to  make contribution for the medical facilities provided by the E.S.I.  Hospitals.  All the establishments have to get themselves registered  under section 2 A of the E.S.I. Act.  They have also to make  necessary contribution as per the provisions of the Act. At the same  time, under section 87 of the Act, exemption can also be granted by  the Government by issuing notification exempting any factory or  establishment  or class of establishments in any specified area  from  operation of this Act for a period of one year and may from time to  time by like notification renew any such exemption for periods not  exceeding one year at a time. It is admitted by learned counsel for the  appellant that the present establishment had obtained exemption up  to the year 1996 but after that exemption was not granted and a  petition was filed in the Court and stay order has been granted.  Therefore, even if the establishment of the Hospital may be for the  purpose of taking care of their employees , it is under statutory  obligation of the appellant management otherwise they would have to  make registration under Section 2A of the E.S.I. Act, 1948.  It is  admitted that the appellant sought exemption from operation of the  Act which was granted up to the year 1996. Be that as it may, the fact  remains that from the materials available on record it is apparent that  the Hospital is not only catering for the employees but it caters to the  Government and private patients as well for which  it is charging fee  for the services rendered, it is irrelevant  whether it is running for  profit or loss. Profit or loss is part of the business and it is incidental   to every business. Therefore, it is not decisive of the matter whether  the establishment is running for profit  or gain.  Our attention was  drawn to a decision of this Court  in the case of Ruth Soren vs.  Managing Committee, EAST I.S.S.D.A. & Ors. reported in (2001) 2  SCC 115. There also, Their Lordships have observed that an  establishment for the purpose of this Act i.e. Bihar Shops and  Establishments Act, 1953 means an establishment which carries on  any business , trade or profession or any work in connection with or  incidental or ancillary thereto.  In the context of educational institution  after referring to  the case of Bangalore Water Supply & Sewerage  Board’s case, Their Lordships observed that  in the case of an  educational institution,  it may be industry but not Establishment  under the Act of 1953, it was observed as under:

       " Even so, the question for consideration is  whether educational institution falls within the  definition of "establishment" carrying business,

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trade or profession or incidental activities  thereto, "Establishment" , as defined under the  Act, is not as wide as "industry" as defined under  the Industrial Disputes Act. Hence, reliance on  Bangalore Water Supply & Sewerage Board v.  A. Rajappa for the appellant is not of any help"

Therefore, this case does not provide any assistance with regard to  the present case at hand. In the said case also it was held that the  respondent which was running an educational institution in which the  appellant was employed, being not an establishment, the application   under section 26(2), before the Labour Court against the appellant  made by the respondent was incompetent and it was observed that  running of the educational institution will not be covered by the  establishment. But in the present case. from the facts as mentioned  above, it is more than evident that the Hospital is not being run for the  employees of the appellant management or their associated  industries only but it caters to the need of the Government servants  as well as private patients and fee is charged from them.  Therefore,  the Hospital is doing business and  it is not  doing charity.  

               Similarly, in the case of B.R.Enterprises  etc. etc. vs.  State of U.P. & Ors. etc.etc. reported in (1999) 9 SCC 700, it was  observed as follows:         " Article 301 is confined to trade and commerce  while Article 298 refers to trade and business  and to the making of contracts for any purpose.  The use of the words "business " and "contracts  for any purpose" and its title"\005 trade, etc."  makes the field of Article 298 wider than Article  301. Significantly, the different use of words in  the two articles is for a purpose; if the field of the  two articles are to be the same,  the same words  would have been used. It is true, that since  "trade" is used both in Articles 298 and 301, the  same meaning should be given. But when the  two articles use different words, in a different set  of words conversely, the different words used  could only be to convey different meanings. If  different meaning is given then the field of the  two articles would be different. So, when instead  of the words "trade and commerce" in Article  301, the words " trade or business" are used it  necessarily has a different and wider  connotation than merely "trade and commerce".  " Business" may be of varying activities, may or  may not be for profit, but it necessarily includes  within its ambit "trade and commerce"; so  sometimes it may be synonymous but its field  stretches beyond "trade and commerce"

Another aspect that was emphasized was that since it is running in  loss and it is not making any profit, therefore it is not covered by the  definition of establishment.  It may be relevant to mention that the  profit or loss is not decisive  of the matter with regard to the business.  In this connection, reference may be made to the decision of this   Court in the case of  Board of Revenue & Ors. v. A. M. Ansari & Ors.  reported in (1976) 3 SCC 512 wherein Their Lordships while  interpreting the definition of business with reference to A.P.General  Sales Tax Act, 1957 have held as follows:  

