RADHU K. KAKDE OF BOMBAY INHABITANT, BOMBAYversusUNION OF INDIA & ORS.

    822


               RADllll K. KAKllE OF l!OMBAY INHABITA!<'r, l!OMBAY
A                                      v.
                           UNION OF INDIA & ORS.

                              DECEMllER 11, 1985

          [V. BALAKRISHNA ERADI, R.B. MISRA AND V. KHALID, JJ.]
B
          Paianent of Bonus Act, 1965 section 32(iv), scope of -
    Whether the Canteen Stores Departn>ant (India) under the Ministry
    of Defence is an "establishn>ant" engaged in any industry carried
    on by or under the authority of any Department of the Central
    Governn>ant and therefore, covered by the provisions of section
    32(iv) of the Act.
c
            Prior to July 1, 1942, canteen facilities had been provided
    to the anned forces of the country by a company known as "Canteen
    Contractors' Syndicate". On June 13, 1942 the defence department
    took over the business of the said company and it was run by the
    Governn>ant of lndis under the title and name "Canteen Stores
    Department". After partition of the country, the Canteen Stores
D   Department of undivided India was wound up and its termiDal
    profits were distributed between India and Pakistan and lndis 1s
    share fotmed the working capital for the Canteen Stores
    Department (India), which was formally inaugurated as a
    "Governn>ant of lndis Ulldertaking" for a perioJ of three years in
    the first instance c..,_ncfng from January 1, 1948. The
E   recruitment rules for the various categories of services of the
    Canteen Stores Department (India) were notified by the president
    by the Ministry of Defence letter dated June 28, 1973. By 8110ther
    letter dated January 28, 1969, Government orders as applicable to
    defence (Civilians) were made applicable to the Canteen Stores
    Department (lndis) employees in toto automatically from the date
F   of their applications to Defence (Civilians). Canteen Stores
    Department (lndis) was allowed to tender military credit notes
    for payn>ant of railway freight by the Governn>ant of lndis
    (Ministry of Railways) Memorandum dated Februsry 28, 1971
    addressed to the Ministry of defence. When the question of
    applicability of section 32(iv) of the Payn>ant of Bonus Act, 1965
G   C8llle up before the Division Bench of the High Court of Bombay,
    the High Court held that the ezemption provided in that section
    is attracted ina81111Ch as the Canteen Stores Department is an
    establishment engaged in an industry carried on by or under the
    authority of a department of a Central Governn>ant. Hence the
    appeal by specisl leave.
H
                R,K. KAl<DE v. U,O,I, [ERADI, J,]              823


          DiSJDissing the appeal, the Court,                          A

       HELD: In the light of all the facts pertaining to the
 history, organisational structure, exercise of functional control
 by Government authorities and the special nsture . of service
 rendered by the Canteen Stores Department (lDdia) to the defence
 forces of the country, it is an "establishment" engaged in an        B
 industry carried on by or under the authority of a department of
 the Central Government nsmely, the Ministry of Defence, (826 C-£]

      lasbtriya Mill !lazdoor Sangh, Nagpur v. 1be lloclel Hills,
Nagpur and Anr., [1985] l s.c.R. 751 applied.
                                                                      c
          CIVIL APPELLATE JURISDICTION : Civil Appeal No, 484 of
  975,

       From the Judgment and Order dated 25.6.1973 of the Bombay
 High Court in Special Civil Appln. No. 1189 of 1968,
                                                                      D
          Jitendra Sharma for the Appellant.

          M.S. Gujaral, G.D. Gupta and R.N. Poddar for the Respon-
 dents.

