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Kiran Industrial Premises Co-Op. Society Ltd., Mumbai v. Janata Kamgar Union, Mumbai And Others

Bombay High Court

Mar 8, 2001

Judgment

Subsequent
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Factual and Procedural Background

The petitioner is a co-operative society (Kiran Industrial Premises Co-operative Society) registered under the Maharashtra Co-operative Societies Act, 1960. The society employed four watchmen (receiving wages in the range Rs. 770 to Rs. 880 per month) and two clerks. The society comprises about 200 members who are owners of industrial units or galas; different commercial or trading activities are carried on by the owners in their individual premises. The society itself, however, is said to perform maintenance and representational functions for members and does not itself carry on commercial or trading activities.

The respondent union and certain workmen filed Complaint ULP No. 621 of 1995 in the Industrial Court, Maharashtra at Mumbai, alleging unfair labour practice under Item 9 of Schedule IV of the M.R.T.U. & P.U.L.P. Act, 1971, on the ground that the society was not paying wages in accordance with the Minimum Wages Act (employees claimed wages applicable to "commercial establishments" under the Minimum Wages Act, 1948). The Industrial Court delivered an order/judgment dated 25 September 2000 adverse to the society. The society challenged that order by approaching the High Court under Article 226 of the Constitution, seeking (a) quashing of the impugned industrial court order; and (b) a declaration that the co-operative society is not a "commercial establishment" under the Shops and Establishment law and that the Bombay Shops and Establishment Act, 1948 and the Minimum Wages Act are not applicable to co-operative societies registered under the M.C.S. Act, 1960.

Legal Issues Presented

Whether the petitioner co-operative society is a "commercial establishment" (within the meaning of the Bombay Shops and Establishments Act / the relevant definitions) such that the Minimum Wages Act, 1948 would apply to its employees (Item 17, Part I of the Schedule to the Minimum Wages Act).
Whether the alleged failure to pay wages in accordance with the Minimum Wages Act constituted an "unfair labour practice" under Item 9 of Schedule IV of the M.R.T.U. & P.U.L.P. Act, 1971.

Arguments of the Parties

Petitioner (Co-operative Society) — Principal Contentions

The society is a separate legal and juristic entity distinct from its members; the business/trade/commercial activities of individual members cannot be attributed to the society.
There is neither pleading nor evidence that the society itself carries on any trade, business or commercial activity (such as sale/purchase of premises or goods) aimed at profit-making or involving capital investment and risk.
The society's activities are confined to maintaining the premises, collecting maintenance/service/property/water charges from members and disbursing or paying statutory dues; it acts as a collective statutory agent for members rather than as a profit-making commercial actor.
Because the society is not engaged in commercial activity or an industry, the Minimum Wages Act and the Shops and Establishments enactment do not apply, and consequently there was no unfair labour practice by the society under Item 9.

