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TMI Blog1971 (11) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... quently he claimed overtime for the remainder of the days as acccording to him other workmen had also been paid similarly. This claim was not admitted by the Federation with the result that the Respondent caused a Lawyer's notice to be issued to the Federation, to the Indian National Committee of International Chambers of Commerce and to the International Chamber of Commerce with its Head Office at Paris, demanding payment of his dues amounting to about ₹ 600/-. When no replies were received, he caused another notice to be served threatening to file a suit whereupon the International Chamber of Commerce sent a telegram to the Federation enquiring whether it should deal with the matter or whether they would deal with it. To this the Federation replied that it will deal with it, but it appears that the claim of the Respondent was not settled. The Respondent then filed a suit for the payment of the arrears. The Federation felt that this action of the Respondent in causing legal notices to be served on the International Chamber of Commerce was taken with a view to bringing the Federation into disrepute, and it was capable of so bringing it in the eyes of the International Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not reply, the Respondent consulted two Lawyers and instructed them to serve necessary legal notices who, advised him that as the work related to the 20th Congress was managed by an independent Committee his claim for the remuneration against the Federation alone would not lie and that he would have to make a claim on all the three bodies namely the Federation, the Indian National Committee of International Chamber of Commerce and the International Chamber of Commerce, Paris, who constituted and managed the affairs of the Congress. He denied that there was any mala fide on his part nor did he ever intend to defame the Federation by serving a notice in accordance with the legal advise given to him. He, however, expressed his sincere regrets to the management and submitted his appeal to the Secretary General of the Federation and requested' him to consider the matter, but it was not even acknowldged. In any case the punishment of discharge in such a small matter is too severe and completely out of proportion and smacks of victimisation. The assertion that the Federation was not an industry was denied. Before the Tribunal a preliminary issue was raised that the, Federation was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erce, industry or manufacture or of rendering material service is satisfied, it will not be an industry under the Act. (2) The promotion of trade and commerce, which, is the main activity of the employer in this case, is not an activity in the nature of or analogous to the activities 'Under the first proposition. (3) As a corollary it follows that the Federation which is really carrying on an activity considered to be an object of general public utility and subserves a charitable purpose cannot be held to be an industry. The promotion of trade and commerce, it is submitted is a charitable object which is the dominant object of the Federation ,and hence it is not an industry as held in some of the recent cases by this Court. What has to be seen is whether the promotion of trade, commerce or industry which is considered to be a charitable object can be termed as a business or trade resulting in the production of material services within the meaning of an industry under Section 2 (j) of the Act. In brief it was argued that if both the ends and means are charitable, the, ends being the activity and . the means the object, the undertaking cannot come within the definition of ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assuming that the undertaking has an object of general public utility within the meaning of the exemption, it does not ipso facto determine its activity nor does it show that it is not an industrial activity. Under the Act the learned Advocate contends it is the nature of the activity that is the test and though an Organisation may have a charitable object it may nonetheless carry on an activity which comes within the term industry, nor does the distribution of profits or otherwise is a crucial element in determining whether its activities are industrial and the undertaking an industry within the meaning of Sec. 2(j). It is further submitted that what has been concentrated in all the cases cited by the learned Advocate for the Appellant under the Income-tax Act is what was the dominant object of the assessee and not what it does, because in those cases the Courts were not concerned in determining what was the nature of the activities A but were only concerned in ascertaining what was the dominant object. Whether these decisions are relevant for deciding the question whether a dispute referred to is an industrial dispute under the Act will be dealt with presently. Before we examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or as an officer or other employee of a prison; or (iii) Who is employed mainly in a managerial or administrative capacity; or (iv) Who, being employed in a supervisory capacity, drawn wages exceeding five hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature. A cursory examination of the definition of industry in Sec. 2(j) without the assistance of the case law would show that it has been divided into 2 parts; the first is, as meaning any business, trade, undertaking, manufacture or calling of employers and the second is, as including any calling, service, employment, handicraft, or industrial occupation or avocation of workmen. The first part defines it in relation to the activities of the undertaking i.e., the employer while the second, in relation to