          The Judgment of the Court was de1.ivered by                 E

        llALAKlUSJINA EBADI, J, In this appeal by special leave
  against the judgment of a Division Bench of the High Court of
  Bombay, the only question raised is whether the provisions of the
  Payment of Bonus Act, 1965 (hereinafter called the 'Act') are
  applicable to the employees of the Canteen Stores Department. The
  answer to this question will depend upon whether the Canteen        F
  Stores Department is an 'establishment' engaged in any industry
  carried on by or under the authority of any department of the
. Central Government; that is because Section 32(iv) of the Act
  lays down that ''Nothing in ·this Act shall apply to - employees
  employed by an establishment engaged in any industry carried on
  by or under the authority of any department of the Central          G
  Govermiient or a State Government or a local authority." In the
  judgment under appeal, the High Court has held that the exemption
  provided for in Section 32(iv) is attracted inasmuch as the
  Canteen Stores Department is an establishment engaged in any
  industry carried on by or under the authority of a department of
  the Central Government. The correctness of the said conclusion
  recorded by the High Court is assailed by the appellant in this     H
  appeal.
     824             SUPREME COURT REPORTS        [1985] SUFP. 3 s.c.R.


A          After bestowing our careful consideration to all aspects of
     the case we are clearly of opinion that the view taken Ly the
     High Court is perfectly correct and that this appeal has only to
     be dismissed. 1hat the Canteen Stores Lepartn.ent is engaged in an
     industry is not in dispute before us and the sole question is
     whether the said industry is carried on by or under the authority
ll   of any department of the Central Government. For a determination
     of the said question one has to examine inter alia the history,
     origin and organisational structure of the establishment, which
     are the authorities exercising financial, adrr,inistrative and
     executive control over it and the rules that govern· its
     functioning.

c          The high Court has in its judgment set out in elaborate
     detail all the relevant facts pertaining to the origin and
     development of this Lepartment right from the period of Second
     World War up till the present time. It is unnecessary for us to
     recapitulate in this judf,lllent all those materials in full.
     Hcrwever, we shall refer to certain salient features emerging from
     the record produced in the case which according to us
D    conclusively go to show that the Canteen Stores Department is an
     establishment engaged in an industry carried on by or under the
     authority of a department vf the Central Government.

            Prior to July 1, 1942, canteen facilities had been provided
     to the armed farces of the country by a company known as "Canteen
E    Contractors' Syndicate." By a Notification (Annexure 'A') dated
     June 13, 1942 published by the Defence Department in the Gazette
     of India, the business of the sal.d company was taken over by the
     Government of India and 1 c was to be run by the Government under
     the name· "'The Canteen Stores Department.•• As and from the date of
     taking over i.e. July 1, 1942, the Government assun.ed control of
 F   the company's business and undertook to meet all liabilities of
     the company as existed on the date of the taking over. This was
     how the Canteen Stores J;,epartment came into being and it was
     continuing to function as such up till the date of the partition
     of the country. After partition of the country, the Canteen
     Stroes Department of undivided India was wound up and its
 G   terminal profits were distributed between India and Fakistan and
     India's share formed the working capital for the Canteen Stores
     Department (India). by a letter dated December 19, 1947 issued by
     the 11inistry of Defence, Government of India to the Quartermaster
     General (India) sanctior. of the Governor General was conveyed to
     the inauguration of Canteen Stores Department (India) as a
 H    'Government Undertaking' for a period of three years in the fi<st
     instance commendr" from J.-:c•.1uy 1, 1948. The Services were to
     comprise:-
              R.R. KAKDE v. U.Q.I. [ERADl, J.]                           825


              (i) Canteen Services (India) Board of Control.
                                                                               A
              (ii) Canteen Section as a part of Q/Coord in QMG's
              Branch Army Headquarters (India).

