P.R. Ramachandra Menon, J.
1. Petitioners are the same in both the appeals, whereas the Crl.M.C. has been filed by a different person. The common link is applicability of the provisions of the Kerala Shops and Commercial Establishments Act (referred to as Shops Act). The contention raised is that the 'hospital' of the petitioners, stated as a charitable establishment, does not come within the purview of the Shops Act.
2. Payment of Gratuity ordered by the controlling authority in terms of the Payment of Gratuity Act, 1972(referred to as Gratuity Act) as confirmed by the W.A.1737 OF 2013 & 1548 OF 2016 & CRL.M.C.1545 OF 2015 5 appellate authority and affirmed by the learned single Judge (repelling the contentions raised by referring to Section 1(3)(b) of the Gratuity act) is under challenge in W.A.No.1737 of 2013. The challenge in WA No.1548 of 2016 is against the order passed by the District Labour Officer (declaring that the appellants' hospital as coming within the purview of the Shops Act) which came to be affirmed, when interference was declined in the writ petition by the very same learned Single Judge, who held that the issue was covered by the judgment in the former case (reported in 2013 (4)KLT 402 - Lourdes Hospital vs. Dr. Abraham Mathew). In Crl.M.C.No.1545 of 2015, the prosecution proceedings launched by the departmental authorities for violation of the provisions of the Shops Act are sought to be interdicted, contending that the hospital is not a 'shop' or 'commercial establishment' under the Shops Act. The said matter came to be tagged along with the appeals, based on the order dated 03.06.2015 passed by a learned Judge of this Court.
3. Heard Mr. Paul Jacob, the learned counsel appearing for the appellants, Mr. Jayaram, the learned counsel appearing for the petitioner in Crl.M.C., Mr. C.S.Ajith Prakash, the learned counsel for the first respondent in W.A. 1737 of 2013 and Shri P.N. Santhosh, the learned Sr.Government Pleader appearing for the State, at length.
4. Coming to the first case, i.e., W.A.No.1737 of 2013, the first respondent was serving the appellant hospital from 1968, till his retirement on attaining the age of superannuation in the year 2005. Only a sum of Rs.2 lakhs was paid by the appellant towards Gratuity, which made the first respondent/Doctor who was appointed as a Dentist and retired from the service as the Head of the Department to move the Controlling Authority under the Gratuity Act, claiming a balance sum of Rs.1.5 lakhs in terms of the Payment of Gratuity Act, 1972. The claim was resisted by the appellant/hospital raising several grounds, including that the Gratuity Act was not applicable to the hospital; that the hospital was a charitable institution making no profit, nor doing any Trade or business; that it was not a 'shop' or 'commercial establishment' under the Shops Act to satisfy gratuity in t
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erms of the Gratuity Act and further that hospitals were exempted from the purview of the 'Shops Act' by virtue of various Government orders issued from time to time and in so far as the Shops Act was not having any application, no liability would arise under the Payment of Gratuity Act, as well. The above contentions raised by the appellant/hospital were repelled and the controlling authority held that gratuity was payable in terms of the Gratuity Act, 1972 and accordingly awarded the balance sum of Rs.1.5 lakhs with interest at the rate of 10% per annum from 22.03.2006. Though an appeal was filed, it came to be dismissed by the appellate authority/Regional Joint Labour Commissioner as per Ext.P8, which was subjected to challenge in W.P.(C)No.4300 of 2010. It was found to be devoid of any merit and the writ petition came to be dismissed, which in turn is under challenge in W.A. 1737 of 2013.
5. In the meanwhile, the Government had issued a Notification bearing No. G.O(Rt)No.2966/2007/LDR dated 04.10.2007 whereby the exemption already granted to 'hospitals' from the provisions of the Shops Act came to be withdrawn. In the said circumstance, the Asst. Labour Officer, Ernakulam having jurisdiction over the area conducted an inspection in the appellant hospital on 25.09.2008, when infringement of various statutory provisions were noted, leading to Ext.P4 notice (in W..A.1548 of 2016), instructing the appellant to appear and produce all the relevant records for scrutiny. This was sought to be challenged by filing W.P.(C)36133 of 2008, which was disposed of, as per the judgment dated 11.12.2008 directing the District Labour Officer [DLO] to consider whether the hospital would come within the purview of the Shops Act or not. It was accordingly, that the matter was considered and a finding was rendered by the DLO that the hospital would definitely come within the purview of the Shops Act, which made the hospital to challenge the same by filing W.P. (C)14777 of 2009. When the matter was taken up for final hearing, it was noted by the learned single Judge that the issue was squarely covered by the ruling reported in 2013 (4) KLT 402[Lourdes Hospital vs. Dr. Abraham Mathew] and accordingly, the writ petition was dismissed, which is sought to be interdicted in W.A.No. 1548 of 2016.
