P.B. NAYAK & ORS.versusMANAGING DIRECTOR, BHILAI STEEL PLANT & ORS.

432                      [2021]REPORTS
               SUPREME COURT   10 S.C.R. 432               [2021] 10 S.C.R.


A                            P.B. NAYAK & ORS.
                                        v.
         MANAGING DIRECTOR, BHILAI STEEL PLANT & ORS.
                         (Civil Appeal No. 4613 of 2013)
B                             OCTOBER 26, 2021
                       [K. M. JOSEPH AND
               PAMIDIGHANTAM SRI NARASIMHA, JJ.]
              Madhya Pradesh Shops and Establishment Act, 1958: s.3(1)(j)
      – Applicability of the Act to respondent-club in view of exemption
C     under s.3(1)(j) – Among the establishments, to which the Act does
      not apply, s.3(1)(j), provides for a club not being a residential club
      – The words ‘residential club’ is found in the definition of the word
      ‘residential hotel’ – A residential hotel is defined as any premises,
      where lodging or board and lodging is provided – The service of
D     lodging or board and lodging must be for payment – The said services
      may be provided to travellers and other members or class of members
      of the public – Thus, the recipients of the services are to be the
      travellers or members of the public or a class of members of the
      public – As per the Bye-laws of the respondent-club, only the Officers
      of Bhilai Steel Plant, MECON, HSCL, BRP and SAIL are eligible to
E     be members of respondent-club on payment of prescribed fee – The
      club premises are described as private premises – There is a
      governing body which manages the affairs of the club – Entry is
      restricted to the members, families of members and such other persons
      as are authorised by the governing body – No outsider could come
F     to the club for taking tea, liquor or eating samosa but he can come
      as a guest of the member – Bye-laws contemplate providing of
      facilities of indoor/outdoor games, library and reading room – The
      members and their families are to be provided facilities for their
      cultural and intellectual advancement – The members of the club
      and their guests and family members cannot be described as the
G     ‘public’ – Thus, respondent club cannot be characterized as premises
      which was ‘wholly or principally’ used for the business of supply of
      meals and refreshment to the public – Respondent-club is, therefore,
      not a residential club and is exempted from the Act.
            Madhya Pradesh shops and Establishment Act, 1958: s.(22),
H     2(23) – Residential hotel – Restaurant and eating house – A perusal
                                       432
 P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT                  433


of s.2(22) of the Act reveal, the distinguishing feature, which is an   A
indispensable requirement, to make any premises, a residential hotel,
is that lodging must be provided – It may be lodging and board or it
may be lodging alone – This meaning does justice to the word
‘residential’ which qualifies hotel – In other words, there may be
hotels which do not provide lodging – Such hotels may fall under
                                                                        B
s.2(23) – What is meant to be conveyed by the word ‘residential
hotel’ is the element of service of lodging, being present which is
provided in the hotel – It is in the company of such words, defining
residential hotels that the word ‘residential club’ is ‘included’.
      Dismissing the appeal, the Court
                                                                        C
       HELD: 1.1 A club consists of its members. It is essentially
a voluntary association. It has its bye-laws. The bye-laws would,
undoubtedly, constitute the contract, binding its members. There
would be a Governing Body or Managing Committee to manage
its affairs. The 1958 Act recites that the Law-Giver enacted it to
regulate the conditions of work and employment in shops,                D
commercial establishments, residential hotels, restaurants, eating
houses, theatres, other places of public amusement or
entertainment and other establishments. Section 3 of the Act
provides that nothing in the Act will apply to certain persons and
establishments. Among the establishments, to which the Act does         E
not apply, Section 3(j), provides for a club not being a residential
club. The words ‘residential hotel’ and ‘restaurant or eating house’
have been defined to mean the premises where the activities, as
defined, are carried out. Section 2(24) defines the word ‘shop’
again as the premises, where, goods or services are rendered.
The definition of the word ‘establishment’ as far as residential        F
hotel, restaurant or eating house and a shop, is with reference to
the premises and the activities, which are carried out therein. In
Section 2(4), ‘commercial establishment’ is defined as an
establishment, which carries on any business, trade or profession,
or any work in connection with any business, trade or profession,       G
inter alia, and includes a society under the Madhya Pradesh
Societies Registration Act and a charitable or other trust and
certain other establishments. However, a factory, shop, residential
hotel, restaurant or eating house, theatre or other place of public
amusement or entertainment, are not included in the definition
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434            SUPREME COURT REPORTS                     [2021] 10 S.C.R.


A     of ‘commercial establishment’. The word ‘establishment’ is
      defined to mean ‘commercial establishment, shop, residential
      hotel, restaurant or eating house, theatre or place of public
      amusement or entertainment. The Act provides for this method
      of defining the word ‘establishment’ for the following reasons.
      Certain provisions of the Act have been made applicable to shops
B
      and establishments. Certain other provisions have been made
      specifically applicable to residential hotels, restaurants and eating
      houses. Still further, theatres or other places of public amusement
      or entertainment receive special treatment in Chapter V. There
      are, however, other provisions, which apply to all establishments.
C     As far as Section 58 of the Act is concerned, it taboos the
      dispensing with the services of an employee by an employer where
      the employee has been employed for a period of three months or
      more, except for a reasonable cause and after giving, such an
      employee, at least one month’s notice or wages in lieu of such
      notice. [Paras 24, 25][451-F-H; 452-A-H]
D
            2.1 The argument of the Respondents No. 1 and 2 is
      essentially based on the second respondent-club not being a
      residential club and, consequently, the Act not being applicable
      to the establishment. As can be seen, Section 3 exempts certain
      persons and establishments from the purview of the Act. Section
E     3(1)(a) to Section 3(1)(d) describes persons to whom the Act does
      not apply. Section 3 (1)(e) to Section 3(1)(j) deals with
      establishments to which the Act does not apply. A club would be
      an establishment. It is not a person. Even though, it could also
      be treated as an association of persons or voluntary association
F     of persons, however, in the context of Section 3, a club is assumed
      to be an establishment. In this regard, the word ‘establishment’
      has been defined as meaning also a residential hotel in Section
      2(22). A residential hotel has been defined as meaning any
      premises, in which, a bonafide business is carried on of supplying
      for payment, board or lodging, and lodging to travellers and other
G     members or class of members of public and including a residential
      club. Therefore, a residential club, is treated as residential hotel,
      which in turn, is included in the definition of the word
      ‘establishment’. A residential club would be an establishment
      under Section 2(8). It is clear that a club is treated as an
H
 P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT                  435


establishment subject only to qualification that it is a residential    A
club. A club, which is not a residential club, may have been within
the ambit of the word ‘establishment’ but for the fact that the
word ‘residential hotel’ takes within its sweep only residential
club. More importantly, the Act specifically exempts clubs which
are not residential clubs. [Para 27][453-D-H; 454-A]
                                                                        B
      2.2 The Appellate Authority has found that the club is
actually an eating house exclusively to serve the class of members
of the Steel Club. It has all the elements of the bar, restaurant
and eating house. The Appellate Authority confined itself only to
the definition of the words ‘restaurant or eating house’ as defined
in Section 2(23) of the Act. The Appellate Authority proceeded          C
to finally find that an establishment of bar, restaurant and for
service to the members of the club, would definitely not be a club
withing the meaning of Section 3(j) of the Act. Therefore, the
finding of the Appellate Authority completely overlooked the
invaluable input provided by the definition of the words ‘residential   D
hotel’ as contained in Section 2(22) of the Act. A residential club,
in contradiction from a club which is not residential, is treated as
an establishment under Section 2(8) of the Act. In other words, a
club, which is residential, would not be entitled to the exemption,
provided in Section 3(j), whereas, a club which is non-residential
is exempted. [Para 28][454-B-F]                                         E