the nature of the work done by the employees and gives an extended connotation though this part standing alone cannot define what an industry is. In either case the activity whether of the undertaking or the employees of that undertaking are to be determined in relation to its being a business, trade, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o enquire whether an "activity of a like nature would be an under- taking if it is carried on by a private citizen or a group of "private citizens. There is no doubt that if a "Hospital is run by private citizens for profit it " would be an undertaking very much like the trade or "business in their conventional sense. We have already stated that the presence of profit motive, is not "essential for bringing an undertaking within Sec.2(j)". Even where no profits are earned or even where it is run without charging fees it was considered to be an undertaking because it is the character of the activities involved in running the Hospital which brings the institution of the Hospital within the meaning of Sec. 2(j). The several attributes which are necessary to constitute the activity into an undertaking analogous to trade or business have been stated though the difficulty of setting out all the possible attributes definitely or exhaustively was recognised, and as working principle it was stated that (a) an activity is systematically or habitually undertaken for the production or distribution of goods or for the rendering of material services to the commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n's . In the Association case which was a Research Association maintained by the Textile Industry and employing technical and other staff, the tests for determining whether the activities of the Association could be construed as an industry as laid down in the Hospital case were repeated and applied. It was pointed out that for the first time in that case, namely the Association case "a fresh test was added that as the employees had no rights in the results: O-L50OSupCI/72 of their labour or in the nature of business and trade, the partnership is only association between the employer and employee". Further after setting out the various facts of the relationship of employers and employees and the need to correlate this to an industry it was observed at page 752, "stated broadly the definition of 'industrial dispute' contains two limitations. Firstly, the .adjective 'industrial relates the dispute to an industry as defined in the Act and, secondly, the definition expressly states that not disputes and differences of all sorts but only those which bear upon the relationship of employers and workmen and the terms of ,employment and conditions of labour a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that "Its extension in the Corporation case "was unfortunate and contradicted the earlier cases". Even where the activity is considered to be an industry the second question which arises is the nature of the work which the employees render. The work must be productive and workmen must be following an employment calling or industrial avocation and are not working in a managerial capacity nor are they highly paid supervisors. It is also not necessary that the workmen should receive a share though there may be occasions when he may receive a share of the produce as part of their wages or as bonus as a benefit. Applying the aforesaid tests it was held that after the first part of the definition and the essential character of the Club is taken into consideration, the activity of the Club cannot be described as a 'trade', 'business', or 'manufacture' and the running of the club is not a 'calling' of the Respondent Club or its managing committee; nor can the Club be said to exist for its members though occasionally strangers also, take benefit from its services. It was pointed out that even after the admission of guests the club remains the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided by the Club could not be said to be in the nature of keeping a Hotel as this facility was provided exclusively for members of the Club at much lower charges than those prevailing in the city with comparable accommodation; that the catering provided in the refreshment room of the Club was also confined to the members of the Club only. No outsider is allowed to take advantage of this facility, and the bye-laws of the Club lay down that even if a guest was introduced by a Member, the guest is not entitled to pay for any refreshment served to him; that although large parties were held at the Club where catering was provided by the Club and non-Members attended such parties, these facilities were in fact provided at the instance of the Members of the Club; nor was there any evidence that a large number of such parties were field for drawing an inference that holding such parties was a systematic arrangement by which the Club was attempting to make profits. The catering facilities to members and outsiders at the stalls at the time of tournament were so provided only twice a year and at concessional rates and could not therefore be said to be for the purpose of carrying on an activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purposes of carrying on business; there are no shareholders, no dividends are declared and no distribution of profits takes place. The admission to the Club is by payment of admission fee and not by purchase of shares. Even this admission is subject to balloting. The membership is not transferable like the right of shareholders and the expulsion of the member under certain circumstances when he looses his right are features which never exist in the case of a shareholder holding shares in a Limited Company. In these circumstances the Club was not considered as a separate legal entity as a Limited Company carrying in