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HC: No disability in bringing medical establishments under 2017 MH Shops & Establishments Act

November 06, 2018:

Bombay High Court
Bombay High Court

Bombay High Court has recently dismissed a challenge to provisions of the new Maharashtra Shops & Establishments (Regulation of Employment & Conditions of Service) Act, 2017 (‘new Act’), which enables the regulation of medical establishments.

The Act particularly focuses on monitoring the conditions of employees working in regulated establishments.

Before its introduction, the erstwhile Maharashtra Shops & Establishments Act, 1948 (‘old Act’) did not regulate medical establishments since they could not be termed as commercial establishments as per Section 2 (4) of the old Act.

In fact, attempts made by the State to bring medical & other non-commercial establishments under the purview of the old Act were reversed by the courts on various occasions.

In D Devendra M Surti v. State of Gujarat, the Supreme Court ruled that the old Act was not intended to cover medical establishments.

In State of Maharashtra v. Dhanlaxmi Meisheri, a similar ruling was made by the Bombay High Court with respect to maternity homes.

In Narendra Keshrichand Fulandi and another v. State of Maharashtra, the High Court concluded that legal practitioners would not come within the purview of the old Act.

The common thread in all these challenges was that the establishments involved did not qualify as a commercial trade or business, which was the confined area that the old Act sought to regulate.

New Act though dropped the term commercial and broadened its purview to any establishment, including medical establishments and medical practitioners.

Specifically, Section 2(4) of the new Act expanded the definition of an “establishment” to include the establishment of any medical practitioner (including hospital, dispensary, clinic, polyclinic, maternity home and such others).

According to the new Act, medical establishments with ten or more employees had to be registered & certain other statutory obligations regarding employee working conditions are required to be complied with.

Adding to it, medical establishments with a lesser number of employees were expected to intimate the existence of the establishment, although they did not have any further statutory obligations thrust upon them.

The new scheme was challenged by a medical practitioner, Dr Pradeep Arora, whose medical clinic had been registered under the Maharashtra Medical Council Act, 1965.

Depending on above-mentioned cases, he contended that his medical establishment could not be further regulated by the new Act.

He argued that the same would be beyond the state’s legislative competence and in violation of his freedom to practice his trade under Article 19 of the Constitution.

Court though did not find any merit in these arguments.

Bench comprising of Justice RK Deshpande & Justice Vinay Joshi noted that the only reason why medical establishments were not included within the purview of the old Act was because the old Act only provided for commercial establishments.

Court also noted that the new Act appeared to have modeled its definition of “establishment” along the lines of an “industry”, to regulate employee conditions in public interest.

Court in this regard has agreed with the state’s arguments that a medical establishment would also involve the three basic ingredients which define an industry, i.e.

  • there should be systematic activity,
  • organized by cooperation between employer and employee, and
  • for the production and/or distribution of goods and services calculated to satisfy human wants and wishes.

Court thus observed,“In our view, it is the harmonious activity carried out in cooperation amongst all the partners in the establishment to render material services to the community with the help of capital, which is covered by the definition of “establishment” under Section 2(4) of the new Act. Whether the establishment is running in profit or loss is of no consequence.“

In view of these observations, the Court dismissed Dr Arora’s challenge, while also noting that the state was well within its legislative competence to bring about such an enactment in public interest.

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