Institute Of Economic Growth vs The Controlling Officer Under The ...
2010 Latest Caselaw 1444 Del

                    *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                                 W.P.(C) 4560/1999

%                                                      Date of decision: 16th March, 2010


INSTITUTE OF ECONOMIC GROWTH                              ..... Petitioner
                   Through: Mr. Pawan Kumar Aggarwal, Advocate.

                                              Versus

THE CONTROLLING OFFICER UNDER THE PAYMENT
OF GRATUITY ACT & ANR.                                    ..... Respondents
                    Through: Mr. R.K.Gauba, Advocate for R-2.

CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1.         Whether reporters of Local papers may
           be allowed to see the judgment?                    YES

2.         To be referred to the reporter or not?             YES

3.         Whether the judgment should be reported            YES
           in the Digest?

RAJIV SAHAI ENDLAW, J.

1. The question which arises for consideration in this writ petition is

whether the petitioner, a society registered under the Societies Registration

Act, with the objective to serve as a post-graduate school for advanced

teaching and research in Economics and allied subjects and to admit students

for this purpose and to undertake cooperative research work on specific

research problems and to arrange for permanent and continuous

investigation into specific economic problems, and working on a no profit

no loss basis and funded by various Ministries of Government of India and

run on the basis of grants mainly received from Government of India, is

covered by the provisions of the Payment of Gratuity Act, 1972 or not.

2. The Controlling Officer under the said Act, on complaint of

respondent No.2, an employee who has retired after rendering 38 years

service in the petitioner institute has held the petitioner to be covered by the

provisions of the Act relying on the judgment of this Court in MCD Vs. V.T.

Naresh MANU/DE/0146/1985 holding MCD to be covered by the

provisions of the said Act. I am unable to comprehend as to how and why

the Controlling Officer, for the reason of the MCD being covered by the Act,

held the same to apply to the petitioner also. The matter has thus been

examined independently.

3. It is the case of the petitioner that the petitioner as per its rules &

regulations follows generally the rules & regulations of the University of

Delhi; that in terms of the said rules, the petitioner though not covered by the

Act has its own scheme for gratuity and whereunder the respondent No.2

became entitled to gratuity of Rs.67,710/- which has already been paid to

him. The claim of the respondent No.2 is that under the provisions of the Act

he was entitled to gratuity of Rs.1 lac. The Controlling Officer holding the

provisions of the Act applicable to the petitioner institute, vide order dated

26th February, 1999 impugned in this petition has directed the petitioner to

pay the balance amount of Rs.32,290/- to the respondent No.2 together with

interest at 10% p.a. from 31st May, 1994 but not exceeding the gratuity

payable now i.e. Rs.32,290/-. This Court vide ex parte order dated 2nd

August, 1999 while issuing notice of the petition stayed the operation of the

order of the Controlling Officer and the said order, on 30th November, 2000

was made absolute till the pendency of this petition.

4. As per Section 1 (3) of the Act, it applies to -

(a) every factory, mine, oilfield, plantation, port and railway company;

(b) every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months;

(c) such other establishments or class of establishments, in which ten or more employees are employed, or were employed, or, any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf.

5. It is the admitted position that at the time of retirement of the

respondent No.2 on 31st May, 1994, the petitioner was not covered by

Clause „a‟ or „c‟ (supra). The only question is whether the petitioner was an

establishment within the meaning of the law in relation to shop and

establishments in Delhi. The Gratuity Act does not define "establishment".

However since it refers to the law in relation to shops and establishments,

looking into the Delhi Shops & Establishments Act, 1954, one finds

establishment defined in Section 2(9) as a shop, a commercial establishment,

residential hotel, restaurant, eating-house, theatre or other places of public

amusement or entertainment. Commercial establishment has been defined in

Section 2(5) of the Shops Act as under:-

"commercial establishment" means any premises wherein any trade, business or profession or any work in connection with, or incidental or ancillary thereto is carried on and includes a

society registered under the Societies Registration Act, 1860 (21 of 1860), and charitable or other trust, whether registered or not, which carries on any business, trade or profession or work in connection with, or incidental or ancillary thereto, journalistic and printing establishments, contractors and auditors establishments, quarries and mines not governed by the Mines Act, 1952 (35 of 1952), educational or other institutions run for private gain, and premises in which business of banking, insurance, stocks and shares, brokerage or produce exchange is carried on, but does not include a shop or a factory registered under the Factories Act, 1948 (43 of 1948), or theatres, cinemas, restaurants, eating houses, residential hotels, clubs or other places of public amusements or entertainment".

6. The counsel for the petitioner contends that the petitioner is an

educational institution and is not run for private gain; that Section 2 (5)

supra includes only those educational institutions in the definition of

Commercial Establishment which are run for private gain. It is thus urged

that the Gratuity Act is not applicable to the petitioner.

The counsel for the contesting respondent No.2 has not addressed any

arguments on this aspect.