      2.3 Words ‘residential club’ is found in the definition of the
word ‘residential hotel’. A residential hotel is defined as any
premises, where lodging or board and lodging is provided. It is,
undoubtedly, to be a bonafide business of supplying lodging or
board and lodging. The service of lodging or board and lodging          F
must be for payment. The aforesaid services may be provided to
travellers and other members or class of members of the public.
Thus, the recipients of the services are to be the travellers or
members of the public or a class of members of the public. A
perusal of Section 2(22) of the Act would reveal, the distinguishing    G
feature, which is an indispensable requirement, to make any
premises, a residential hotel, is that lodging must be provided. It
may be lodging and board or it may be lodging alone. This meaning
does justice to the word ‘residential’ which qualifies hotel. In
other words, there may be hotels which do not provide lodging.
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436            SUPREME COURT REPORTS                       [2021] 10 S.C.R.


A     Such hotels may fall under Section 2(23). What is meant to be
      conveyed by the word ‘residential hotel’ is the element of service
      of lodging, being present which is provided in the hotel. It is in
      the company of such words, defining residential hotels that the
      word ‘residential club’ is ‘included’. The word ‘residential’
      qualifies the word ‘club’. The expression ‘residential’, in the
B
      context of the Act, and particularly in contrast with a club not
      being a residential club, would mean that lodging is provided in
      such a club. In other words, the distinction between a residential
      club, which would be an establishment under Section 2(8), and, a
      club, which is not a residential club, which would be exempted
C     under the Act, is that in the former, there would be lodging
      provided, whereas, in the latter, the facility of lodging is not, as
      such, made available. Undoubtedly, but for the fact that the
      Legislature has included a residential club expressly in the
      definition of the word ‘residential hotel’, it may have been open
      to question in that a club is ordinarily understood as being distinct
D
      from a hotel. [Para 29] [454-F-H; 455-A-D]
            Daly’s Club Law by J.N. Martin – referred to.
             3.1 If the activity which is carried out ‘wholly or principally’
      is the business of supply of meals or refreshment to the public or
E     to a class of public, then the employees working in connection
      would get the protection under the Act. At the same time, if there
      is genuinely a club where the members assemble not for the
      purpose of wholly or principally having their meals or refreshment
      but in connection with other activities and any meals, refreshment
      and drinks are also served then a distinction must indeed be
F     drawn. This is inevitable as harmonizing of the provisions of
      Section 3 (j) under which legislature has carved out an exemption
      in favour of clubs not being residential by not applying the
      provisions of the Act must be given effect to. [Para 34][456-C-F]
             3.2 It is, therefore, necessary to first ascertain whether
G     the club exists only in name, and for all intents and purposes it is
      a restaurant or eating house. Undoubtedly, the second respondent
      is a club. There are members. The members are defined as the
      members of the Bhilai Steel Plant, MECON, HSCL, BRP and
      any other officer of SAIL found eligible to become a member of
H
 P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT                 437


the Club. The governing body may also grant rights as associate        A
member to certain others. Similarly, there can be temporary
members. Entry into the club premises is regulated by bye-laws
of the Club. The club premises are described as private premises.
Entry is restricted to the members, families of members and such
other persons as are authorised by the governing body. There is
                                                                       B
a governing body which manages the affairs of the club. The aims
and objectives of the club are provided in bye-law No.2, that is to
provide the members and their families with the facilities
obtainable in a club of this nature including indoor games like
table tennis, billiards, cards, chess, carrom etc. Also, bye-laws
contemplate providing of facilities of outdoor games like tennis,      C
badminton, squash etc. The bye-laws also contemplate a library
and reading room. So also, the members are to be provided social
gathering and swimming. The members and their families are to
be provided facilities for their cultural and intellectual
advancement. [Para 35][456-F-H; 457-A-B]
                                                                       D
      3.3 The second respondent is, admittedly, a club under its
bye-laws. The objective of the club was to provide various indoor
or outdoor games, library and reading room facilities and social
gatherings. It also contemplated providing members and their
families with facilities for their cultural, social and intellectual
advancement. There is evidence to show that the objects in the         E
bye-laws were actually realised and the members were indeed
being provided with various facilities. The witness for the
appellant has stated that the workmen were allotted duty
separately by the Club Manager. He has said that the he was
working in the canteen which was run by the Club. Other people         F
were working in the canteen, bar, billiard room, concert room
and table tennis room. Members came there to play tennis,
badminton and cards. The witness for the respondents have
spoken about the club providing facilities like indoor games,
outdoor games, social gathering and also about there being facility
for social cultural development for the families of the club           G
members. There are 1400 members of the Club. The club has
been working since 1982. The Appellate Authority has also found
that the club does provide indoor and outdoor games. It goes on
to find that as far as the activities of the club is concerned, the
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438            SUPREME COURT REPORTS                       [2021] 10 S.C.R.


A     Act does not apply. But a bifurcation is made qua the catering
      service. [Para 37][457-D, F-H; 458-A-B]
             3.4 Second respondent was a genuine club. There were
      three different class of members. The club was a private premise.
      Entry to the club premises was restricted to the members and
B     their families and other persons permitted by the governing body.
      The club did indeed provide various facilities to be availed by
      the members and others permitted to come to the club. It is to
      cater to their needs by way of food that apparently the catering
      contract was entered into. The appellate authority finds that
      identity cards were issued to the appellants in the year 1996. No
C     doubt the dates of issue precede the day 05.09.1996, the date on
      which the catering contract is seen issued. The witness for the
      appellants has stated in his evidence “the club invites Shiva Caters
      for party and give contract to him and like this every year any one
      comes on contract. They arrange parties and we used to work with
D     them.” No outsider come to the steel club for taking tea, whiskey
      or eating samosa but he can come as a guest of the memberis
      the further deposition of the witness for the appellants.
      [Para 38][458-B-E]
             3.5 In the light of this state of facts and the definition of the
E     word ‘restaurant and eating place’ the conclusion appears to be
      inevitable that the respondent club cannot be characterized as
      premises which was ‘wholly or principally’ used for the business
      of supply of meals and refreshment to the public. In the first place
      the members of the Club and their guests and family members
      cannot be described as the ‘public’. Even proceeding on the basis
F     that the members of the club and their family members and the
      guests whom they would bring would constitute a class of the
      public, the fact remains that the Court must turn a blind eye to
      the multifarious activities which are both contemplated in the
      bye-laws and which were admittedly being carried out in the
G     premises by way of indoor or outdoor games, gatherings to find
      that the premiseswas being used ‘wholly or principally’ for the
      business of supply of meals or refreshment. The fact that by
      catering services, food and refreshment and even liquor as are
      permitted in Clubs under law was being provided would not make
      it a case where the club became premises in which the supply of
H
 P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT                      439