6. As mentioned already, the petitioner in the Crl.M.C.1545 of 2015 seeks to quash Annexure A2 complaint and all further proceedings in S.T.No.3649 of 2013 on the files of the Judl.Magistrate of the First Class, Ottappalam . The said proceedings are in respect of the alleged violation of various provisions of the Shops Act, which according to the petitioner are not sustainable in law, as the petitioner's hospital is a charitable Trust hospital registered under Annexure A1 Certificate of Registration and it will not come within the purview of the Shops Act, the primary object of the establishment being philanthropic/service/charity and not profit. Reliance is also sought to be placed on the provisions of the Shops Act, contending that the establishment is outside the purview of the said Act.
7. With regard to the issue pertaining to the payment of Gratuity, Section 1(3)(b) of the Payment of Gratuity Act, 1972 says as follows:
“3. It shall apply to :
(b) every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months. “
The thrust of challenge raised by the appellant is that, in so far as the Payment of Gratuity Act is made applicable to every 'shop or establishment' within the meaning of any law for the time being in force in relation to the Shops and Establishments in the State, it is necessary to look into the definition of the term 'commercial establishment' under the Shops Act. It is asserted that the appellant hospital being a charitable institution, it will not come within the purview of the definition of the term 'commercial establishment'. It is contended that the liability under the Payment of Gratuity Act, being by way of 'reference', as distinct from 'incorporation', only those establishments which are covered under the Shops Act alone could be brought within the purview of the Payment of Gratuity Act.
8. The reliance sought to be placed on the various judicial precedents in support of the contentions with reference to 'legislation by reference', have been adverted to by the learned single Judge. Similar exercise has been done with regard to the contention that hospital is not covered under the definition of the term 'commercial establishment' in the Shop Act. The plea raised with reference to the exemption granted by the Government of Kerala under Section 5 of the Shops Act and that the exemption was in force, preventing the first respondent/Doctor from approaching the Controlling Authority under the Gratuity Act is also taken note of. The version putforth by the first respondent that the Gratuity Act is a welfare legislation; that exemption was granted by the Government from the operation of the Shops Act only for the specified period and not altogether, thus indicating that the hospitals were actually covered under the Shops Act and that the reference to the Shops Act in Section 1(3)(b) of the Gratuity Act was only for the purpose of coverage as on the relevant date (by virtue of the terminology used - ”every shop or establishment within the meaning of any law for the time being in force”) have been specifically adverted to. The ostensible difference between 'reference by legislation' and 'reference by incorporation' was also discussed in the light of the judicial precedents, particularly by quoting paragraphs 16 of the decision rendered by the Apex Court in State of M.P. vs. M.V. Narasimhan [AIR 1975 SC 1835]. It was accordingly, that the learned Single Judge arrived at a finding that the Gratuity Act, a Central legislation, was aimed for providing gratuity to employees engaged inter alia in shops and other establishments and that the two Acts are not supplemental to each other; nor are the provisions in pari materia. We have gone through the provisions and rulings as referred to in the judgment under challenge and we concur with the finding and the observations.
9. Going by the scheme of of Gratuity Act, the shops and commercial establishments, which were covered under the Shops Act at the time of introduction of Gratuity Act would continue to be so covered under the said Act, irrespective of any amendment, repeal or exemption brought under the Shops Act. It cannot be said that the amendment of the Shops Act, if not brought into the Gratuity act, would make the Gratuity Act unworkable. For the same reason, a notification for exemption under the Shops Act would not apply to the Gratuity Act, as the power to grant exemption from the provisions of the Gratuity Act stands exclusively vested with the Central Government.
