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Judgment
T.S. Sivagnanam, J.—The petitioner in both the writ petitions is the Vivekananda Kendra Rural Development Programme,
Vivekanandapuram and the challenge in both the cases is to a common order passed by the first respondent under the provisions of the Tamil
Nadu Shops and Establishment Act, 1947 (The Shop Act), in the appeals filed by the second respondents against the order dispensing with their
services from the Rural Development Programme. The petitioner would contend that they are part of the activities of Vivekananda Kendra Rural
Development Programme, which was established with the object of propagating the philosophy of Swami Vivekananda. The institution itself is a
charitable and service organisation without any profit motive and several young men and women rendered selfless service through out the country
in pursuit of the objectives of the institution. It is further stated that as a part of their activities, education is given to poor children, nutritious food is
provided to them, free medical camps are conducted and in addition to these charitable activities, rural development is undertaken in various parts
of the country like Tamil Nadu, Karnataka and Bihar. In Tamil Nadu the programme is conducted in five southern Districts, namely, Kanyakumari,
Tirunelveli, Tuticorin, Ramanathapuram and Virudhunagar. According to the petitioner, the Rural Development Programme is centered around
Tuticorin District and for administrative convenience, the petitioner''s office was shifted to Tuticorin. The second respondent in W.P. No. 8738 of
2006, was working as a Compounder on a monthly payment of Rs. 2090/- and the second respondent in W.P. No. 8739 of 2006, was working
as a Graduate Social Worker (Pattathari Thondar) and receiving a monthly payment of Rs. 3580/-. On 11.02.1999, an office order was issued by
transferring the second respondent in W.P. No. 8738 of 2006 to Valliyur to assist the Doctor in the Medical Centre in that area and by a
subsequent order, he was transferred to Sathankulam to assist the Doctor which also comes under Valliyur area. Similarly, the second respondent
in W.P. No. 8739 of 2006, was transferred to Madurai District and advised to do his service in the rural area in Madurai District. Both the
respondents did not obey the order of transfer and one of them sent a letter dated 28.02.2000, questioning the transfer with a copy of the letter
marked to the Assistant Commissioner of Labour. Thereafter, both the respondents did not report for work, though the petitioner had sent
communication to them calling upon them to report for work. The second respondent sent a reply stating that a suit has been filed before the
District Munsif Court, Nagercoil, questioning the transfer and till the disposal of the suit they cannot insist him to join duty in the transferred place.
Thereafter, the petitioner issued a charge memo dated 30.01.2001/30.09.1999 to the respondents respectively. The second respondent in W.P.
No. 8738 of 2006 did not submit any explanation, whereas the other respondent submitted his explanation. The petitioner decided to conduct a
domestic enquiry and sent a notice of enquiry to both the second respondents. As both of them did not participate in the domestic enquiry stating
that civil suit was pending, they were set exparte and after considering the oral and documentary evidence placed by the petitioner, the enquiry
officer submitted a report holding that the charges were proved. Thereafter, second show cause notice was issued to both the second respondents
along with the copy of the enquiry officer''s report as earlier, only the second respondent in W.P. No. 8739 of 2006 submitted his further
explanation and thereafter, the petitioner by orders dated 01.10.2002/11.12.2001 respectively dismissed them from service.
Aggrieved by such order both the respondents preferred appeals under the Provisions of the Shop Act before the first respondent along with
application for condonation of delay. The delay was condoned by the first respondent and the appeals were taken on file as TNSE No. 6 of 2002,
and TNSE No. 1 of 2003. The petitioner filed counter statement setting out the factual details and also raising a preliminary objection stating that
the provisions of the Shop Act are not applicable to the petitioner, it is a charitable organisation and it is neither an establishment or commercial
establishment under the Shop Act nor it is an ''industry'' as defined under the Industrial Disputes Act (I.D. Act).