meals and refreshments was ‘wholly or principally’ what was                 A
carried out. [Para 39][458-E-H]
       3.6 The Appellate Authority proceeds on the basis that
providing food, refreshment and drink are not contemplated in
the bye-laws and therefore, it would attract Section 2(23) of the
Act. Bye-law No.2 provide that the aims and objectives of the               B
club was to provide to the members and their families the facilities
usually obtainable in a club of this nature and ‘including’ the various
facilities like indoor and outdoor games etc. Therefore, providing
of food and refreshment cannot be described as falling outside
the scope of the bye-laws. In other words, a proper interpretation
of bye-law No.2 would mean that the specifically enumerated                 C
facilities in bye-law No.2 are not exhaustive. The bye-laws do not
reveal provision for lodging. There is no finding also that the
club was providing lodging. Appellants have not made out a case
for interference with the impugned Judgment. [Paras 40, 41,
42][459-A-D]                                                                D
        Bangalore Water Supply and Sewage Board v. A.
        Rajappa and others AIR 1978 SC 548 : [1978] 3
        SCR 207 – referred to.
                        Case Law Reference
                                                                            E
[1978] 3 SCR 207                 referred to            Para 23
        CIVIL APPELLATE JURISDICTION: Civil Appeal No.4613 of
2013.
      From the Judgment and Order dated 02.02.2009 of the High Court
of Chhattisgarh at Bilaspur in W.P. No.501 of 2002.                         F
       Rajeev Kumar Bansal, Abhishek Sharma, Akshay K. Ghai, Advs.
for the Appellants.
     Dhruv Mehta, Sr. Adv., Santosh Kumar-I, Advs. for the
Respondents.
                                                                            G
        The Judgment of the Court was delivered by
        K. M. JOSEPH, J.
      1. The appellants impugn the Judgment of the High Court rendered
in a Writ Petition filed, under Article 226 and 227, by respondents 1 and
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440            SUPREME COURT REPORTS                          [2021] 10 S.C.R.


A     2. By the impugned Order,the Order dated 18.01.2002,passed by the
      Appellate Authority,under Section 58(2) of the Madhya Pradesh Shops
      & Establishments Act, 1958 (for short,‘the Act’), came to be set aside.
      The appellants, along with certain others, invoked the jurisdiction of the
      AppellateAuthority under Section 58(2) complaining that their services
      were terminated illegally by the respondents which complaint was
B
      accepted by the Appellate Authority. The AppellateAuthority directed
      the Respondent No. 1 and 2 to reinstate the appellants with full back
      wages from 15.04.1997 till the date of reinstatement. In the alternative
      the Respondent No. 1 and 2 were directed to pay compensation to each
      of the appellants as calculated in the order without reinstatement. It is
C     this order which stands set aside by the High Court. The High Court has
      found that the Act cannot be made applicable in view of the exemption
      available under Section 3(j) of the Act.
            THE FRAMEWORK OF THE ACT
            2. Section 2(8) defines the word Establishment as: -
D
            (8) “establishment” means a shop, commercial establishment,
            residential hotel, restaurant, eating-house, theatre, or other place
            of public amusement or entertainment to which this Act applies
            and includes such other establishment of like nature as the
            Government may, by notification, declare to be an establishment
E           for the purposes of this Act;
            3. As can be seen from the said definition, Establishment means
      the various places it includes. The word commercial establishment is
      defined in Section 2 (4).
            (4)”Commercial establishment” means an establishment which
F           carries on any business, trade or profession or any work in
            connection with, or incidental or ancillary to, any business, trade
            or profession and includes: -
            [(a) a society registered or deemed to have been registered under
            the [Madhya Pradesh Societies Registration Act, 1959 (1 of 1960)]
G           and a charitable or other trust, whether registered or not, which
            carries on whether for gain or not, any business, trade or profession
            or work in connection with or incidental or ancillary to such
            business, trade or profession;]
            (b) an establishment which carries on the business of advertising,
H           commission agency, forwarding or commercial agency or which
 P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT                        441
                     [K. M. JOSEPH, J.]

      is a clerical department of a factory or of any industrial or           A
      commercial undertaking;
      (c) an insurance company, joint stock company, bank, broker’s
      office and exchange,
      but does not include a factory, shop, residential hotel, restaurant,
      eating-house theatre or other place of public amusement or              B
      entertainment;
      4. It further includes residential hotel.The said expression is
definedin Section 2 (22).
      (22) “residential hotel” means any premises in which a bona fide        C
      business is carried on of supplying for payment lodging or board
      and lodging to travellers and other members or class of members
      of the public and includes a residential club;
      5. An establishment includes further a restaurant or eating-house
and the said words are defined in Section 2 (23).                             D
      (23) “restaurant or eating-house” means any premises in which it
      is carried on wholly or principally the business of the supply of
      meals or refreshments to the public or a class of the public for
      consumption on the premises, and includes a Halwai’s shop; but
      does not include a restaurant or a canteen attached to a factory if
                                                                              E
      the persons employed therein are allowed the benefits provided
      for workers under the Factories Act, 1948 (63 of 1948);
      6. Further the expression shop is definedin Section 2(24).
      (24) “shop” means any premises where goods are sold, either by
      retail or wholesale or both or where services are rendered to           F
      customers, and includes an office, a store room, godown,
      warehouse or workplace, whether in the same premises or
      otherwise used in connection with such trade or business but does
      not include a factory, a commercial establishment, residential hotel,
      restaurant, eating-house, theatre or other place of public amusement
      or entertainment or a shop attached to a factory where the persons      G
      employed in the shop are allowed the benefits provided for workers
      under the Factories Act, 1948 (63 of 1948);
     7. It is further necessary to notice the definition of the word
employee.It is defined in Section 2 (6).
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442            SUPREME COURT REPORTS                         [2021] 10 S.C.R.


A           (6) “employee” means a person wholly or principally employed,
            whether directly or through any agency, and whether for wages
            or other consideration, in or in connection with any establishment,
            and include an apprentice, but does not include a member of the
            employer’s family;
B           8. The word employer is defined in Section 2 (7).
            (7) “employer” means a person owning or having ultimate control
            over the affairs of an establishment and includes the manager,
            agent or any other person acting in the general management or
            control of such establishment;
C            9. Under Section 3, the Act will not apply to certain persons or
      establishments. Since much turns on the scope of this provision, we may
      refer to the same. Section 3 reads as follows:
            “3. Act not applicable to certain persons and establishments. - (1)
            Nothing in this Act shall apply to: -
D
            [(a) persons occupying positions of management and declared as
            such under clause (a) of sub-section (2) of Section 6 or employed
            in a confidential capacity not exceeding ten percent of the total
            number of the employees in the establishment or three in number
            whichever is less;]
E
            (b) persons whose work is inherently intermittent such as traveller,
            canvasser, a watchman or a caretaker;
            (c) persons exclusively engaged in preparatory or complementary
            work, such as clearing or forwarding clerks, responsible for the
            despatch of goods by rail or other means of communication and
F
            for customs formalities or messengers;
            (d) persons exclusively employed in the collection, delivery or
            conveyance of goods;
            (e) offices of the Union or State Government or of Local Authorities
G           and of the Reserve Bank of India, the State Bank of India and the
            Life Insurance Corporation;
            (f) establishment for the treatment or the care of the sick, infirm,
            destitute or mentally unfit;
            (g) bazars, fairs or exhibition for the sale of works for charitable
H           or other purposes from which no profit is derived;
 P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT                           443
                     [K. M. JOSEPH, J.]