10. There is a contention for the appellant/writ petitioner that the hospital would not come under the definition of the term 'commercial establishment' (under the Shops Act), it being a charitable one and that the challenge would stand even without the exemption notification. Much reliance is sought to be placed by the appellant/petitioner on Dr.D.M. Surti vs. State of Gujarat [AIR 1969 SC 63] where the attempt to bring a 'Doctor's dispensary' within the purview of the Bombay Shops and Establishments Act was interdicted and the contention raised to the contrary by the State before the Apex Court was repelled. In fact, this is with reference to the 'professional element' of the Doctor concerned, who is running the establishment. Similarly, the rulings rendered, holding that the Lawyer's firm or Chartered Accountant's office is not a commercial establishment, by virtue of the professional character/activity involved also do not support the cases in hand. Merely because the appellant/petitioner is involved in some charity, it would not take the 'hospital' out of the definition of the term 'commercial establishment' or 'shop' under the Shops Act. Paragraph 6 of the verdict passed by the Apex Court in Dr. D.M.Surti's case (cited supra) and cited by the appellant, as extracted by the learned single judge clearly holds the position against the appellant/writ petitioner. Going by the definition of the term 'shop' under Section 2(15) of the Shops Act, even if the hospital is not falling under the definition of the term 'commercial establishment' under Section 2(4) of the Shops Act, applying the principle of 'ejusdem generis', the definition of the term 'shop' under Section 2(15) would take in a hospital as well. Further, Section 3(2)(a) of the Shops Act makes it clear point blank that nothing contained in Section 10 of the Shops Act shall apply to hospitals and other institutions for the treatment or care of the sick, the infirm, the destitute or the mentally unfit. As rightly noticed by the learned Single Judge, if the hospitals were not covered under the definition of the Shop Act, there was no purpose for the above provision to exempt hospitals from the rigor of 'opening and closing hours' stipulated under Section 10 of the Shops Act.
11. No specific provision or precedent is brought to our notice by the learned counsel appearing for the appellant/petitioner to persuade us to take a different view. However, this Court finds it appropriate to have a survey of various precedents cited across the Bar, particularly from the part of the appellant/petitioner. It would only be appropriate if the relevant provisions defining the terms 'commercial establishment' (Section 2(4))'establishment' (Section 2(8)) and 'shop' (Section 2(15)) of the Shops Act are immediately referred to, which hence are extracted below: Section 2(4):
“4) 'Commercial establishment', means a commercial or industrial or trading or banking or insurance establishment, an establishment or administrative service in which the persons employed are mainly engaged in office work, hotel, restaurant, boarding or eating house, cafe or any other refreshment house, a theatre or any other place of public amusement or entertainment and includes such other establishment as the Government may, by notification in the Gazette, declare to be a commercial establishment for the purposes of this Act, but does not include a factory to which all or any of the provisions of the Factories Act, 1948 (Central Act 63 of 1948) apply.'
“(8) 'establishment' means a shop or a commercial establishment.”
“(15) 'shop' means any premises where any trade or business is carried on or where services are rendered to customers, and includes offices, storerooms, godowns or warehouses, whether in the same premises or otherwise, used in connection with such trade or business but does not include a commercial establishment or a shop attached to a factory where the persons employed in the shop are allowed the benefits provided for workers under the Factories Act, 1948 (Central Act 63 of 1948).
12. In the verdict passed by the Apex Court in Dr. Surtis case [AIR 1969 SC 63], the question involved was whether a 'Doctor's dispensary' was a commercial establishment within the meaning of the Bombay Shops and Establishments Act. The Apex Court held that the profession carried on by an individual, by his personal skill and intelligence stands on a different footing ; though Section 2(4) of the Act has used words of very wide import and grammatically it may include even a consulting room, where the Doctor examines his patients with the help of a solitary nurse or attender, but in construing the language of the said provision, the principle of 'noscitur a sociis' has to be applied. It was also stated that, under such circumstance, the presence of the profit motive or the investment of capital tradition, associated to the notion of trade and commerce cannot be given undue importance. The correct test, according to the Apex Court, is whether the activity is systematically and habitually undertaken for production or distribution of goods or for rendering material services to the community, or any part of the community, with the help of employees in the manner of a trade or business in such undertaking. As held by the Apex Court, where the professional activity is carried on in such a manner, that the condition of co-operation between the employer and the employees is necessary for its success and its object is to render material service to the community, then these can be regarded as some of the features which render the carrying on of a professional activity to fall within the ambit of Section 2(4) of the Shops Act. This by itself is sufficient to hold that the various activities being pursued by the appellant/petitioner hospital engaging several doctors, nurses, technicians, experts, officers, staff and such others, providing different types of services to the patients/customers, clearly make them fall within the purview of the definition of the term 'shop' under Section 2(15) of the Act. The benefit given to an 'individual Doctor', with reference to his professional skill and the activities being pursued, utilising his intelligence cannot be equated with the activity being pursued by the appellant/petitioner 'hospital' to claim similar benefit.