The first respondent by a common order dated 07.07.2006, allowed the appeals and held that there was violation of principles of natural justice
in the conduct of the domestic enquiry, since the domestic enquiry could have been conducted at Kanyakumari and the enquiry appears to have
been hurriedly closed. So far as the question as to whether the petitioner would fall within the definition of ''commercial establishment'' as defined
under the Shop Act, the first respondent held that provident fund contribution has been deducted from the second respondents and from the
deposition of the Management witness, it is seen that though the petitioner is a Charitable organisation, the petitioner is operating with a profit
motive and therefore, they would be amenable to the provisions of the Shop Act. Accordingly, the appeals were allowed by common order dated
07.07.2006 and the order of dismissal was set aside. The said order passed by the first respondent is impugned in the writ petitions.
The learned counsel appearing for the petitioner reiterated the contentions raised before the first respondent as regards the applicability of the
Shop Act and submitted that the petitioner is a service organisation and the second respondent joined the organisation voluntarily to do service and
the amount paid to them is only a honorarium and not like a regular employee and the petitioner organisation is neither a shop nor a establishment
or a commercial establishment under the Act, it is not carrying on any trade, or business so as to be called a Shop or Establishment and it is not an
''industry'' as defined under the I.D. Act and that the first respondent failed to take into consideration the elaborate evidence placed before it to
establish that the petitioner is only a service organisation. Further, it is contended that the first respondent failed to appreciate the evidence given by
RW-1 clearly stating about the activities of Vivekananda Kendra Rural Development Programme and how they propagate the philosophy of
Swami Vivekananda. Further it was stated that the medical centre established by the petitioner organisation is rendering free medical care, which is
part of their social service activity. Further, it is contented that the petitioner organisation is exempted from the applicability of the provisions of the
Sales Tax Act and other statute and the Government has issued exemption notification in the light of the fact that the petitioner organisation is being
run on the donations received from the public. It is further submitted that the first respondent failed to take note of the decision of the Hon''ble
Supreme Court in Bangalore Water Supply and Sewerage Board Vs. A. Rajappa and Others, . Further it is submitted that both the second
respondents were fully aware about the petitioner organisation and agreed to join service by receiving honorarium and therefore, they cannot
contend that the petitioner is covered under the provisions of the Shop Act. Further, the learned counsel pointed out that the finding of the first
respondent that the domestic enquiry was not conducted properly, is an incorrect finding and even assuming it was true, the first respondent has
jurisdiction to ask the parties to lead evidence to establish the charge and without resorting to such procedure, straightaway set aside the order of
dismissal. On the above submissions, the learned counsel sought for setting aside the impugned order.
The learned counsel appearing for the second respondent submitted that the second respondents were employees of the petitioner organisation
and the provisions of the Shop Act are fully applicable to the petitioner organisation and P.F. Contributions are deducted from the second
respondents and therefore, there is employer-employee relationship between the parties and the provisions of the Shop Act are applicable and the
order passed by the first respondent is just and proper and calls for no interference.
I have heard the learned counsels appearing for the parties and carefully perused the materials placed on record.
The Shop Act was enacted to provide for regulation of conditions of work in shops, commercial establishments, restaurants, theaters and other
establishments. Section 2(3) defines ''Commercial Establishment'' to mean an establishment which is not a shop but which carries on the business of
advertising, commission, forwarding or commercial agency, or which is a clerical department of a factory or industrial undertaking or which is an
insurance company, joint stock company, bank, broker''s office or exchange and includes such other establishment as the State Government may
by notification declare to be a commercial establishment for the purposes of this Act. Section 2(6) defines ''Establishment'' to mean a shop,
commercial establishment, restaurant, eating-house, residential hotel, theatre or any place of public amusement or entertainment and includes such
establishment as the State Government may by notification declare to be en establishment for the purposes of this Act. Section 2 (16) defines
''Shop'' to mean any premises where any trade or business is carried on or where services are rendered to customers and includes offices, store-
rooms, godowns and warehouses, whether in the same premises or otherwise, used in connection with such business but does not include a
restaurant, eating-house or commercial establishment. Section 4 of the Act deals with ''Exemption'', Section 5 deals with the ''Power of
Government to apply the Shop Act to exempted persons or establishments'' and Section 6 gives power to the State Government to exempt any
establishment from the provisions of the Act either permanently or for a specified period. Section 41(2) provides for the ''person employed'' to
appeal to such authority as may be prescribed against the order dispensing with his services on the ground that there was no reasonable cause for
doing so or on the ground that he had not been guilty of the misconduct as held by the employer. The manner in which appeals filed u/s 41(2) are
to be considered has been stated under Rule 9 of the Tamil Nadu Shops and Establishment Rule, 1948, (Rules).