      (h) stalls and refreshment rooms at Railway Stations, or railway           A
      dining cars;
      [(i) x x x]
      (j) clubs not being residential clubs; and
      (k) any other class of establishments or class of persons which            B
      the Government may, by notification, exempt from the operation
      of this Act:
      Provided that if in the opinion of the State Government the
      circumstances existing in any particular class of cases hereinbefore
      mentioned requires that all or any of the provisions of this Act           C
      should be extended thereto, the State Government may, by
      notification, extend to such class of cases all or any of the provisions
      of this Act and thereupon such provisions shall apply to such class
      of cases.
      (2) The Government may, by notification, direct that any or all of         D
      the provisions of this Act shall, subject to such terms and conditions
      as may be specified in such direction, not apply to such classes of
      establishments or class of persons as may be specified therein.”
                                                       (Emphasis supplied)
       10. Section 6 provides that every establishment to which the Act          E
applies shall be registered in accordance with the Act. Chapter III of the
Act deals with SHOPS AND COMMERCIAL ESTBALISHMENTS.
The various provisions contained in the said chapter provide for regulating
conditions of employment in regard to Shops and Commercial
Establishments. Chapter IVpurports to regulate the conditions of
                                                                                 F
employment in regard to RESIDENTIAL HOTELS, RESTUANRANTS
AND EATING- HOUSES. Chapter V deals with THEATRES OR OTHER
PLACES OF PUBLIC AMUSEMENT OR ENTERTAINMENT. Chapter
VI applies to all establishments and it deals with EMPLOYMENT OF
CHILDREN, YOUNG PERSONS AND WOMEN. Similarly, Chapter
VII deals with provisions applicable to all establishments and it deals          G
with LEAVE WITH PAY AND PAYMENT OF WAGES. Chapter VIII
again contains provisions applicable to all establishments. It is in Chapter
XI,that Section 58 under the section heading “Notice of dismissal”figures:
      “58. Notice of dismissal. - (1) No employer shall dispense with
      the services of an employee who has been employed for a period             H
444            SUPREME COURT REPORTS                          [2021] 10 S.C.R.


A           of three months or more except for a reasonable cause, and without
            giving such employee at least one month’s notice or wages in lieu
            of such notice:
            Provided that such notice shall not be necessary if the services of
            such employees are dispensed with on a charge of misconduct
B           supported by satisfactory evidence recorded at an enquiry held
            by the employer for the purpose.
            (2) (a) The employee discharged, dismissed or retrenched may
            appeal to such authority and within such time as may be prescribed
            either on the ground that there was no reasonable cause for
C           dispensing with his services or on the ground that he had not been
            guilty of misconduct as held by the employer or on the ground that
            such punishment of discharge or dismissal was severe.
            (b) The Appellate Authority may, after giving notice in the
            prescribed manner to the employer and the employee, dismiss the
D           appeal or direct the reinstatement of the employee with or without
            wages for the period during which he was kept out of employment
            or direct payment of compensation without reinstatement or grant
            such other relief as it deems fit in the circumstances of the case.
            (3) The decision of the Appellate Authority shall be final and binding
E           in both the parties and be given effect to, within such time as may
            be specified in the order of the Appellate Authority.”
            11. Section 63 which also falls in Chapter XI provides that the
      provisions of the Workmen’s Compensation Act, 1923 (VIII of 1923)
      and the rules made under the said Act will apply mutatis mutandis to
F     every employee of an establishment.
            12. We heard the learned Counsel for the appellantsShriRajeev
      Kumar Bansal. We also heard learned Senior Counsel for the Respondent
      No. 1 and 2, Shri Dhruv Mehta assisted by Shri Santosh Kumar.
             13. The learned counsel for the appellants would point out that
G     the High Court ought not have interfered with the order of the Appellate
      Authority which was based on evidence. It is contended that the appellants
      were working as employees of the respondent. It is his contention that
      the activity which was being carried out in the club precincts amounted
      to supply of meals or refreshments. Since Section 2 (23)
      defines”restaurant or eating-house” and as a “restaurant or eating-house”
H
 P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT                          445
                     [K. M. JOSEPH, J.]

is also an establishment and what is more even if the restaurant or eating-     A
house in which the appellants were employees catered for a class of the
public, the Act stood attracted. In other words, the contention is that
even if the Respondent No. 1& 2 were running aclub in so far as the
persons who frequented the club represented a section of the public that
sufficed to attract the Act. He elaborated by pointing out that under the
                                                                                B
bye-laws of the club the members of the club as also their guests and
family members could avail of the services atthe eating house in which
the appellants were working as employees.
       14. Per Contra, Shri Dhruv Mehta, learned Senior Counsel mainly
points out that as held by the High Court in the impugned Judgment, the
respondent-Club not being a residential club, it stood exempted from the        C
Act under Section 3(j) of the Act. He would contend that there is clinching
evidence of the fact that the respondent-club would fall within the purview
of Section 3(j) in the form of the definition of the word ‘residential hotel’
in Section 2(22). In other words, he contended that Section 2 (22) defines
‘residential hotel’ as including a residential club. Therefore, the core        D
concept of the residential hotel is the service of lodging which is available
in a residential hotel. In other words, the residential club would be
providing facility for lodging. In a club, which is not a residential club,
which falls under Section 3(j), there would not be lodging. This suffices,
according to him, to cull out the true contours of a non-residential club.
The respondents run a club, which is not a residential club.                    E

     15. The Bye-Laws of the club have been produced before us.
We may notice the following:
      “2. AIMS AND OBJECTIVES
      The aims and objectives of the STEEL CLUB are:- to provide the            F
      members and their families with the facilities usually obtainable in
      club of this nature and including-
             a)     Indoor games like ‘Table Tennis, Billiards, cards.
                    chess, carrom etc.
             b)     Outdoor games like Tennis, Badminton, Squash etc.           G

             c)     Library and reading room facilities.
             d)     Social gatherings, and swimming,
      ii) to provide the members and their families with necessary
      facilities for their cultural, social and intellectual advancement.       H
446              SUPREME COURT REPORTS                      [2021] 10 S.C.R.