Respondents (Union and Employees) — Principal Contentions

The respondents alleged that the society did not pay wages in accordance with the Minimum Wages Act and that this failure amounted to an unfair labour practice under Item 9 of Schedule IV of the M.R.T.U. & P.U.L.P. Act, 1971.
The respondents relied on a number of judicial decisions to support their contention that entities such as the petitioner may be treated as "commercial establishments" for the purpose of minimum wages and related labour protections.
The respondents had also invoked Item 6 of Schedule II of the Act, but the Industrial Court found no substance or pleadings on that point (and the High Court noted the absence of evidence to support that invocation).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Karmani Properties v. State of West Bengal, 1994 III LLJ (SC) 378	Relied upon by respondents (general authority cited).	The court recorded that respondents relied upon this judgment but stated it did not refer to it because the facts of the present case were totally different.
Rasheed Maskati v. Abbas Hussaini, 1990 (60) FLR 776; also reported as 1999 III LLJ (Bombay) 331	Establishment/Trust owning properties and collecting rent from tenants may be a "commercial establishment" attracting the Minimum Wages Act when it renders organised services to tenants and earns rent.	The court analysed this authority: it held that the Maskati judgment found a trust to be a commercial establishment because the trust collected rent and provided organised services for gain; the court distinguished Maskati on facts because the society in the present case merely collected maintenance/service charges and passed them on (not collecting rent for itself as profit), so Maskati's ratio did not apply.
Chandraman Upadhyay v. Rajasthan CHS, 1988 II CLR (HC) 440	Where a society's bye-laws include avowed objects like carrying on trade, buying/selling/developing land and powers to deal commercially with property, it may be held to be a commercial establishment.	The court observed that this decision turned on peculiar bye-laws and powers in that society; the court found no comparable bye-laws or activities in the present case and therefore treated that authority as inapplicable.
Maharashtra General Kamgar Union v. Anand Kamal Co-op. Hsg. Society, 1994 1 CLR (HC Bom.) 632	Relied upon by respondents (general authority cited).	The court noted it was relied upon but stated the facts in the present case were totally different and therefore did not rely on it in its reasoning.
Narendra Fuladi v. State of Maharashtra, 1985 Mh. L.J 1	Relied upon by respondents (general authority cited).	The court recorded reliance by respondents but did not apply the case, stating factual differences.
Bangalore Water Supply v. A. Rajappa, 1978 March I.C.R 99	Relied upon by respondents (general authority cited).	The court noted reliance but did not apply the authority to its decision because the present facts differed.
Jai Jai Ram Manohar Lal v. National Building Material Supply, Gurgaon, 1970 SCJ 129	Relied upon by respondents (general authority cited).	The court recorded reliance but did not refer to or apply it owing to factual distinctions.
Pralhad Pawar v. Managing Director, 1999 II Bom. C.R 840	Relied upon by respondents (general authority cited).	The court noted the citation but did not apply it because the facts were different.
Rambhau Dhamange v. Kinkar CHS Ltd., 1966 Mh. L.J 1 : 1965 Bom. L.R Vol. LXVII 877	Relied upon by respondents (general authority cited).	The court observed the reliance but did not treat the authority as determinative given different facts.
Maharashtra Co-op. Housing Finance Society Ltd. v. V.S. Loni, 1984 Mh. L.J 279	Relied upon by respondents (general authority cited).	Recorded as relied upon; the court did not adopt it as controlling on the present facts.
D.B. Khade v. Ramsingh Jaisingh, 1986 (52) FLR 378	Relied upon by respondents (general authority cited).	The court noted reliance but did not apply the decision to the present case for lack of factual similarity.

Court's Reasoning and Analysis

The court's analysis proceeded in a factual and legal sequence:

Characterisation of the petitioner: The court emphasised that the petitioner society is a separate juristic entity distinct from its members, who are owners of the industrial galas. The society's function, as presented by evidence, was to maintain the premises and to act for members in collecting and disbursing prescribed charges and statutory dues.
Evidential finding: The court found no pleading or evidence that the society itself engaged in commercial trading activities, such as sale or purchase of premises or goods, or any organised commercial enterprise pursued for profit. The workmen's evidence referred to activities in the premises of members, not to activities of the society itself. The society's secretary consistently described the society's work as maintenance and administration of the society; cross-examination did not disclose any commercial activities of the society.
Statutory definition examined: The court referred to Item 17 of Part I of the Schedule to the Minimum Wages Act (employment in any shop or commercial establishment) and to the definition of "commercial establishment" in Section 2(4) of the Bombay Shops and Establishments Act, which embraces an establishment carrying on business, trade or profession (and includes societies registered under the Societies Registration Act if they carry on business).
Conceptual legal test applied: The court assessed whether the society's activities evidenced commercial character — focusing on indicators such as organised business activity, investment of capital, an object of profit or gain, and exposure to commercial risk. The court concluded that the society's activities were confined to maintenance, collection and remittance of charges, and statutory compliance; there was no investment of capital to carry on a commercial venture, no motive of profit, and no commercial risk or object of gain.
Distinguishing authorities: The court expressly analysed Rasheed Maskati (trust owning properties) and Chandraman Upadhyay (society with bye-laws authorising commercial dealings). In Maskati the trust was held to be commercial because it collected rent and provided organised services for gain; the court distinguished Maskati because the petitioner did not collect rent for itself or seek profit, but merely collected and passed on maintenance receipts. In Chandraman Upadhyay the finding of commercial character turned on specific bye-laws empowering commercial transactions; the court found no comparable bye-laws or activities in the present case.
Consequential conclusion: Applying the legal definition and the factual findings, the court concluded the petitioner society is neither a "commercial establishment" nor an "industry" within the meaning of the Minimum Wages Act, 1948. Consequently, the alleged failure to pay wages according to the Minimum Wages Act did not arise, and there was no unfair labour practice under Item 9 of Schedule IV of the M.R.T.U. & P.U.L.P. Act attributable to the society on the facts of this case.
Relief and ancillary directions: In light of the factual and legal analysis, the court quashed and set aside the industrial court's impugned judgment and made the rule absolute in terms of the petitioner's prayers. The court also observed alternative remedies for the workmen (per Section 91 of the M.C.S. Act, 1960) and directed the State Government to consider suitable legislative amendment to address employees of co-operative societies who render services to members but do not neatly fall within the term "commercial establishment." The Prothonotary and Senior Master was directed to send a copy of the judgment to the State Government for necessary legislative action.