The facts of the case as pleaded by both parties have been set out in the preceding paragraphs. The preliminary objection raised by the
petitioner is as regards the applicability of the Shop Act to their organisation. This being essentially a question of jurisdiction ought to have been
addressed by the first respondent at the first instance or at least, it should have been first among the several issues framed by the first respondent.
Before the first respondent on the side of the second respondent in both the writ petitions examined themselves as PW-1 & amp; 2 and in TNSE
No. 1 of 2002, 24 documents were marked as Exhibits P1 to P24 and TNSE No. 6 of 2003, 22 documents were marked as Exhibits P1 to P22.
On the side of the petitioner organisation in TNSE No. 1 of 2002, 28 documents were marked as Exhibits R1 to R28 and TNSE No. 6 of 2003,
25 documents were marked as Exhibits R1 to R25 and the Assistant Secretary of the organisation was examined as RW-1. In the impugned order
after extracting the pleadings of both parties, the first respondent framed two questions for consideration, namely, whether the second respondents
were entitled to maintain the appeals under the provisions of the Shop Act and if so, whether the appeals have to be allowed. As regards the
maintainability of the appeal under the Shop Act, the first respondent decided the issue in favour of the second respondents only on two grounds.
Firstly, on the ground that P.F. Contribution is deducted and secondly, though the petitioner is a service organisation, there is evidence to show
that there is some element of profit. On the second question, the first respondent held that the domestic enquiry was not fair and proper, adequate
opportunity was not given to the second respondent and domestic enquiry was hurriedly closed and there has been violation of principles of natural
justice and therefore, the appeals were allowed.
After perusing the impugned order, it is seen that the first respondent committed a fundamental error in not framing the questions for
consideration in a proper manner, which has resulted in an erroneous order. The first question, that should have been framed and considered is as
regards the applicability of the Shop Act as to whether the petitioner is an ""establishment"" or a ""commercial establishment"", a ""shop"" or an
industry"". For securing an answer to these questions, the first respondent ought to have gone into the oral and documentary evidence produced by
the petitioner and see as to whether the relevant tests have been satisfied. The Hon''ble Constitution Bench in the celebrated decision in the case of
Bangalore Water Supply and Sewerage Board Vs. A. Rajappa and Others, , laid down the tests and guidelines for inclusion and exclusion within
the term ''industry'' as defined u/s 2(j) of the I.D. Act. At this stage, it would be useful to take note of the relevant paragraphs of the said
judgment:-
''Industry'', as defined in Sec, 2(j) and explained in Banerji, has a wide import.
(a) Where (i) systematic activity, (ii) organized by co-operation between employer and employee, (the direct and substantial element is chimerical)
(iii) for the production and/or distribution of goods and services calculated to satisfy human wants and wishes (not spiritual or religious but inclusive
of material things or services geared to, celestial bliss e.g. making, on a large scale, prasad or food), prima facie, there is an ''industry'' in that
enterprise.
(b) Absence of profit motive or gainful objective is irrelevant, be the venture in the public, joint private or other sector.
(c) The true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer-employee relations.
(d) If the Organisation is a trade or business, it does not cease to, be one because of philanthropy animating the undertaking.
II
Although sec. 2(j) uses, words of the widest amplitude in its two limbs, their meaning cannot be magnified to overreach itself.
(a) ''Undertaking'' must suffer a contextual and associational shrinkage as explained in Banerji and in this judgment, so also, service, calling and the
like. This yields the inference that all organized activity possessing the triple elements in I (supra), although not trade or business, may still be
''industry'' (provided the nature of the activity, viz. the employer-employee basis, bears resemblance to what we find in trade or business. This
takes into the fold of ''industry'' undertakings, callings and services adventure ''analogous to the carrying on of trade or business''. All features, other
than the methodology of carrying on the activity viz. in organizing the co-operation between employer and employee may be dissimilar. It does not
matter, if off the employment terms there is analogy.