A           3. MEMBERSHIP
            a) Members
            All the officers of Bhilai steel plant, MECON, HSCL, BRP, and
            any other officer of SAIL posted at Bhilai shall be eligible to
            become member of monthly fees after prior approval of the
B           Governing Body.
            b) Associate Members
            The Governing Body may, at its discretion, admit prominent citizens
            of the local areas, Government officers and officers of public
C           Limited companies having local site office, as Associate Members
            of the club, subject to payment of the prescribed admission fee
            and monthly subscription. Ordinary members on their ceasing to
            be a member on retirement from B.S.P. can become Associate
            Members on his/her request. They will have no right for voting.
            Maximum, number of such member ship shall not exceed 20% of
D           the club membership.
            c) Temporary Members
            Foreigners connected with Bhilai steel plant as well as outstation
            guests, dependent brothers/sisters who are not resident of Bhilai/
            Durg, of members/ Associate Members, may be admitted to the
E
            club as temporary members for a maximum period of three months,
            at the discretion of Governing Body. Temporary members will
            have no voting right.”
             16. Bye-Law 4 provides for the admission fee and monthly
      subscription. Bye-Law 6 provides for entry into the club premise, which
F
      reads as follow:
            “6. ENTRY INTO THE CLUB PREMISES
            Family means spouse and children only. Children who are
            employed/married shall not constitute a part of the family.
G           Dependent children upto the age of 21 years are permitted.
            i)     The club premises are private premises and entry thereto
                   is restricted to members and their families, guests of
                   members and other persons as may be authorised by the
                   Governing Body. The Governing Body or any office Bearer
H                  of the club as may be authorised by the Governing Body on
 P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT                          447
                     [K. M. JOSEPH, J.]

             his behalf, may refuse entry to any person to the club             A
             premises at their/his discretion.
      ii)    The members/ Associate members be allowed to bring to
             the club, their guests, subject to the following conditions:
             a)     Local guests who are residents of Bhilai are not
                    allowed.                                                    B

             b)     a member/associate member is allowed to bring out-
                    station guests, at a time upto ten days in a month
                    continuously. The charges per guest will be Rs 1 /-
                    per day.
                                                                                C
             c)     A guest register will be maintained at the entry of
                    the club. A members must fill all the particulars
                    regarding the guests must pay the charges as per
                    above in advance.
             d)     For any other special functions, the charges will be        D
                    made as decided by the governing body.
             e)     Governing body of the club reserves the right of
                    admission to any guest.”
      17. The club is managed by a Governing Body.
       18. It is necessary to notice the permission granted by the              E
respondent-club to run catering service to one Shiv Caterers at the
respondent-club dated 05.09.1996. Relevant provision to be noted are,
as follows - Clause (I) provided that the caterer will run the services
only for the members of the Steel Club and their families and guests.
The club was to make available the premises and other facilities. The           F
caterer was to pay rent of Rs.5,000/- per month with a discount of 15
per cent on the catering bill pertaining to the club account. The period of
the catering service was from 27.08.1996 to 31.03.1997. It is further
provided that caterer and its staff members were to observe strict discipline
and Code of Conduct. Clause (VI) is relevant and it reads as follows:
                                                                                G
      “VI. All the staff members for running the canteen will be arranged
      by you only and wages and other statutory liabilities to be incurred
      in this regard will be borne by you only. The undersigned or steel
      club will not be responsible for the above payment. In case club is
      compelled to pay any sum on your behalf under any statutory
                                                                                H
448             SUPREME COURT REPORTS                          [2021] 10 S.C.R.


A           liability, the amount to be paid by me or club will be recovered
            from your security deposit and running bills etc.”
             19. All the staff to be employed were to be neatly dressed and
      they were to have a common uniform. As per Clause (X), the catering
      services was to be made throughout the working hours of the club and
B     all days of the week, as decided by the club. Under Clause (XI), the
      catering facilities was to be strictly extended only to the bonafide club
      members, their families and guests. Clause (XIV) provided as follows:
            “XIV. You will be responsible for the rules and regulation of
            employment in accordance with the government rules and
C           regulation with regard to the staff engaged by you at your risk
            and responsibility.”
            THE FINDINGS OF THE APPELLATE AUTHORITY
             20. The Appellate Authority notes the case of the appellants to be
      that the appellants worked in the establishment of the respondent-club
D     or rather that they worked in the restaurant for different periods. The
      restaurant was being run by the respondents. Their work was satisfactory.
      The service of two of the appellants were made permanent. The
      respondents appointed Shiva Catering but appellants have not been
      employed or paid their wages since April, 1997 and their termination of
E     service is in violation of Section 58 of the Act.
             21. The case of the respondent-club is noted to be that the appellants
      were not employed in their establishment. There was no master-servant
      relationship between them. The claim of exemption under Section 3(j) is
      noted. The Appellant Authority finds that the establishment is a club,
F     ostensibly established for the service Officers of the Bhilai Steel Plant,
      MECON, HSCL, BRP and Officers of SAIL posted at Bhilai. It is found
      that the plain reading of the bye-laws would show that the club is definitely
      an establishment within the meaning of Section 3(j) of the Act. The
      Appellate Authority, however, proceeds to reason that the establishment
      is to be identified by its actual functioning and character and only such
G     facts would contribute to decide, if such an establishment is an
      establishment attracting Section 3(j). Evidence was taken. The bye-laws,
      it was found went to show there was no mention of any eating house or
      catering to the extent of providing liquor and food, requiring considerable
      worker force. It was found that the existence of any restaurant could
      not be as per the bye-laws. The identity cards issued to the appellants
H
 P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT                         449
                     [K. M. JOSEPH, J.]

were found to be under the seal and signature of the club. They were           A
found to be designated as Waiter, Bearer, Cook. The date of issuance in
the identity card was found to be 21.05.1996 in all cases, except two,
where the dates are noted as 27.05.1996 and 28.05.1996. The existence
of restaurant and bar selling food and liquor, was found established through
the Bills. The bills were found to be issued by Bhilai Caterers, Steel
                                                                               B
Club. All the bills bore the seller’s identity as Steel Club. It is found on
the evidence that the club had control over the catering and its employees,
as regard the discipline. The Appellant Authority found it to be established
that in fact the establishment in question, has been doing everything
what an eating house or a restaurant or a bar do individually. The word
‘club’, it is noted, was not defined in the Act. The dictionary meaning of     C
the word ‘club’ was found to be an association of persons for special
purpose. The establishment provided indoor games like tennis, billiards,
etc., and outdoor games like tennis, swimming and badminton. The
meaning that may be assigned to the word ‘club’, under Section 3(j),
would be what has been assigned to this word in dictionary wherein the
                                                                               D
word was defined as the place where association of persons takes place
for special purposes. It was further found that in the case of the
establishment in question, the facts show that establishment is actually
an eating house, exclusively to serve the class of the members of the
Steel Club, a place of amusement/entertainment provided at costs or
payment, food, drink and along with facilities for entertainment like games,   E
etc. The activities were found to be that of eating house supplying meals,
refreshment to the members of the club and not the general public and
not a club under Section 3(j). There existed an eating house/restaurant
and bar to serve the members of the club. They existed in the club
premises and run by the club exclusively for its members. As far as the
                                                                               F
activity of the club is concerned, it was found that the Act did not apply
to it but the establishment like bar and restaurant, though exclusively for
the members, would definitely be not club in itself. Examining the
arguments of the respondents that the Steel Club is neither a residential
hotel nor restaurant or eating place, as defined in Section 2(22) and
Section 2(23) of the Act, the Authority confined itself to Section 2(23). It   G
was found that an establishment carrying on business of supply of meals
or refreshment to a class of public would be an eating house, for the
purpose of Section 2(23) of the Act. The members of the club were
found to be the class of the public. An establishment of bar, restaurant
and for service to the members of the club, would definitely not be a
                                                                               H
450            SUPREME COURT REPORTS                           [2021] 10 S.C.R.