13. The law declared by the Apex Court in AIR 1984 SC 1700 [V.Sasidharan vs. M/s.Peter and Karunakar and others] is with reference to the question whether the office of a Lawyer or a firm of Lawyers would constitute a 'commercial establishment'. It is held that the office of a Lawyer is not a shop to attract the provisions of the Shops Act. Here again, it is with reference to the sole professional intelligence of a lawyer/lawyers and hence it does not come to the rescue of the appellant/petitioner. Same is the position with regard to the verdict passed by a learned Judge of this Court in 1991 (1) KLT 89 [Ramanathan vs. State of Kerala] holding that the office of a Chartered Accountant is not a commercial establishment under the Shops Act.
14. A question whether the benefits payable under the Maternity Benefit Act 1961 could be denied, with reference to the exemption of 'private hospitals' from the purview of the 'Shops Act' came up for consideration of this Court two and a half decades ago. There is a reference under Section 2(1)(b) of the Maternity Benefit Act( as in the Gratuity Act) that the provisions of the said Act would be applicable to every 'shop' or 'establishment' within the meaning of any law 'for the time being in force' in relation to the shops and establishments in a State in which 10 or more persons were employed or were employed on any day of the preceding 12 months. Sec. 2(1)(b) of the Maternity Benefit Act is almost similar in terms of Section 1(3) (b) of the Payment of Gratuity Act. The said question was considered by a learned Judge of this Court in Dr. Thomas Eapen vs. Asst. Labour Officer [1993(2) KLJ 78] and it was held that, in view of the exemption given by the State Government from the provisions of the Shops Act, provisions of the Maternity Benefit Act were not applicable to private hospitals. The said dictum was subsequently doubted by another learned Judge, who referred the matter to a Division Bench. The point was dealt with elaborately by a Bench of this Court in Noorul Islam Educational Trust vs. Asst. Labour officer, [2008(1)KLT 473], whereby it was categorically held that, by virtue of the mandate of Section 2(1) of the Maternity Benefit Act, private hospitals continued to be covered by the provisions of the said Act, notwithstanding the exemption of private hospitals from the operation of the provisions of the Kerala Shops and Commercial Establishments Act, 1960 and therefore the decision in Dr.Thomas Eapens' case (supra) did not lay down the correct legal position and accordingly, it was overruled. We are in full agreement with the finding and reasoning given by the Bench in the said case.
15. As mentioned already, the power to grant exemption from the operation of the provisions of the Payment of Gratuity Act is under Section 5, conferring the authority upon the appropriate Government. Similarly under the Shops Act, similar power to exempt is provided under Section 5. It was in exercise of the said power, that notifications were being issued by the State of Kerala from time to time, with occasional breaks. Admittedly, the exemption granted as per G.O. (Rt) No.2885/2005/LBR dated 19.10.2005) for a period of two years was later withdrawn as per G.O.(Rt) No.2966/2007/LBR dated 04.10.2007). The withdrawal of exemption is not under challenge in any of these proceedings and the attempt is only to contend that even in the absence of any exemption, coverage cannot be there under the Shops Act, so far as the appellant/petitioner hospital is concerned.
16. It would be worthwhile to note the distinction between the scope and power for granting exemptions under Sections 3 and 5 of the Shops Act, which hence are reproduced below:
”3. Exemptions:-(1) Nothing contained in this Act shall apply to-
(a) persons employed in any establishment in a position of management;
(b) persons whose work mainly involves travelling and persons employed as canvassers and caretakers and whose names do not appear in the muster rolls;
(c) establishments under the Central or any State Government, local authorities, the Reserve Bank of India and cantonment authorities
(d) establishments in mines and oil fields;
(e) establishments in bazaars in places where fairs or festivals are held temporarily for a period not exceeding fifteen days at a time;
(f) establishments which, not being factories within the meaning of the Factories Act, 1948 (Central Act 63 of 1948) are in respect of matters dealt with in this Act, governed by a separate law for the time being in force in the State of Kerala.