Holding and Implications

Holding: The High Court quashed and set aside the industrial court's order dated 25 September 2000 and made the rule absolute in terms of the petitioner's prayer clauses. Concretely, on the facts before the court, the Kiran Industrial Premises Co-operative Society was held not to be a "commercial establishment" or an "industry" so as to attract the Minimum Wages Act, 1948 or the Bombay Shops and Establishment Act, 1948 for the purpose of the complaints considered in this case.

Implications:

Direct effect: The Industrial Court judgment in Complaint ULP No. 621 of 1995 (25-9-2000) was quashed and set aside; the society was relieved of the adverse finding that it engaged in unfair labour practice under Item 9 on the basis that it fell within the Minimum Wages Act.
Remedial route for employees: The court noted that the respondents (union and employees) may approach the appropriate authority under Section 91 of the Maharashtra Co-operative Societies Act, 1960 for any statutory remedy available to them.
Legislative/administrative implication: The court directed the State Government to consider amending relevant statutory provisions to address the position of employees of co-operative societies that employ staff to render services to members but do not clearly fall within the statutory concept of "commercial establishment." A copy of the judgment was to be forwarded to the State Government for necessary legislative action.
Precedential note: The court's decision is fact-specific and rests on its findings about the society's lack of commercial activity, its non-profit-maintenance character, and the absence of evidence that it carried on trade; the court distinguished earlier authorities relied upon by respondents on grounds of factual difference.

Order accordingly.

Show all summary ...

1. The petitioner is a co-operative society registered under the Maharashtra Co-operative Societies Act, 1960. It has employed four persons as watchmen and has been paying wages between the range of Rs. 770 to Rs. 880 per month. In addition to the four watchmen, there are two clerks employed by the society. The society has 200 members as the owners of the industrial units or industrial galas. The society has several commercial premises wherein different kind of commercial or trading activities are carried on by the owners of the units. The society is registered as a commercial premises society. The society has nothing to do with the commercial or trading activities of its members. The society itself is not carrying on any commercial or trading activity. The society is aggrieved by the impugned judgment and order dated 25th September, 2000 given by the industrial court, Maharashtra at Mumbai in Complaint ULP No. 621 of 1995 filed by the respondent union and the concerned workmen making an allegation of unfair labour practice against the petitioner society that they are not getting wages in accordance with the Minimum Wages Act. According to the respondents by violating the provisions of the minimum wages Act, the society engaged in unfair labour practice within the meaning of Item 9 of Schedule IV of the M.R.T.U & P.U.L.P Act, 1971. Though the respondents had invoked Item 6 of Schedule II of the Act, the industrial court has found that there was absolutely no substance in the allegations and there were no pleadings on that point. I also find that the main grievance of the respondents was failure on the part of the petitioner society to pay them the wages in accordance with the notification issued by the State Government under the Minimum Wages Act, 1948 in relation to the employment in establishments or commercial establishments under Entry 17 of Part I of the Schedule to the Minimum Wages Act, 1948.