A     club within the meaning of Section 3(j) of the Act though such
      establishment may be under the management of the club. The Authority
      finds further that for example, there are many establishments under the
      management of Bhilai Steel Plan but all of them were not factories,
      manufacturing steel and such establishments are identified by their
      functioning and nature subjecting them to respective applicable laws.
B
      Thereafter, the Authority proceeded to find that the appellants were
      employees and granted the relief, as already noted.
            THE FINDINGS OF THE HIGH COURT
            22. We notice the following findings:
C           “15. Halsbury, 4th Edn., Vol.6, para 201, P.56 defines club as
            “Except a proprietary club or an investment club, it may be defined
            as a society of persons associated together, not for the purpose of
            trade, but for social reasons, the promotion of politics, sport, art,
            science or literature, or for any other lawful purpose; but trading,
D           activities will not destroy the nature of a club if they are merely
            incidental to the club’s purposes. Therefore, a club cannot be held
            to be a place of public entertainment even if the club supplies the
            goods to its members at a fixed price.
                   xxx                     xxx                   xxx
E           17. Section 3 exempts certain persons and establishments from
            application of the Act. Section 3 sub-section (j) exempts clubs not
            being a residential clubs from the application of the Act. There is
            noevidence available on record. that petitioner No.2 is a residential
            club. Even the Appellate Tribunal has not held that petitioner No.2
F           is a residential club. It is neither a proprietary club nor any
            investment club. As per the bye-laws available on record, officers
            of the Bhilai Steel Plant, MECON, HSCL, BRP AND SAIL are
            eligible to be the members of the club on payment of prescribed
            admission and monthly fee. The discretion is reserved to the
            governing body to admit other class of persons to induct as
G           associate members of the club subject to payment of prescribed
            fee. Apart from above 2 clauses, temporary membership can be
            granted to the foreigners connected with Bhilai Steel plant for a
            limited period. Entry in the club premises is restricted to its members
            and other persons authorized by the governing body. The aims
            and objectives as contained in clause-2 of the bye-laws are to
H
    P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT                        451
                        [K. M. JOSEPH, J.]

         provide the members and their families with facilities usually          A
         obtainable in clubs of this nature including indoor games, outdoor
         games, library, reading room, social gathering and to provide
         necessary facilities for their cultural, social and intellectual
         advancement Learned Appellate Tribunal referring to Section 2
         of the bye-laws of the establishment has observed that there is no
                                                                                 B
         mention of any eating house or catering to the extent of providing
         liquor or food requiring considerable work force, therefore, it has
         held that existence of restaurant is not in accordance with bye-
         laws.
         18. In the considered opinion of this Court, the above finding of
         the appellate Tribunal is perverse, as in sub-clause (1) of clause-     C
         2 of the bye-laws, it has been specifically mentioned that the aims
         and objectives of the Steel club are to provide to its members and
         their families with the facilities usually obtainable in clubs ofthis
         nature including other aims and objectives mentioned in subsequent
         part of clause 2. Existence of catering facilities in the club to       D
         members alone would not convert the establishment into restaurant
         or eating house. The Steel Club is entitled for exemption from the
         application of the Act of 1958, as per the provisions of Section
         3(j) of the Act.”
       23. It was further found that Steel Club-second respondent, may           E
be held to be an industry under Section 2(f) of the Industrial Disputes
Act, 1947, as held by this Court in Bangalore Water Supply and Sewage
Board v. A. Rajappa and others1 and the appellants may be held to be
its employees. However, the provisions of the Shops and Establishments
Act, cannot be made applicable to such Steel Club, in view of the
exemption available under Section 3(j) of the Act.                               F

         ANALYSIS AND FINDINGS
       24. A club would consist of its members. It is essentially a voluntary
association. It would have its bye-laws. The bye-laws would, undoubtedly,
constitute the contract, binding its members. There would be a Governing         G
Body or Managing Committee to manage its affairs.
       25. The Act recites that the Law-Giver enacted it to regulate the
conditions of work and employment in shops, commercial establishments,
residential hotels, restaurants, eating houses, theatres, other places of
1
    AIR 1978 SC 548                                                              H
452             SUPREME COURT REPORTS                            [2021] 10 S.C.R.


A     public amusement or entertainment and other establishments. As we
      have noted, the word ‘establishment’ has been defined to mean ‘a shop,
      commercial establishment, a residential hotel, restaurant, eating house,
      theatre or other place of public amusement or entertainment, to which
      the Act applies’. At this juncture, that we must notice Section 3 of the
      Act. It provides that nothing in the Act will apply to certain persons and
B
      establishments. Among the establishments, to which the Act does not
      apply, Section 3(j), provides for a club not being a residential club. We
      have noticed the definition of ‘residential hotel’ (Section 2(22) and
      ‘restaurant or eating house’ (Section 2(23)). These words have been
      defined to mean the premises where the activities, as defined, are carried
C     out. Section 2(24) defines the word ‘shop’ again as the premises, where,
      goods or services are rendered, inter alia. The definition of the word
      ‘establishment’ as far as residential hotel, restaurant or eating house and
      a shop, is with reference to the premises and the activities, which are
      carried out therein. In Section 2(4), ‘commercial establishment’ is defined
      as an establishment, which carries on any business, trade or profession,
D
      or any work in connection with any business, trade or profession, inter
      alia, and includes a society under the Madhya Pradesh Societies
      Registration Act and a charitable or other trust and certain other
      establishments. However, a factory, shop, residential hotel, restaurant or
      eating house, theatre or other place of public amusement or entertainment,
E     are not included in the definition of ‘commercial establishment’. As already
      noted, the word ‘establishment’ is defined to mean ‘commercial
      establishment, shop, residential hotel, restaurant or eating house, theatre
      or place of public amusement or entertainment. The Act provides for
      this method of defining the word ‘establishment’ for the following reasons.
      Certain provisions of the Act have been made applicable to shops and
F
      establishments. Certain other provisions have been made specifically
      applicable to residential hotels, restaurants and eating houses. Still further,
      theatres or other places of public amusement or entertainment receive
      special treatment in Chapter V. There are, however, other provisions, as
      noticed, which apply to all establishments. As far as Section 58 of the
G     Act is concerned, it taboos the dispensing with the services of an
      employee by an employer where the employee has been employed for a
      period of three months or more, except for a reasonable cause and after
      giving, such an employee, at least one month’s notice or wages in lieu of
      such notice. The proviso dispenses with the notice, if there is a charge
      of misconduct, supported by satisfactory evidence recorded in an enquiry.
H
 P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT                           453
                     [K. M. JOSEPH, J.]