III
Application of these guidelines should not stop short of their logical reach by invocation of creeds, cults or inner sense of incongruity or other
sense of motivation for or resultant of the economic operations. The ideology of the Act being industrial peace, regulation and resolution of
industrial disputes between employer and workmen, the range of this statutory ideology must inform the reach of the statutory definition. Nothing
less, nothing mom.
(a) The consequences are (i) professions, (ii) Clubs (iii) educational institutions (iiia) co-operatives, (iv) research institutes (v) charitable projects
and (vi) other kindred adventures, if they fulfil the triple tests listed in I (supra), cannot be exempted from the scope of sec. 2 (j).
(b) A restricted category of professions, clubs, co-operatives and even Gurukulas and little research labs, may qualify for exemption if in simple
ventures substantially and going by the dominant nature criterion substantially, in single simple ventures, no employees are entertained but in minimal
matters, marginal employees are hired without destroying the non-employee character of the unit.
(c) If in a pious or altruistic mission many employ them-selves, free or for small honoraria, or likely return mainly by sharing in the purpose or
cause, such as lawyers volunteering to run a free legal services clinic or doctors serving in their spare hours in a free medical centre or ashramites
working at the bidding of the holiness, divinity or like central personality and the services are supplied free or at nominal cost and those who serve
are not engaged for remuneration or on the basis of master and servant, relationship, then, the institution is not an industry even if stray servants,
manual or technical, are hired. Such eleemosynary or like undertakings alone are exempt-not other generosity, compassion, developmental passion
or project.
IV
The dominant nature test:
(a) where a complex of activities, some of which qualify for exemption others not, involves employees on the total undertaking, some of whom are
not ''workmen'' as in the University of Delhi Case or some departments are not productive of goods and services if isolated, even then, the
predominant nature of the services and the integrated nature of the departments as explained in the Corporation of Nagpur, will be true test. The
whole, undertaking will be ''industry'' although those who are not ''workmen'' by definition may not benefit by the status.
(b) Notwithstanding the previous clauses, sovereign functions, strictly understood, alone qualify for exemption, not the welfare activities or
economic adventures undertaken by government or statutory bodies.
(c) Even in departments discharging sovereign functions, if there are units which are industries and they are Substantially severable, then they can
be considered to come within sec. 2(j).
(d) Constitutional and competently enacted legislative provisions may well remove from the scope of the Act categories which otherwise may be
covered thereby.
In the case of General Manager, Indian Overseas Bank Vs. Workmen, All India Overseas Bank Employees Union, the question arose as to
whether jewel Appraisers for loan are to be treated as workmen and to be absorbed as part-time clerical job of the bank. Pointing out the
distinction between the jewel Appraisers and the employees of the bank, the Hon''ble Supreme Court held as follows:-
The appointment of regular employees is subject to the qualification and age prescribed. Their recruitment is made through employment
exchange/Banking Service Recruitment Board. They have fixed working hours and monthly wages and are subject to disciplinary control.
Control/supervision is exercised not only with regard to the allocation of work, but also the way in which the work is to be carried out. There is a
retirement age. They are subject to transfer and while in employment they cannot carry on any other occupation. On the other hand, the
engagement of jewel appraisers is not subject to any qualification/age. They are engaged directly by the local Manager. There are no fixed working
hours for them and no guaranteed payment. Only commission is paid to them. They are not subject to disciplinary control. There is no
control/supervision over the nature of work to be performed. Their charges are paid by the borrowers. There is no retirement age and no bar to
carry on any avocation or occupation. The Bank though has a list of appraisers, it is not obligatory for it to allot work to any particular jewel
appraiser. Therefore, the jewel appraisers are not employees of the Bank.