2. We have to bear in mind that the petitioner society is a separate independent and distinct entity and a legal and juristic personality independent of its members who are the share holders of the society owning the premises in their own right. The business, trade or commercial activities of the members cannot be mixed up with the activities of the society and by no stretch of imagination can it be said that the society is also carrying on the business, trade or commercial activities because its members are engaged in such activities, besides, it is neither pleaded nor proved, nor is there even a shred of evidence or material on record to conclude or even to infer that the society is engaged in any business, trade or commercial activities. The workmen have not led any evidence to, prove what commercial activities were carried on by the society. There is a statement made in their evidence about the activities in the premises of the members but nothing about the society's activities. On the contrary the society's secretary has clearly stated that the society's work is of maintaining, the society. Even in his cross-examination not even a whisper of activities of the society is put to him. No doubt a few questions were put to him about the commercial activities in the galas or the premises of the society owned by the members. The entire building is of industrial galas but that does not make the society itself a commercial establishment carrying on any trade, business or any commercial activities. It is clear that the society is a collective person of the members. Who have organised themselves to maintain the society and to carry on its affairs in accordance with the bye laws, rules and the Act. It is a distinct legal entity from the members. It collects the maintenance charges, service charges, property and water charges payable to the municipal corporation. It acts as a statutory agent to collectively represent the members. It looks after the maintenance of the building and renders services such as collecting the prescribed charges from the individual members and disburse or spend them in accordance with law for repairs, water charges, property taxes, payment of wages etc. and keeps proper accounts and get the accounts approved annually in its general meeting. There is no evidence or material to conclude or to infer what other activities are engaged in by the society. There is no pleading or proof to say that the society itself is carrying on the trade, business or a commercial activity such as sale or purchase of the premises or any goods or merchandise and it earns any income therefrom.

3. Let us now analyse the legal provisions. The claim of the employees for minimum wages is under the Minimum Wages Act. Item 17 of the Part I of the Schedule reads as under:—

17. Employment in any shop or commercial establishment (not being an employment in any bank or an employment which is included) under any of the other entries in this Schedule.

EXPLANATION.— For the purpose of this entry, the expressions, “Shop” and “Commercial Establishment” shall have the meaning respectively assigned to them in the Bombay Shops and Establishments Act, 1948.

4. The employees are claiming wages as prescribed for the commercial establishment under the Act and alleged failure to be an unfair labour practice under Item 9 of Schedule IV of the M.R.T.U & P.U.L.P Act. The term “commercial establishment” has been defined under the Bombay Shops and Establishments Act, in Section 2(4) which reads as under:—

“Commercial establishment” means an establishment which carried on, any business, trade or profession or any work in connection with, or incidental or ancillary to, any business, trade or profession (and includes establishment of any legal practitioner, medical practitioner, architect, engineer, accountant, tax consultant or any other technical or professional consultant and also includes) a society registered under the Societies Registration Act, 1866 (XXI of 1860) and a charitable or other trust, whether registered or not, which carries on (whether for purposes of gain or not) any business, trade or profession or work in connection with or incidental or ancillary thereto but does not include a factory, shop, residential hotel, restaurant, eating house, theatre or other place of public amusement or entertainment:”

5. The concept of “commerce” or “commercial” is well known and has been the subject matter of umpteen number of judicial decisions and I need not dwell on that point. In my opinion based on the facts of the present case, the society cannot be said to be engaged in any commercial venture or a business, trade or profession. There is no investment of capital nor is there any motive for profit or gain. Its a simple activity confined to the maintenance of the premises and payment of different statutory dues to the prescribed authorities and to employ the services of some persons to carry out such activities. There is no commercial aim or purpose to engage in the activities of the society. It is possible that out of its total receipts from the members, the society might have excess amount over its expenditure but that is not the test to hold that these activities are commercial in nature to dub the society as a commercial establishment. There is neither an object of profit nor a risk of making loss in the maintenance activities of the society. I, therefore, hold that the petitioner society is neither “a commercial establishment” nor “an industry” to attract the provisions of the Minimum Wages Act, 1948. The society has therefore not engaged in an unfair labour practice as contemplated under item 9 of the M.R.T.U & P.U.L.P Act, 1971. Shri A.D Shetty, the learned Advocate for the respondents Union and the employees have relied upon the following judgments which I have not referred as the facts in the present case are totally different from the facts of the each of the said judgments:—