The employee, who is discharged, dismissed or retrenched, can appeal             A
against the same, complaining that there was no reasonable cause, inter
alia, for the dispensing of his services. The word ‘employee’ has been
defined, as noticed, ‘as a person, wholly or principally employed, whether
directly or through any agency and whether for wages or for other
consideration, in or in connection with any establishment’. An apprentice
                                                                                 B
is also covered by the definition of the word ‘employee’. The word
‘employer’ is defined as ‘the person owning or having control over the
affairs of an establishment and includes the manager, agent or any other
person, acting in the general management or control of such
establishment.
       26. Therefore, the scheme of the Act is that the rights conferred         C
on an employee to appeal against the action of the employer of an
establishment, is fundamentally based on there being an establishment,
to which, the Act applies. In other words, if the Act does not apply, the
dismissal, termination or retrenchment of the employee cannot attract
Section 58 of the Act. This is despite the fact that but for the exemption,      D
he is an employee in an establishment otherwise.
       27. The argument of the Respondents No. 1 and 2 is essentially
based on the second respondent-club not being a residential club and,
consequently, the Act not being applicable to the establishment. As can
be seen, Section 3 exempts certain persons and establishments from the           E
purview of the Act. Section 3 [(a) to Section 3 (1) (d)] describes persons
to whom the Act does not apply. Section 3 (1) e to Section 3 (1) j deals
with establishments to which the Act does not apply. A club would be an
establishment. It is not a person. Even though, it could also be treated as
an association of persons or voluntary association of persons,however,
in the context of Section 3, we would proceed on the basis that a club is        F
an establishment. In this regard, the word ‘establishment’ has been
defined as meaning also a residential hotel in Section 2(22). A residential
hotel has been defined as meaning any premises, in which, a bonafide
business is carried on of supplying for payment, board or lodging, and
lodging to travellers and other members or class of members of public            G
and including a residential club. Therefore, a residential club, is treated
as residential hotel, which in turn, is included in the definition of the word
‘establishment’. A residential club would be an establishment under
Section 2(8). It is clear that a club is treated as an establishment subject
only to qualification that it is a residential club. A club, which is not a
residential club, may have been within the ambit of the word                     H
454             SUPREME COURT REPORTS                          [2021] 10 S.C.R.


A     ‘establishment’ but for the fact that the word ‘residential hotel’ takes
      within its sweep only residential club. More importantly, the Act
      specifically exempts clubs which are not residential clubs.
              28. Thus, proceeding, indeed, on the basis that the second
      respondent-club is an establishment, the only question to be determined
B     is whether it is a club, which is not a residential club. The Appellate
      Authority has found that the club is actually an eating house exclusively
      to serve the class of members of the Steel Club. It has all the elements
      of the bar, restaurant and eating house. Even though, the Appellate
      Authority was called upon to deal with Section 2(22) of the Act, defining
      the words ‘residential hotel’, we find that the Appellate Authority confined
C
      itself only to the definition of the words ‘restaurant or eating house’ as
      defined in Section 2(23) of the Act. The Appellate Authority has
      proceeded to finally find that an establishment of bar, restaurant and for
      service to the members of the club, would definitely not be a club withing
      the meaning of Section 3(j) of the Act. Therefore, the finding of the
D     Appellate Authority completely overlooked the invaluable input provided
      by the definition of the words ‘residential hotel’ as contained in Section
      2(22) of the Act. We find clear illumination of the mind of the Legislature
      being provided by the definition of the words ‘residential hotel’ for the
      reason that it helps the Court to understand the ambit of Section 3(j),
      which provides for exemption of a club, which is not residential. This is
E
      for the reason that a residential club, in contradiction from a club which
      is not residential, is treated as an establishment under Section 2(8) of the
      Act. In other words, a club, which is residential, would not be entitled to
      the exemption, provided in Section 3(j), whereas, a club which is non-
      residential is exempted.
F
              29. It is, therefore, necessary to probe further as to what is the
      meaning of the expression ‘residential club’. Words ‘residential club’ is
      found in the definition of the word ‘residential hotel’. A residential hotel
      is defined as any premises, where lodging or board and lodging is provided.
      It is, undoubtedly, to be a bonafide business of supplying lodging or
G     boardand lodging. The service of lodging or board and lodging must be
      for payment. The aforesaid services may be provided to travellers and
      other members or class of members of the public. Thus, the recipients
      of the services are to be the travellers or members of the public or a
      class of members of the public. A perusal of Section 2(22) of the Act
      would reveal, the distinguishing feature, which is an indispensable
H
 P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT                          455
                     [K. M. JOSEPH, J.]

requirement, to make any premises, a residential hotel, is that lodging         A
must be provided. It may be lodging and board or it may be lodging
alone. This meaning does justice to the word ‘residential’ which qualifies
hotel. In other words, there may be hotels which do not provide lodging.
Such hotels may fall under Section 2(23). What is meant to be conveyed
by the word ‘residential hotel’ is the element of service of lodging, being
                                                                                B
present which is provided in the hotel. It is in the company of such
words, defining residential hotels that the word ‘residential club’ is
‘included’. We would think that the word ‘residential’ qualifies the word
‘club’. The expression ‘residential’, in the context of the Act, and
particularly in contrast with a club not being a residential club, would
mean that lodging is provided in such a club. In other words, the distinction   C
between a residential club, which would be an establishment under
Section 2(8), and, a club, which is not a residential club, which would be
exempted under the Act, is that in the former, there would be lodging
provided, whereas, in the latter, the facility of lodging is not, as such,
made available. Undoubtedly, but for the fact that the Legislature has
                                                                                D
included a residential club expressly in the definition of the word
‘residential hotel’, it may have been open to question in that a club is
ordinarily understood as being distinct from a hotel.
       30. The Appellate Authority has not found that the second
respondent is a residential club. Appellate Authority did not even consider
the said provision, that is,Section 2 (22), though Respondents No. 1 and        E
2 did invite its attention to the said provision. There is no material also
placed before the Court to conclude that the second respondent-club
was a residential club. If the second respondent-club is not found to be
a residential club, then, it is clear that it would be a club, which is not a
residential club. It would stand exempted under Section 3(j) of the Act.        F
       31. The question however would arise as to whether the second
respondent is a club? Is it a restaurant or eating house falling under
Section 2(23) of the Act? The Appellate Authority has found it to be
restaurant or eating houseas defined in Section 2 (23), and therefore, an
establishment under Section 2(8) of the Act. We have already referred           G
to the findings rendered by the Appellate Authority.
      32. In Daly’s Club Law by J.N. Martin, the word ‘club’ has been
understood as follows:
      “The word “club” means essentially an association of individuals
      in a way that involves to some degree the factors of free choice          H
456              SUPREME COURT REPORTS                              [2021] 10 S.C.R.