(2) Nothing contained in Section 10 shall apply to:
(a) hospitals and other institutions for the treatment or care of the sick, the infirm, the destitute or the mentally unfit;
(b) such chemists 'or druggists' shops, as the Government may, by general or special order, specify;
(c) clubs and residential hotels, hostels attached to schools or colleges, and establishments maintained in boarding schools, in connection with the boarding and lodging of pupils and resident masters;
(d) stalls and refreshment rooms at railway stations, docks, wharves or ports.”
“5. Exemptions:- The Government may, if they are satisfied that public interest so requires or that the circumstances of the cases are such that it would be just and proper to do so having regard to the nature and capacity of the establishment, by notification in the Gazette, exempt either permanently or for any specified period, any establishment or class of establishments in any area or persons or class of persons to which or to whom this Act applies, from all or any of its provisions subject to such restrictions and conditions as the Government deem fit.”
When Section 5 deals with the power of the Government to grant exemption, if the Government is satisfied that the public interest so requires or in the circumstances of the case, it would be just and proper to do so, by issuing notification in the Gazette granting such exemption either permanently or for a specified period, to the establishment/class of establishments concerned or persons/class of persons concerned. Unlike this, the power to exempt under Section 3 is under the Act itself, as enacted by the Legislature. Sub section (2) of Section 3 clearly says that nothing contained in Section 10 shall apply to hospitals and other institutions for the treatment or care of the sick, the infirm, the destitute or the mentally unfit. Section 10 of the Shop Act deals with 'opening and closing hours' which is reproduced below:
“10. Opening and closing hours: (1) No establishment shall on any day be opened earlier than and closed later than such hour as may be fixed by a general or special order of the Government made under sub-section (2);
Provided that any customer who was being served or was waiting to be served in any establishment at the hour fixed for its closing may be served during the quarter of an hour immediately following such hour.
(2) The Government may, by general or special order, fix the time at which any establishment or class of establishments shall be opened or closed in any local area.”
17. From the above, it is clear that the law makers were conscious enough to provide exemption under the statute(even at the time when it was enacted) clearly specifying that exemption in the case of 'hospital' was required only to the extent in relation to the 'opening and closing hours', as dealt with under Section 10 of the Act and nothing beyond. In other words, 'hospitals' were very much intended to be included within the purview of the 'Shops Act', giving exemption only to the limited extent with reference to Section 10; however, leaving it open to the Government to grant exemption under 'Section 5', by issuing notification in the Gazette, if the requirements under Section 5 were satisfied. This being the position, the contention of the appellant/petitioner that their hospitals are not covered under the Shops Act is only to be repelled.
18. In this context, it will be apposite to make a reference to the law declared by the Apex Court in 2005 (9) SCC 605 [Management of the Tata Iron and Steel Co.Ltd. vs. Chief Inspecting Officer and others]. The adverse orders/verdicts suffered with respect to Section 2(6) of the Bihar Shops and Establishments Act, 1953, were sought to be challenged by the Management Company before the Apex Court. It was also contended that the hospital of the appellant Company was providing medical services to its employees and its associated industries and it being not involved in commercial activities as such, it was not an establishment under the said Act. The High Court upheld the coverage under the Act, which led to the appeal before the Apex Court. The evidence disclosed that the hospital was one of the divisions of the appellant and that the hospital was not only catering for the employees of the appellant Company but also to the Government and private patients as well. It was also found that the hospital was charging fees from the Government servants and private patients and that, it could not be said that what they were doing was charity. The Apex Court held that, if the activity is frequent, continuous and relating to business, whether it earns profit or not is irrelevant. Since the above ingredients were present in respect of the activities of the hospital, it was held as an establishment under Section 2(6) of the above Act. The observations made by the Apex Court in 'paragraphs 17' are relevant and hence it is reproduced below :
Another aspect that was emphasiszed 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 and Ors. v. A. M. Ansari and 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 :
....profit motive is not an essential constituent in view of the amendment introduced in the 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 and 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.
19. On applying the law laid down by the Apex Court as above, this Court does not require any second thought to hold that the challenge raised by the appellant/petitioner disputing the coverage is thoroughly wrong and misconceived.
Both appeals as well as the Crl.M.C are dismissed accordingly.