business. The Madras Gymkhana Club(1) as well as the Cricket Club (2 cases were again considered by a larger Bench of six Judges of this Court in Management of Safdarjung Hospital, New Delhi v. Kuldip Singh Sethi(3), when the previous case law was also reviewed. In that case this Court was considering whether Safdarjung Hospital, the Tuberculosis Hospital and the Kurji Holy Family Hospital were industry for the purposes of reference under Sec. 10(1)(d) of the Act. In the Safdarjung Hospital case the Hospital Mazdoor Sabha case again loomed large because on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n employers and employees, the former engaged in business, trade, undertaking, manufacture or calling of employers and the latter engaged in any calling, service, employment, handicraft or industrial occupation or avocation. There must therefore,. be an enterprise in which the employers follow their avocations as detailed in the definition and employ workmen who follow one of the avocations detailed for workmen. The definition no doubt seeks to define 'industry' with reference to employers' occupation but includes the employees, for without the two there can be no industry. An industry is only to be found when there are employers and employees, the former relying upon the services of the latter to fulfil their own occupations". After setting out the passages to which references have been made while examining the Gymkhana case it was again pointed out that when Lord Wright said that 'trade' is a term of widest scope, it was true but "the word as used in the statement be distinguished from professions although even professions have `trade unions'. The word 'trade' includes persons in a line of business in which persons are employed as workme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r industrial occupation or avocation of workmen in aid of the employers' enterprise. It is not necessary that there must be a profit motive but the enterprise must be analogous to trade or business in a commercial sense". Though it was considered unnecessary to refer to the earlier cases as they were all referred to in the Gymkhana Club case, the following propositions which were deduced from them have been summed up at page 189 :- ". . before the work engaged in can be described as an industry, it must bear the definite character of 'trade' or 'business' or 'manufacture' or 'calling' or must he capable of being described as an undertaking resulting in material goods or material services". Thereafter the Hospital Mazdoor Sabha(") case was closely considered and while doing so it was said that "if a hospital, nursing home or dispensary is run as a business in a commercial way there may be found elements of an industry there. Then the hospital is more than a place where persons can get treated for their ailment. It becomes a business". It was further pointed out that in the Hospital Mazdoor Sabha case, hospitals ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the functions of Government and the Hospital is run as a Department of Government. it cannot therefore, be said to be an industry". The Tuberculosis Hospital was said to be wholly charitable and a research institute the dominant purpose of which was research and training but as research and training cannot be given without beds in a hospital, the hospital was being run. The treatment was therefore, part of the research and trade. As such it was not considered to be an industry. The object of the Kurji Holy Family Hospital as found to be entirely charitable. it also carries on work of training, research and treatment and the distribution of surplus profit if any was Prohibited. That was also not considered to be an industry. We refer to these two cases particularly because a good deal of argument has been addressed to us in support of the proposition that where the object of an institution is for a charitable purpose that would exclude its activity from coining within the definition of an industry under Sec. 2(j); that in the two particular instances the Hospitals were charitable institutions and therefore it was contended that merely on that ground they were not an indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame it would subserve general public utility. In the Tribune case the printing and publication of the newspaper which was not carried on for private profit to any person was held by the Privy Council to be a charitable object of general public utility although the newspaper charged its readers and advertisers at the ordinary commercial rates. It would appear that a commercial Organisation run for profit is not necessarily excluded from the exemption under the Income-tax Act if its object was the accomplishment of a charitable purpose. In the All India Spinners' Association(1) case Lord Wright explained the difference between the English law of charity which was largely influenced by Lord Macnaghten's definition in Commissioners for Special Purposes of Income- tax v. Pemsel(2) and Sec. 4 (3) (i) of the Income-tax Act. Under the English law decisions on "the law of charities are not based on definite and precise statutory provisions" but were spelled from a list of charitable objects contained in the preamble of Act of 43 Elizabeth (1601) and in doing so they made liberal use of analogies, so that the modern English law can only be ascertained by considering a mass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both of the brokers and dealers but also of the public interested in securities to assist, regulate and control the trade in securities, to maintain high standards of commercial honour and integrity, to promote and inculcate honourable practices, trade and business etc. In the Commissioner of Income-tax, West Bengal v. Bengal Home Industries Association(2) Mitter and Ray, JJ. as they then were referred to the three principles deduced in Commissioner of Inland Revenue v. City of Glasgow Police Atheletical 'Association(3) by Lord Cohen from English cases and applied them to the facts of that case to ascertain whether any Association formed to promote and develop Home Industries, arts and crafts in the Presidency of Bengal was a public charitable institution and as such entitled to exemption under Sec. 4 (3) (i) of the Income-tax Act. It is contended by the learned Advocate for the Appellant that the Andhra Chamber of Commerce(4) case illustrates the first principle, the Bombay Panirapole v. The Workmen and Anr.