       " \005 profit motive is not an essential constituent  in view of the amendment introduced in the

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definition of the term ’dealer’ in 1966. As regards  the other ingredients the auctions of the forest  produce by the Government of Andhra Pradesh  are admittedly carried on only annually and not  at frequent intervals. Thus the important element  of frequency being lacking in the instant cases, it  cannot be held that the said Government was  carrying on the business of sale of forest  produce."                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Therefore, to say that the Hospital is not making any profit that is not  the touchstone whereby we can judge whether they are doing the  business or not. If the activity is frequent, continuous and relating to  business, whether they earn profit or not that is not the crux of the  matter. Profit or loss is incidental to the business. What is essential is  the frequency, continuity and relating to transactions. These  ingredients are present in the present activities of the Hospital  that it  is continuing and regularly taking care of the patients be it private  patients or patients belonging to the appellant management or their  associated industries. Therefore, the emphasis of the learned counsel  that it is not making profit is not relevant for the present case.  Our  attention was  also invited to various other definitions  with regard to  the business in the context of relevant enactment. It is not necessary  to refer to those definitions. Suffice it to say that the profit and loss is  not an essential ingredient of business, what is important is  frequency, relating to business and continuity. Therefore, from the  materials placed by the parties, it is more than apparent that the  present Hospital is a part of the establishment of the appellant  management and it caters not only for the employees of the appellant  management & its associated companies but for  Government  servants and private patients as well from whom fee is charged.  Therefore, they are doing business and they fall within the definition  of establishment as defined in Section 2 (6) of the Act.

       The next question which has been argued by learned senior  counsel for the appellant was that  it was doing charity, therefore, it is  entitled to exemption under section 4(2)  read with Item No.2 of  Schedule I.  We fail to understand  how this activity of the present  Hospital can be treated to be a charity.  As pointed out above, it is  under the obligation of the appellant Management  to subscribe for  the employees  under the Employees State Insurance Act, 1948 by  making contribution. Since they were  not subscribing contribution  because they obtained exemption under section 87 of the E.S.I.Act,  1948 as  they run the hospital for the benefit of the employees , the  exemption was granted to them till 1996 but subsequently that  exemption was refused.   Therefore, it cannot be said that what they  are doing is charity. Apart from that they are charging fee from the  Government Servants and the private patients for the services  rendered by them.  It is not their case that they are treating all and  sundry without any charges. In this connection, learned counsel for  the appellant invited our attention to a decision of this Court in the  case of  Additional Commissioner of Income Tax, Gujarat,  Ahmedabad v. Surat Art Silk Cloth Manufacturers’ Association, Surat  reported in (1980) 2 SCC 31. This was a case under the Income-Tax  Act, 1961 and in that connection Their Lordships reviewed all the  case law in paragraph 6 of the judgment and observed that law is well  settled  that if there are several objects  of a  trust or the institution,  some of which are charitable and some non-charitable and the  trustees or the managers in their discretion are to apply the income or  property to any of those objects, the trust or institution would not be

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liable to be regarded as charitable and no part of its income would be  exempt from tax. In other words,  where the main or primary objects  are distributive, each and every one of the objects must be charitable  in order that the trust or institution might be upheld as a valid charity.  Their Lordships have applied the principle of dominant purpose. The  question  is whether it is satisfied in the present case or not. In the  present case, the dominant purpose is to cater for the  needs of the  employees of the appellant Management and its associated  Industries.   In fact, it was established for that particular purpose only.   But the services were also extended to Government servants and to  the private patients not free of cost. Therefore, the dominant purpose  for establishing the hospital is not charitable  which is exempted  under the Act  and  the law which has been laid down by this Court in  the aforesaid case  is that the principle of dominant purpose should  be found out from the activities or the business. If the dominant  purpose is appearing as charity then it will be admissible to the  benefit of a charity and if it is  incidental purpose then it will not be  entitled to the benefit. In the present case, neither of the situation  arises.  It is established that this hospital caters as a social measure  for the employees of the appellant Management and its associated  industries and for the benefit of the Government servants as well as  private patients, on payment of fee. Therefore, it does not qualify for  any cause as charitable institution so as to be exempted under  section 4(2) of the Act read with Item No.2 of Schedule I. In this  connection, our attention was also invited to a decision  in the case of    Le Cras. V. Perpetual Trustee Co.Ltd. & Ors. reported in (1967) 3 All  E.R. 915.  In this case, a testator bequeathed by his will two-thirds of  the income of his residuary estate to the Sisters of Charity for the  general purposes of St.Vincent’s Private Hospital for a period of two  hundred years or for so long as they should conduct the Hospital. The  private hospital was  having 82 beds   and close to a public hospital  which had 500 beds.  This was also conducted by the Sisters of  Charity who were a voluntary association  of women devoting  themselves without reward. The reason for establishing the private  hospital was to relieve the pressing demand of the public for  admission to the general hospital. Charges were made at the private  hospital for beds; it provided accommodation and medical treatment  in greater privacy than would be possible in a general hospital. There  were surpluses of income over expenditure but the private hospital  was not conducted for profit. The surpluses had been used to  contribute to the maintenance of the general hospital and for the  general purposes of the Sisters of Charity.  In that context their  Lordships held that the gift of income to the Sisters of Charity for the  general purposes of the private hospital was a valid charitable gift.  Therefore, what prevailed in the mind of Their Lordships  is the  dominant purpose for which the hospital was being run. That is not  the case here.

