1968 (8) TMI 200 - SC - Companies Law

Cricket Club not an 'industry' under Industrial Disputes Act

The Supreme Court held that the Cricket Club of India Ltd. does not qualify as an 'industry' under the Industrial Disputes Act. The Court determined that ... Industry - members' club as self-serving institution - undertaking analogous to business - co-operation between capital and labour - systematic commercial activity vs occasional events - promotion of sport not trade or business - incorporation does not convert nature of activityIndustry - members' club as self-serving institution - undertaking analogous to business - Whether the Cricket Club of India Ltd. is an 'industry' within the meaning of the Industrial Disputes Act so as to make a reference under Section 10(2) competent - HELD THAT: - Applying the principles laid down in Madras Gymkhana Club, the Court examined whether the Club's activities bear the definite character of trade, business, manufacture, calling or an undertaking producing material goods or material services through co-operation between employers and employees. The Court found that the Club is primarily a members' club organised for promoting sports and providing recreation to its members, and that many of its activities (residential accommodation, catering for members, and facilities for members) are self-serving and confined to members. The income from immovable properties let out for shops and offices was not shown to be generated through the co-operation of the Club's employees in a manner that converts the activity into an industry. The limited staffing connected with those properties and the nature of the lettings indicated that the rents arise from investment rather than from an undertaking run with employees' co-operation for production of material goods or services. Occasional stalls run during two annual open tournaments and infrequent functions where outsiders attend were held to be exceptional, concessional or arranged through members, not evidence of a systematic commercial undertaking. The Court considered the maintenance of the Stadium and sale of tickets for a small number of Test Matches to be in furtherance of the Club's primary object of promoting cricket; these occasional receipts did not convert the Club's core self-serving activities into an industry. [Paras 9, 10, 11, 12, 13]The Court held that the Club is not an 'industry' within the meaning of the Act and that the Tribunal's order dismissing the Club's preliminary objection was erroneous.Systematic commercial activity vs occasional events - promotion of sport not trade or business - Whether occasional commercial features (stadium ticketing, seat-allotment agreements, stalls at tournaments, and catering for functions) render the Club an industry - HELD THAT: - The Court analysed each purported commercial feature. Agreements allotting seats to other sports organisations at concessional rates and sale of spectator tickets on rare occasions were held to be incidental to the Club's object of promoting cricket, not indications of a profit-driven undertaking. Stalls at annual open tournaments occur only rarely and at concessional rates to facilitate events; large functions cited were shown to have been arranged through members and contracted with members, not with outside organisations. The limited frequency, concessional pricing and member-mediated nature of such activities meant they were not systematic commercial operations capable of converting the Club into an industry. [Paras 11, 12, 13]The incidental and infrequent commercial activities did not convert the Club's activities into an industry.Co-operation between capital and labour - undertaking analogous to business - Whether income from letting immovable properties and provision of residential accommodation to members amounts to an industrial undertaking because of requisite co-operation between capital and labour - HELD THAT: - The Tribunal's conclusion that lettings and residential services converted the Club into an industry was reversed. The Court observed that only a very small number of employees attended to the immovable properties and that the rents from third-party lettings arise from investment rather than from labour-enabled production or distribution of material goods or services. Residential accommodation is provided exclusively to members (including honorary members), charged at concessional consolidated rates and organised as a self-service facility. These facts distinguish the activities from a hotel-keeping or commercial letting business and do not demonstrate the sustained co-operation between capital and labour necessary to characterise an industry under the Act. [Paras 8, 9]Letting of properties and provision of exclusively member-residential accommodation did not make the Club an industry.Incorporation does not convert nature of activity - members' club as self-serving institution - Whether incorporation of the Club as a limited company alters its character and makes it an industry - HELD THAT: - Though the Club is incorporated, the Court held that corporate form cannot be decisive. The Club functions as a members' institution without shareholders, dividend distribution or transferable share-rights; membership rights are conditional and not akin to shareholding. Therefore, legal incorporation does not change the substantive nature of the Club's activities as a self-serving organisation for members, and incorporation alone cannot convert those activities into an industrial undertaking. [Paras 14]Incorporation as a limited company did not convert the Club's self-serving activities into an industry.Final Conclusion: The appeal is allowed; the Tribunal's order holding the Cricket Club of India Ltd. to be an 'industry' is set aside on the grounds that the Club's activities are essentially those of a members' self-serving institution, and the incidental or occasional commercial features and its corporate form do not suffice to characterise it as an industrial undertaking under the Industrial Disputes Act. Parties to bear their own costs. Issues Involved:1. Whether the Cricket Club of India Ltd. qualifies as an 'industry' under Section 2(j) of the Industrial Disputes Act.2. The relevance of the Club's activities and their classification in determining if it constitutes an industry.3. The impact of the Club's incorporation as a Limited Company on its status as an industry.Detailed Analysis:1. Whether the Cricket Club of India Ltd. qualifies as an 'industry' under Section 2(j) of the Industrial Disputes Act:The primary issue in this case was whether the Cricket Club of India Ltd. (the 'Club') qualifies as an 'industry' under Section 2(j) of the Industrial Disputes Act. The Tribunal had previously ruled that the Club is an industry, making the reference under the Act competent. The Club appealed this decision, arguing that it is not an industry and thus not subject to the Act.2. The relevance of the Club's activities and their classification in determining if it constitutes an industry:The Club argued that it is a Members' Club, not a proprietary Club, and its primary objectives are to encourage and promote various sports, particularly cricket, and to provide recreational facilities for its members. The Club's activities include maintaining sports facilities, providing residential accommodations for members, and running a Catering Department. The Club contended that these activities do not amount to an 'industry' as defined by the Act.The Supreme Court referenced its previous decision in the Madras Gymkhana Club case, which laid down principles for determining when a Club can be considered an industry. The Court reiterated that not every human activity involving employers and employees qualifies as an industry. Activities that are primarily self-serving for members and do not involve systematic production or distribution of material goods or services do not qualify as an industry.The Court examined the specific activities of the Club:- Sports and Recreational Activities: The primary purpose of the Club is to promote sports and provide recreational facilities for its members. The Court noted that these activities are self-serving and do not involve the systematic production or distribution of material goods or services.- Residential Accommodations: The Club provides residential accommodations exclusively for its members. The Court held that this is a self-serving activity and not comparable to running a hotel, as it is not open to the general public.- Catering Services: The Club's Catering Department serves only its members and their guests, with transactions confined to members. The Court found this to be a self-serving activity, not an industrial activity.- Stadium and Cricket Matches: The Club earns income from selling tickets to spectators for cricket matches and from agreements with organizations for reserved seats in the stadium. The Court held that these activities are incidental to the Club's primary objective of promoting cricket and do not transform the Club into an industry.3. The impact of the Club's incorporation as a Limited Company on its status as an industry:The Club is incorporated as a Limited Company under the Indian Companies Act. The Union argued that this incorporation makes the Club a separate legal entity, distinct from its members, and thus qualifies it as an industry. The Court, however, held that the incorporation is a legal technicality and does not change the nature of the Club's activities. The Club remains a Members' Club, with no shareholders, no distribution of profits, and membership being fluid and non-transferable. Therefore, the incorporation does not make the Club an industry.Conclusion:The Supreme Court concluded that the Club's activities are primarily self-serving for its members and do not involve the systematic production or distribution of material goods or services. Therefore, the Club does not qualify as an 'industry' under Section 2(j) of the Industrial Disputes Act. The Tribunal's order was set aside, and the appeal was allowed, with each party bearing its own costs.