(5), illustrates the second principle and the Ahmedabad Textile Research Association(6) case, the third principle. What the House of Lords were considering in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attle was sold and except perhaps a stud bull or two, none were purchased. Nevertheless it was held that the Managing Committee of the Trustees had decided sometime early to upgrade the infirm cattle and rear them into good animals so as to get good and pure milk for the inmates of the Panjrapole. In fact the upgrading was to such an extent that the milk yielded was, far in excess for the inmates of the Panjrapole. Although The sale proceeds of the milk were never utilised nor meant for the benefit of the donors or trustees, the very production of it in such large bulk wholly unrelated to the needs of the sick cattle showed that the institution was pursuing an activity with the central idea of obtaining a steady income therefrom. Mitter, J. who spoke for the Court observed "In our view, the facts justifiably lead to the conclusion that the in stitution deliberately diversified its objects from only tending to the sick, infirm or unwanted cattle by adopting the policy of keeping cattle not merely for their own sake but for the sake of improving the cattle population committed to its care with an eye to serve human beings by making large quantities of good milk available to them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ematic activity which the Organisation is discharging namely whether it part-takes the nature of a business or trade, or is an undertaking or manufacture or calling of employers. If it is that and there is cooperation of the employer and the employee resulting in the production of material services, it is an industry notwithstanding that its objects are charitable or that it does not make profit or even where profits are made, they are not distributed among the members. it now remains to be seen whether the Federation is an industry within, the meaning of Sec. 2(j). The objects of the Federation.are set out inter-alia in clauses 3(a) to (k) of the Memorandum of Association of which the more significant are Cl. 3 (a) and (e) to (k). These are to promote Indian business in matters of inland and foreign trade, transport, industry and manufacture, finance and all other economic subjects and to encourage Indian Banking shipping and insurance; to promote support or oppose legislation or other action effecting economic interests and in general to take the initiative to assist and promote trade, commerce and industry, to provide for arbitration in respect of disputes arising in the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Railway freights etc. Among important ad-hoc matters taken up were Cargo seized by Pakistan in the course of hostilities during 1965. It also facilitates the resolution of various difficulties in respect of foreign exchange and export promotion which are being experienced by the trade, in respect of foreign exchange allocation for export promotion purposes and made several suggestions regarding granting of foreign exchange for business facilities abroad and the need to avoid delay in sanctioning foreign exchange, increase in existing scales of allowances, liberal allocation of the after sales service. It took up the case of the established exporters other than manufacturers who were barred from entering into export trade in ground-nut oil cakes. It sponsored the cause of the exporters of precious stones to allow reasonable time for submission of their reports and calling back the consignments if, there was no sale. In Company Law matters also it sponsored the cause of the various Companies and the difficulties that they were encountering. It would appear that on the request of Goa Mineral Ore Exporters' Association, the Committee requested the Government to give the matter s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e meaning of Sec. 2 (j) of the Act. Now coming to the merits of the case we find little substance. in the contention of the Federation that the Respondent had issued legal notices to the International Chamber of Commerce with a view to bring discredit to the Federation-its employer. The charge of misconduct that was framed against the Respondent was that he having acted in a manner inconsistent with his duties and obligation as an employee of the Federation he caused to be addressed without any justification copies of the letters to the International Chamber of Commerce "with a view to bring and or capable of bringing disrepute to the Federation in the eyes of the International Chamber of Commerce. The Enquiry Officer in the domestic enquiry held that having regard to the emphatic assertion of the Respondent that he had no intention to bring disrepute to the Federation in any way and that he was only trying to get his legitimate dues "it is not necessary to analyse the exact intention, but the effect has been to convey to the International Chamber of Commerce a low impression about the Federation and thereby to bring down the prestige of the Federation in the eyes of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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