Similarly in the case of   Trustees of Tribune Press, Lahore  v  Commissioner of Income-tax, Punjab reported in AIR 1939 PC 208,  similar question arose under the Income Tax Act,1922.  In the said  case   while dealing with the Income Tax Act, 1922 held as follows :

       " Though the personal or private opinion of the  Judge is immaterial, nevertheless for a charitable gift to be  valid it must be shown (1) that the gift will or may be  operative for the public benefit, and(2) that the trust is one  the administration of which the Court itself could, if  necessary, undertake and control. There is nothing in the  Income-tax Act to discharge the Court of its responsibility  in coming to a finding as to the character of the object of a  trust- a matter which bears directly upon it’s validity."     Here also the question was what is the dominant purpose for which  the trust is created. If the trust is dominantly for the purpose of charity  

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then of course it will qualify for the exemption. This  is not the case  here. Our attention was also invited to a decision of this Court in the  case of  Joseph Rowntree Memorial Trust Housing Association Ltd. &  ors. v. Attorney General reported in [1983] 2 W.L.R. 214.  Similarly,  in this case also, the question came up for determination was  whether  the scheme was charitable in law or not. Their Lordships  held as follows:

" That the words describing the beneficiaries of  the first set of charitable purposes in the  preamble to the Statute  of Elizabeth had to be  read disjunctively  so that beneficiaries could  be  either aged, impotent or poor but that in order to  be considered charitable the gift to such people  had to have as its purpose the "relief" of a need  attributable to the condition of the beneficiaries;  that, since the provision of special  accommodation relieved a particular need of the  elderly , whether poor or not, attributable to their  aged condition, the schemes were within the  scope of the charitable purpose of providing  relief to the aged."

Therefore, the ratio is the dominant purpose in each case. If it is  meant essentially for charitable purpose and not open for any other  purpose, then of course such institution will qualify for exemption as  charitable institution.

       Similarly, in the case of P.C.Raja Ratnam Institution V. M.C.D.&  Ors. reported in 1990 (Supp.) SCC 97, the question arose whether   under Delhi Municipal Corporation Act, 1957, the school run by the  society is covered under charitable purpose or not. Their Lordships  held as follows:                 

" The test of ’charitable purpose’ is satisfied by  the proof of any of the three conditions, namely,  relief of the poor, education, or medical relief.  The  fact that some fee is charged from the  students is also not decisive inasmuch as the  proviso indicates that the expenditure incurred in  running the society may be supported  either  wholly or in part by voluntary contributions.  Besides, the explanation is, in terms inclusive  and not exhaustive."  

However, in this case,  Their Lordships remitted the case  for fresh  decision as the High Court had not adverted to the aforesaid cause.  But in the present case, the facts are well known and it is more than  clear that the establishment of the Hospital was not for charitable  purpose, it was meant as social measure for the benefit of the  employees of the appellant Management  and its associated  industries as a statutory obligation & for the other patients charges  were levied. Therefore, by no stretch of imagination it can be said that  Hospital is being run for a charitable purpose.                 In the result, in view of our discussions made above, we  find that the view taken by the High Court is correct and there is no  ground to interfere with the same.  The appeal is accordingly  dismissed. No costs. Civil Appeal No.2309 of 1999:                 In view of the order passed in Civil Appeal No.37 of 1998,  this appeal also fails and is accordingly dismissed. No costs.