(i) Karmani Properties v. State of West Bengal, 1994 III LLJ (SC) 378; (ii) Rasheed Maskati v. Abbas Hussaini, 1990 (60) FLR 776; (iii) Rasheed Maskati v. Abbas Hussaini, 1999 III LLJ (Bombay) 331; (iv) Chandraman Upadhyay v. Rajasthan CHS, 1988 II CLR (HC) 440; (v) Maharashtra General Kamgar Union v. Anand Kamal Co-op. Hsg. Society, 1994 1 CLR (HC Bom.) 632. (vi) Narendra Fuladi v. State of Maharashtra, 1985 Mh. L.J 1; (vii) Bangalore Water Supply v. A. Rajappa, 1978 March I.C.R 99; (viii) Jai Jai Ram Manohar Lal v. National Building Material Supply, Gurgaon, 1970 SCJ 129; (ix) Pralhad Pawar v. Managing Director, 1999 II Bom. C.R 840; (x) Rambhau Dhamange v. Kinkar CHS Ltd., 1966 Mh. L.J 1 : 1965 Bom. L.R Vol. LXVII 877. (xi) Maharashtra Co-op. Housing Finance Society Ltd. v. V.S Loni, 1984 Mh. L.J 279. (xii) D.B Khade v. Ramsingh Jaisingh, 1986 (52) FLR 378.

6. In the case of R.A Maskati (supra) a learned Single Judge of this Court has held that a trust owning certain properties to be a commercial establishment to attract the provisions of the Minimum Wages Act. The Trust had employed various workmen to provide services to the tenants of the buildings, of watchmen, liftmen, sweepers etc. The trust as a landlord was collecting and earning rent from the tenants and therefore the activities of the trust were held to be an organised services rendered to the tenants who were paying rent to the trust which partook the character of commercial nature. In our case the society is not collecting any rent for itself as a gain or profit but is collecting the maintenance and other service charges and various taxes to be paid in turn to the municipal authorities on behalf of the members. The society can be said to be merely collecting and passing on the receipts from the members. There is no element or aim or object of earning profit or gain for itself as in the case of a landlord. The ratio of this judgment, therefore, would not apply to the facts of the present case. This judgment has been confirmed by our division bench in appeal but it is of no avail to the respondents.

7. The second judgment (Chandraman H. Upadhyay) (supra) strongly relied on by Shri Shetty is also by another learned Single Judge of our High Court (H.H Kantharia, J.). In this case the learned Judge has held the society to be a commercial establishment on the basis of the peculiar facts that in the bye-laws of the society its avowed object was “to carry on trade of building and buying, selling, hiring, letting and developing land in accordance with the co-operative principles and to establish and carry on social, recreative and educational work in connection with its tenants and the society shall have full power to do all things it deems necessary for the accomplishment of all objects specified in its bye-laws or expedient including the powers to purchase, hold, sell, exchange, mortgage, rent, lease, sub-lease, surrender, accept surrenders of and deal with lands of any tenure and to sell by instalments and subject to any terms or conditions and to make and guarantee advances to members for building or purchasing property and to erect, pull down, repair, alter or otherwise deal with any building thereon”.

8. In our case there is not even an iota of such activities to make it either an “industry” or “a commercial establishment”. This judgment also does not assist the respondents in any way. In view of the above discussion the impugned judgment and order of the industrial court is quashed and set aside. Rule is made absolute in terms of prayer clauses (a) and (b) which are reproduced below:—

(a) The Hon'ble Court be pleased to issue writ of certiorari or any other appropriate writ in the nature of certiorari or any other appropriate writ order direction under Article 226 of the Constitution of India calling for the records and proceedings from the respondent No. 7 and after going through the same and after going through the legality and validity thereof to quash and set aside the impugned order/judgment dated 25-9-2000 (being Exhibit “F” hereto)

(b) That the Hon'ble Court may be pleased to declare that co-operative society in particular Kiran Industrial Premises Co-operative Society is not an establishment which can be called a commercial establishment under Shop and Establishment Act; 1948 and the Hon'ble Court may be pleased to declare that neither the Bombay Shops and Establishment Act, 1948 nor the Minimum Wages Act, 1946 are applicable to the co-operative society registered under the M.C.S Act, 1960.

9. It would be open for the respondents Union and the employees as submitted by Shri Jha, the learned Advocate for the petitioner society, to approach the appropriate authority under Section 91 of the M.C.S Act, 1960.

10. The State Government shall consider the issue of such employees of co-operative societies and amend the relevant statutory provisions suitably forthwith as there are innumerable such societies which employ a large number of employees rendering services to their members, but which do not exactly fall in the category of the term “commercial establishment”.

11. The Prothonotary and Senior Master is hereby directed to send a true copy of this judgment to the State Government for necessary legislative action in the matter.