7. Though I have found judgments of the Bombay High Court, viz. in

Principal, Bhartiya Mahavidyalaya Vs. Ramakrishna Wasudeo Lahudkar

MANU/MH/0541/1993 holding an educational institution to be covered by

the definition of a Commercial Establishments but I find that Section 2(4) of

the Bombay Shops & Establishments Act while defining Commercial

Establishments does not provide for an educational institution as Section

2(5) of the Delhi Shops Act does. Thus the said judgment can have no

application to Delhi. Though on first blush the contention of the counsel for

the petitioner is found attractive but I find that the Division Bench of this

Court in Delhi Council For Child Welfare Vs. Sheela Devi 132 (2006) DLT

696, in connection with the applicability of the Minimum Wages Act, has

interpreted Section 2(5) of the Delhi Shops Act. It was held that

"Having examined the records of the case and the order of the competent authority and the impugned order of the learned Single Judge, we are of the view that the concurrent findings of both the competent authority and learned Single Judge do not call for any interference. Although the expression sought to be defined under Section 2(5) of the Shops Act is that of a 'commercial establishment', what is contained in the definition is indicative of the wide sweep of those words. The definition is an inclusive one and expressly includes ''a society registered under the Societies Registration Act, 1860 and charitable or other trust whether registered or not, which carries on any business, trade or profession or work in connection with, or incidental or ancillary thereto." We may add that the word 'work' is wide enough to include the activities of an organisation like that of the appellant before us. If even a charitable trust which obviously would not be engaged in any commercial activity for profit is expressly included in this definition, as is a Society, we see no reason why it would not include the appellant. It may also be noticed that latter part of the definition excludes certain types of establishments. In other words, the definition expressly states that it ''does not include a shop or a factory registered under the Factories Act, 1948,' theatres, cinemas, hotels, eating houses, restaurants, health clubs or other places of public amusement or entertainment.'' The purpose of this exclusion is that, but for such an exclusion these establishments would otherwise be included in the definition. If it was the legislative intention to expressly exclude establishments like that of the appellant, then that would have been expressly stated in the definition itself. The absence of such an exclusion has to be construed to mean that organisations and establishments like that of the appellant would fall in the inclusive ambit of definition."

Applying the said judgment, the petitioner even though a society

working on "no profit no loss basis" would be covered by the definition of

Commercial Establishments in Section 2(5) of the Shop Act and

consequently it will be an establishment under Section 2(9) of the Shop Act

and covered by Section 1 (3) (b) of the Gratuity Act.

8. Even though in the judgment (supra) of the Division Bench, the

petitioner therein Delhi Council For Child Welfare was not carrying on any

trade, business or profession and was stated to be providing service of

vocational training but the Division Bench had no occasion to consider

whether it would be a educational institution and if it was held to be an

educational institution, whether it could be exempted for the reason of not

working for private gain. I have wondered whether the petitioner, a society

carrying on work in the field of education and hence covered by definition of

commercial establishment in the Shop Act, would still be exempted owing to

a special niche being carved out in Section 2(5) of the Shop Act for

educational or other institutions. However I am unable to hold that the

petitioner though a commercial establishment as per the judgment (supra) of

the Division Bench would still be excluded from the said definition for the

reason of being in the field of education and not working for private gain.

Once the petitioner being a society carrying on work is held to be a

commercial establishment, it cannot be excluded there from for the reason of

being in the field of education. Various components of Section 2(5) of the

Act have to be read harmoniously. Thus educational or other institutions run

for private gain have to be necessarily held to be for entities which are not

societies, may be sole proprietary, partnerships or limited companies etc. No

case therefore for holding the judgment of the Division Bench to be not

applicable to the present case is made out.

9. I may also notice that vide Notification dated 3rd April, 1997 under

Section 1(3)(c), the Gratuity Act has been extended to educational

institutions.

10. I must also record that it was the argument of the counsel for the

contesting respondent No.2 that even as per the University Calendar, he was

entitled to gratuity in the sum of Rs.1 lac and had been wrongly denied the

same; the counsel for the petitioner had responded by contending that if

there was any error in computation of gratuity paid to the respondent No.2,

the respondent No.2 should approach the petitioner institute for re-

computation.

11. Having found the petitioner to be covered by the definition of

Commercial Establishment, within the Shops Act, the Gratuity Act is found

applicable to the petitioner under Section 1(3)(b) thereof at the time of

retirement of the respondent No.2. The petition therefore fails and is

dismissed. The interim order of stay of operation of the order dated 26th

February, 1999 of the Controlling Officer under the Gratuity Act is vacated.

The petitioner is directed to pay the amount due in terms of the said order to

the respondent No.2 within four weeks hereof. The respondent No.2 is also

awarded costs of Rs.10,000/- of these proceedings.

RAJIV SAHAI ENDLAW (JUDGE) 16th March, 2010 pp