              (iii) Canteen Stores Department (India).
                                                                               B
The duties and functions of the three bodies were to be as set
out in the Annexure to the said letter. Subsequently, by another
letter dated October 27, 1950, the sanction of the President was
conveyed to the continuance·of Canteen Services (India) inclusive
the Canteen Stores Department (India) as a Government of India
Undertaking to function under the control of the hinistry of
Defence.                ·                                                      c

      A Study Group appears to have been constituted to examine
the organisational set up of the Canteen Stores Department
(India) and based on the recommendations of the said Study Group,
Canteen Services (India) was re-organised and besides the three
                                                                               D
wings mentioned earlier an Executive COllllllittee of the Board of
Control waa also set up by the letter dated April 17, 1969 issued
by the Government of India, Ministry of Defence to the Chief of
the Army Staff. Detailed instructions.regarding the policy to be
pursued in regard to procurement, storage, distribution, disposal
of stores and fixation of wholesale and retail prices were issued
                                                                               E
by the Government of India to the Chief of the Army Staff' by the
letter (Annexure 'E'), dated August 29, 1969 and it was as per
these    instructions   that   the    Canteen    Stores    Department    was
carrying on its activities. It is noteworthy that this letter was
issued with the concurrence of the Yd.nistry of Finance (Defence)
and this is specifically stated in the last paragraph thereof.
                                                                               F
      By the notification (Annexure 'F') dated February 1, 1966,
issued by the Ministry of Law in exercise of the powers conferred
by clause (1) of Article 299 of the Constitution, various
Officers of the Canteen Stores Department (India) designated
therein were authorised to enter into contracts on behalf of the
President of India. The Notification states that contracts for                 G
local purchases could be entered into by the Chairman Board of
Administration and that contracts and deeds relating to supply or
purchase for the Canteen Stores Department (India) and leases of
lauds and buildings belonging to a department could also be
executed bY the Chairman Board of Administration.

        The   recruitment   rules    for   the   various    categories    of   H
services of the Canteen Stores Department (India) were notified
     826             SUPREME COURT REPORTS       [1985] SUPP. 3 s.c.R.

A    by the President by the Ministry of Defence letter dated June 28,
     1973 - Annexure 'G'. By the letter dated January 28, 1969,
     addressed by the Army Headquarters to the Chairman, Board of
     Administration,Canteen Stores Department (India), it was intima-
     ted that Government orders as applicable to Defence (Civilians)
     should be made applicable to the Canteen Stores Department
ll   (India) employees in automatically from the date of their appli-
     cations to Defence (Civilians). That the Government had complete
     control over the surplus generated by the department and that it
     could be distributed only with the sanction of the Fresident is
     clear from the letter dated January 9, 1975 - Annexure 'I' 'issued
     by the Ministry of Defence to the Chief of the Army Staff, The
     canteen Stores Department (India) was allowed to tender military
c    credit notes for payment of railway freight by the Government of
     India (Ministry of Railway.s) ~iemorandum dated February 20, 1971
     addressed to the Ministry of Defence.

           In the light of all these facts pertaining to the history,
     organisational structure, exercise of functional control by
     Governmental authorities and the special nature of service
D    rendered by it to the Defence forces of the country, we have no
     hesitation to hold that the High Court was clearly rl.ght in
     holding that the Canteen Stores Department (India)        is an
     'establishment' engaged in an industry carried on by or under the
     authority of a department of the Central Government namely, the
     Ministry of Defence.
E
           The scope of the expression "establishment engaged in any
     industry carried on by or under the authority of any department
     of the Central Government or State Government or local authority"
     occurring in Section 32(iv) has been explained in a recent
     decision of this Court in Bashtriya Mill Mazdoor Sangh, Nagpur v.
F    The Model llills, Nagpur and Anr., [1985] 1 s.c.R. 751, to which
     judgment two of us (1radi J. and Khalid J.) were parties. On an
     application of the interpretation given to the expression in that
     judgment, the present case clearly falls within the scope of
     Section 32 (iv) of the Act in view of the special and exclusive
     nature of the service rendered by the Canteen Stores· Department
G    (India) to the defence personnel for which purpose alone the
     "Industry" is being carried on by the establishment.

           We accordingly, confirm the judgment of the High Court and
     dismiss this appeal. There will be no order as to costs.
H



     S.R.                                            App~al   dismissed.