A            (which connotes a power of exclusion), permanence, corporate
             identity2 and the pursuit as a common aim of some joint interest
             other than the acquisition of gain (or some mutual advantage directly
             connected with the acquisition of gain, such as those provided by
             membership of a professional society or trade union. It is the last-
             named qualification that distinguishes clubs from business or
B
             professional partnerships, and from trade unions and the like.”
            33. Clubs have been classified broadly into Members Clubs and
      Proprietorship Clubs. There are different classes of members clubs.
             34. In the light of the scheme of the Act, it may not be sufficient
C     to claim the benefit of the exemption under Section 3 (j) for the
      respondents to flaunt the appellation of the organisation as a club. The
      club cannot become a cloak or made a front behind which what is done
      is as contained in Section 2(23) of the Act. In other words, if the activity
      which is carried out ‘wholly or principally’is the business of supply of
      meals or refreshment to the public or to a class of public, then the
D     employees working in connection would get the protection under the
      Act. At the same time, if there is genuinely a club where the members
      assemble not for the purpose of wholly or principally having their meals
      or refreshment but in connection with other activities and any meals,
      refreshment and drinks are also served then a distinction must indeed be
E     drawn. This is inevitable as harmonizing of the provisions of Section 3 (j)
      under which legislature has carved out an exemption in favour of clubs
      not being residential by not applying the provisions of the Act must be
      given effect to.
             35. It is, therefore, necessary to first ascertain whether the club
F     exists only in name, and for all intents and purposes it is a restaurant or
      eating house. Undoubtedly, the second respondent is a club. There are
      members. The members are defined as the members of the Bhilai Steel
      Plant, MECON, HSCL, BRP and any other officer of SAIL found eligible
      to become a member of the Club. The governing body may also grant
      rights as associate member to certain others. Similarly, there can be
G     temporary members. Entry into the club premises is regulated by bye-
      law 6 of the Club. The club premises are described as private premises.
      Entry is restricted to the members, families of members and such other
      persons as are authorised by the governing body. There is a governing
      2
       Not to be confused with corporate status: a club may be a corporate body, but may
H     also be an unincorporated association (See Flemying v. Hector (1836), 2 M. &W.172.)
 P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT                          457
                     [K. M. JOSEPH, J.]

body which manages the affairs of the club.The aims and objectives of           A
the club are provided in bye-law No.2, that is to provide the members
and their families with the facilities obtainable in a club of this nature
including indoor games like table tennis, billiards, cards, chess, carrom
etc. Also, bye-laws contemplate providing of facilities of outdoor games
like tennis, badminton, squash etc. The bye-laws also contemplate a
                                                                                B
library and reading room. So also, the members are to be provided social
gathering and swimming. The members and their families are to be
provided facilities for their cultural and intellectual advancement.
       36. The inquiry conducted by the Appellate Authority was
predominantly based on the definition of the word ‘restaurant or eating
house’ (Section 2(23)). The Appellate Authority glossed over the vital          C
clue provided by the inclusion of the residential club as a residential
hotel.
        37. It must be noticed that the second respondent is, admittedly, a
club under its bye-laws. The objective of the club was to provide various
indoor or outdoor games, library and reading room facilities and social         D
gatherings. It also contemplated providing members and their families
with facilities for their cultural, social and intellectual advancement. The
appellants are correct in contending that the authority and the court are
not to be held hostage by the words used in the bye-laws. In other words,
the bye-laws may unerringly point to activities which are associated            E
with a club. However, in point of fact what actually goes on in the
premises, may be only activities as are described in Section 2(23) of the
Act, namely, the premise of the club may be used wholly or principally
only for the purpose of an eating place or restaurant. If that is the case
the court would not be oblivious to the actual nature of activities and still
clothe the organisation as a Club exempted under Section 3(j). However,         F
in this regard there is unmistakable evidence to show that the objects in
the bye-laws were actually realised and the members were indeed being
provided with various facilities. The witness for the appellant has stated
that the workmen were allotted duty separately by the Club Manager.
He has said that the he was working in the canteen which was run by             G
the Club. Other people were working in the canteen, bar, billiard room,
concert room and table tennis room. Members came there to play tennis,
badminton and cards. The witness for the respondents have spoken about
the club providing facilities like indoor games, outdoor games, social
gathering and also about there being facility for social cultural development
for the families of the club members. There are 1400 members of the             H
458             SUPREME COURT REPORTS                          [2021] 10 S.C.R.


A     Club. The club has been working since 1982. The Appellate Authority
      has also found that the club does provide indoor and outdoor games. It
      goes on to find that as far as the activities of the club is concerned, the
      Act does not apply. But a bifurcation is made qua the catering service.
              38. We can safely conclude that second respondent was a genuine
B     club. There were three different class of members. The club was a
      private premise. Entry to the club premises was restricted to the members
      and their families and other persons permitted by the governing body.
      The club did indeed provide various facilities to be availed by the members
      and others permitted to come to the club. It is to cater to their needs by
      way of food that apparently the catering contract was entered into.The
C     appellate authority finds that identity cards were issued to the appellants
      in the year 1996. No doubt the dates of issue as already noted precede
      the day 05.09.1996, the date on which the catering contract is seen
      issued.The witness for the appellants has stated in his evidence that “the
      club invites Shiva Caters for party and give contract to him and like this
D     every year any one comes on contract. They arrange parties and we
      used to work with them.” No outsider come to the steel club for taking
      tea, whiskey or eating samosa but he can come as a guest of the member
      is the further deposition of the witness for the appellants.
             39. In the light of this state of facts and the definition of the word
E     ‘restaurant and eating place’ the conclusion appears to be inevitable that
      the respondent club cannot be characterized as premises which was
      ‘wholly or principally’ used for the business of supply of meals and
      refreshment to the public. In the first place as already noticed, the
      members of the Club and their guests and family members cannot be
      described as the ‘public’. Even proceeding on the basis that the members
F     of the club and their family members and the guests whom they would
      bring would constitute a class of the public, the fact remains that the
      Court must turn a blind eye to the multifarious activities which are both
      contemplated in the bye-laws and which were admittedly beingcarried
      out in the premises by way of indoor or outdoor games, gatherings to
G     find that the premiseswas being used ‘wholly or principally’ for the
      business of supply of meals or refreshment. The fact that by catering
      services, food and refreshment and even liquor as are permitted in Clubs
      under law was being provided would not make it a case where the club
      became premises in which the supply of meals and refreshments was
      ‘wholly or principally’ what was carried out.
H
 P.B. NAYAK & v. MANAGING DIRECTOR, BHILAI STEEL PLANT                            459
                     [K. M. JOSEPH, J.]

       40. The Appellate Authority proceeds on the basis that providing           A
food, refreshment and drink are not contemplated in the bye-laws and
therefore, it would attract Section 2(23) of the Act. We notice in this
regard that bye-law No.2 (See para 15 of this judgment) does provide
that the aims and objectives of the club was to provide to the members
and their families the facilities usually obtainable in a club of this nature
                                                                                  B
and ‘including’ the various facilities like indoor and outdoor games etc.
Therefore, providing of food and refreshment cannot be described as
falling outside the scope of the bye-laws. In other words, a proper
interpretation of bye-law No.2 would mean that the specifically
enumerated facilities in bye-law No.2 are not exhaustive.
      41. The bye-laws do not reveal provision for lodging. There is no           C
finding also that the club was providing lodging. In such circumstances,
the question that should have been asked was, whether, being a club,
which was not residential in nature, it stood exempted. This was not
done.
       42. In such circumstances, we are of the view that appellants              D
have not made out a case for interference with the impugned Judgment.
The Appeal fails and it shall stand dismissed. There will be no order as
to costs.

Devika Gujral                                                 Appeal dismissed.   E




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