2014 (7) TMI 1336 - SC - Indian Laws

Race clubs qualify as 'shops' under ESI Act 1948 for providing entertainment services through systematic economic activity

The SC held that race clubs fall within the definition of 'shop' under the ESI Act, 1948. The court found that race clubs conduct systematic economic ... Interpretation of statute - Race Club - would fall within the scope of word 'shop', for the purposes of notification issued under Sub-section (5) of Section 1 of the Employees' State Insurance Act, 1948 or not? - modus operandi of the club - Meaning of term 'shop' and 'establishment' - Doctrine of 'pari materia' - whether the judgment in the EMPLOYEES STATE INSURANCE CORPORATION VERSUS HYDERABAD RACE CLUB [2004 (7) TMI 654 - SUPREME COURT] was correct in holding that a 'race-club' is an 'establishment' for the purposes of the ESI Act? HELD THAT:- 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 (7) TMI 654 - SUPREME COURT], 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 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 - 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. 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 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' - 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'. Whether the activities of a race-club are 'entertainment'? - HELD THAT:- The 'entertainment' is an activity that provides with amusement or gratification. Further, it would include public performances, including games and sports - 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. Whether the Appellant-Turf Clubs fall under the definition of the term 'shop' for the purposes of the ESI Act? - HELD 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 viewer ship of the said entertainment, to the facilitating of betting activities, and that too for a consideration- either in the form of admission fee 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. 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 - Appeal disposed off. Issues Involved:1. Whether the judgment in the Hyderabad Race Club case was correct in holding that a 'race-club' is an 'establishment' for the purposes of the ESI Act.2. Whether the Appellant-Turf Clubs fall within the scope of the definition of the word 'shop' as categorized in the notifications.Detailed Analysis:Issue 1: Whether a 'race-club' is an 'establishment' under the ESI Act.The Court examined whether a 'race-club' qualifies as an 'establishment' for the purposes of the ESI Act. The term 'establishment' is not defined in the ESI Act, so the Court referred to dictionary definitions and previous judicial interpretations. According to Black's Law Dictionary and other legal sources, an 'establishment' generally means a place of business or a permanent commercial organization. The Court noted that the activities of the Bangalore Turf Club and the Royal Western India Turf Club, which include organizing horse races, charging admission fees, and facilitating betting, constitute systematic commercial activities. Consequently, the Court held that a 'race-club' is indeed an establishment within the meaning of the ESI Act, aligning with the decision in the Hyderabad Race Club case.Issue 2: Whether the Appellant-Turf Clubs fall within the definition of 'shop' under the ESI Act.The Court then considered whether a 'race-club' could be categorized as a 'shop' under the ESI Act. The term 'shop' is also not defined in the ESI Act, so the Court referred to dictionary definitions and previous judicial interpretations. According to various dictionaries, a 'shop' is a place where goods or services are sold. The Court reviewed previous cases where the term 'shop' was interpreted broadly to include places where services are sold, such as advertising agencies and restaurants. The Court found that the activities of the Appellant-Turf Clubs, which include providing entertainment and facilitating betting for a fee, fit within the broad definition of a 'shop'. The Court emphasized that the ESI Act is a social welfare legislation and should be interpreted liberally to extend benefits to as many employees as possible.Conclusion:The Court concluded that:1. A 'race-club' is an 'establishment' as correctly held in the Hyderabad Race Club case.2. The Appellant-Turf Clubs are covered under the term 'shop' for the purposes of the ESI Act and the notifications issued thereunder.The Court disposed of Civil Appeal No. 2416/2003 accordingly and vacated the interim order. Other appeals involving the Royal Western India Turf Club Ltd. were sent back to an appropriate two-Judge Bench for adjudication on issues not addressed in this judgment. The Court also addressed a related appeal involving a chit fund, holding that chit fund businesses also fall within the definition of 'shop' under the ESI Act.