In the light of the decision of the Hon''ble Supreme Court, in order to satisfy the tests as to whether an organisation is an industry u/s 2(j) of the
I.D. Act, a triple test is required to be fulfilled namely, (i) systematic activity; (ii) organised by cooperation between employer and employee (the
direct and substantial element is commercial); and (iii) for the production and/or distribution of goods and services calculated to satisfy human
wants and wishes (not spiritual or religious but inclusive of material things or services geared to celestial bliss, e.g., making on a large scale, prasad
or food) prima facie, there is an ''industry'' in that enterprises. If the organisation is a trade or business it does not cease to be one because of
philanthropy animating the undertaking.
Similarly, to satisfy the definition of commercial establishment defined u/s 2(3) or establishment under 2(6) or Shop u/s 2(16) of the Shop Act,
it is necessary for the appellate authority under the Act to go into the facts and the nature of activities carried on and then come to a factual
conclusion, the said organisation would fall within one among the three definitions so as to apply to the provisions of the Shop Act. Likewise, the
first respondent is also required to go into the aspect as to whether the second respondent would fall within any one of the definition u/s 2(12) to
mean a ''person employed''. However, in the instant case, the first respondent miserably failed to address any of these questions.
The conclusion of the first respondent stating that since P.F. Contributions are collected the provisions of the Shop Act, would apply is a very
cursory finding without going into the larger question as regards the nature of activity of the petitioner. This was required to be done by the first
respondent, since the first respondent accepted that the petitioner was a charitable organisation. Without doing such exercise, the first respondent
could not have rendered such a finding.
Coming to the factual aspect, it is to be noted that few other persons had filed a suit in O.S. No. 148 of 1999, on the file of the II Additional
District Munsif Court, Nagercoil for a declaration and injunction to declare the shifting of the administrative office from Kanyakumari to Tuticorin
District and the incidental transfer of the plaintiffs as illegal and for a consequential permanent injunction. The petitioner was arrayed as the
defendant in the suit which was decreed by judgment and decree dated 10.02.2005. The petitioner preferred appeal in A.S. No. 43 of 2005
before the Principal Sub-Court, Nagercoil and the learned appellate Court allowed the appeal and set aside the judgment and decree in the suit.
Though this judgment was delivered subsequent to the impugned order passed by the first respondent, yet on a perusal of the same, it is seen that
the lower appellate Court has carefully analyzed the documents produced by the petitioner/defendant. The lower appellate Court has also rendered
a finding that the employment is for rendering charitable and spiritual service.
By the impugned order, the first respondent set aside the order of dismissal solely on the ground that there has been violation of principles of
natural justice. However, the first respondent did not embark upon the exercise to examine whether there is evidence available to establish that the
second respondent is not guilty of the charge. Admittedly, the first respondent permitted the parties to lead oral and documentary evidence. In such
circumstances, the first respondent having arrived at a finding that the domestic enquiry was not fair and proper, should have examined as to
whether the charge against both the second respondents was proved by the petitioner organisation by leading evidence. However, such exercise
was not done by the first respondent and straightaway proceeded to set aside the order of dismissal. This inherent defect cannot be set right and
the error committed by the first respondent has led to a perverse decision.
Hence for all the above reasons, the impugned order passed by the first respondent calls for interference and the matter has to be decided
afresh by the first respondent taking note of the observations made in this order and the test laid down by the Hon''ble Supreme Court. It is seen
that at the time when the writ petition was admitted, an order of interim stay was granted on 22.09.2006, subject to the condition that the second
respondent in both the writ petitions shall be paid the last drawn wages. Till the matter is decided by the first respondent afresh as directed in this
order, the petitioner shall pay the last drawn wages to both the second respondents in the writ petitions till they attain the age of retirement as per
the terms and conditions of their original engagement. In the result the writ petitions are allowed and the impugned orders are set aside and the
matter is remanded to the first respondent to decide the matter afresh following the decision of the Hon''ble Supreme Court and taking note of the
observations made in this order and a final decision may be arrived at expeditiously. It is open to both parties to lead further oral and documentary
evidence before the first respondent. No costs. Consequently, connected miscellaneous petitions are closed.