AI Drafter 
TaxTMI 
TaxTMI 
2014 (7) TMI 1336
X X X X Extracts X X X X
X X X X Extracts X X X X
....rises 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: ORDER 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 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ri materia 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, 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" ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ultural 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'. 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. ... 2. ... 3. Shops, Road Motor Transport Establishments, Cinema including preview theatres and newspap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 v. R.K. Swamy and Ors. (1994) 1 SCC 445 and ESIC v. 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 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 r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing 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 Corporation (2009) 9 SCC 61. It is submitted 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 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 socioeconomic justice of our 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, disab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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: 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 Corporation (2009) 9 SCC 61 (at page 66), it was observed that: 20. The Employees' State Insurance Act is a beneficial legislation. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 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, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....propriate to consider the following cases. 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 intentions of the Legislature as apparent by the statute and if the words are sufficiently flexible to admit of some other construction by which that intention can be better effectuated. 30. In the case of Sheikh Gulfan v. Sanat Kumar Ganguli (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 the bare dictionary meaning of words may not necessarily assist a prope....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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.; 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....' 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 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: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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'. 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. Agai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de 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 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 system....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers, both professional and amateur; ... 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 viewer ship of the said entertainment, to the facilitating of betting activities, and that too for a consideration-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rants, 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 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 Wor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere 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 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 Coun....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 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-bein....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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'. 79. 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. 80. 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 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 en....