Non-residential clubs will not fall under the Stores and Establishments Act: Supreme Court


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The Supreme Court ruled that simply because a non-residential club provides meals and refreshments, the provisions of the Madhya Pradesh Stores and Establishments Act 1958 will not apply to it.

A bench including Judges KM Joseph and PS Narasimha was in the process of deciding a case related to the Bhilai Steel Club. Few employees, whose services at the club were terminated, approached the authority under Madhya Pradesh’s Stores and Establishments Act, challenging their dismissals. The authority under the Act ruled that the termination of services was illegal and ordered the reinstatement of the employees.

The view of the High Court

This was challenged by the Club in the High Court. The High Court overturned the authority’s order on the grounds that the Stores and Establishments Act was not applicable to the Bhilai Steel Club. The High Court noted that section 3 (j) exempted a non-residential club from the law.

After careful reading of the Club’s statutes, the High Court observed that, in accordance with paragraph (1) of clause (2) of the statutes, its purpose and purpose is to provide its members and their families with the facilities usually available. in clubs of this nature, including various facilities like indoor and outdoor games etc. Vol 6, paragraph 201, in a “restaurant or dining house”. Therefore, extending the benefit of Article 3 (j), the High Court held that the provisions of the law could not be made applicable to Respondent No.2.

Supreme Court upholds High Court’s point of view

On appeal to the Supreme Court, the Council of Appellants (Employees), Mr. Rajeev Kumar Bansal pointed out that the activity of Respondent No. 2 amounted to “providing meals or refreshments” “to a category of public”, which is squarely covered by the definition of “restaurants or restaurants” in the article 2 (23) of the Law.

Senior Lawyer, Mr. Dhruv Mehta appearing on behalf of the respondents argued that section 2 (22) defines “residential hotel” to include “residential club”. The basic requirement to qualify as a “residential hotel” is the provision of accommodation, which would also be a fundamental requirement for “residential clubs”. The Club did not have accommodation and therefore cannot be considered a “residential club”. In light of the same, Mr. Mehta argued that Respondent # 2, being a non-residential club, was entitled to avail itself of the exemption under section 3 (j) of the Act.

To decide whether the benefit of the exemption provided for in section 3 (j) should be granted to the respondents, the Supreme Court conducted two inquiries with the board of directors –

I. Wasn’t Respondent # 2 a residential club?

ii. Was Respondent # 2 a club?

The Supreme Court observed that the definition of “residential hotel” in Article 2, paragraph 22, includes “residential club”, which states that:

“Section 2 (22) -” residential hotel “means any premises in which a bona fide business is carried on consisting in providing for a consideration accommodation or board and lodging to travelers and other members or categories of members of the public and includes a residential club. “

The Supreme Court observed that the essential condition for a place to be qualified as a hotel residence is that it must provide accommodation. In this context, the word “residential” which qualifies the word “club” would necessarily mean that accommodation is provided in such a club. Clubs with accommodation facilities would be considered residential clubs and therefore an establishment under section 2 (8) of the Act, while those without accommodation would be considered non-residential clubs. residential and would not be covered by the Act.

Turning to the second inquiry, the Supreme Court referred to the definition of “club” enumerated in the Daly Clubs Act by JN Martin which reads as follows:

“The word” club “essentially denotes an association of individuals in a way which involves to some extent the factors of free choice (which connotes a power of exclusion), permanence, corporate identity and prosecution. as a common objective of a common interest other than the acquisition of gain (or a mutual benefit directly related to the acquisition of gain, such as those provided by membership in a professional society or trade union. This is the last qualification that distinguishes clubs from commercial or professional partnerships, and unions and others. “

The Supreme Court observed that Respondent No. 2 had three different categories of membership – members of Bhilai Steel Plant, MECON, HSCL, BRP; any other SAIL officer deemed eligible to become a member of the club; associate members chosen by the board of directors. It was a private room with restricted access. The Articles reflected the fact that Respondent # 2 was a club. In line with the club’s goals and objectives, he planned to provide members and their families with the facilities available at a club of this nature, including indoor games such as table tennis, billiards, cards, chess, carrom, etc., and outdoor such as tennis, badminton, squash, etc. The regulations also provide for a library, reading room, and space for social gathering and swimming. Members and their families should also benefit from facilities for their cultural and intellectual advancement.

The Court noted that the members did not meet on the premises of the club for the purpose of taking “all or mainly” their meals or refreshments, but in the course of other activities, and to serve meals, refreshments and refreshments. drinks are only incidental to these other activities.

Relying on the definition of “club” and reviewing the facts of the case, the Supreme Court concluded that Respondent 2 was indeed a non-residential club and, therefore, was entitled to an exemption. Since the dismissal of the appellants cannot result in the application of section 58 of the Act when the respondents are exempted from the scope of the law in accordance with section 3 (j), the Supreme Court decided not to interfere with the judgment of the High Court.

[Case Title: P.B. Nayak And Ors. v. Managing Director, Bhilai Steel Plant And Ors. Civil Appeal No(s) 4613 of 2013]

Reference: LL 2021 SC 626

Click here to read / download the judgment

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