Co-operative Housing Societies Not 'Industries' or 'Establishments' Under Labour Laws: Bombay High Court

In a significant ruling for residential management bodies, the Bombay High Court has clarified the jurisdictional limits of labour authorities regarding cooperative housing societies. Justice Sandeep V. Marne held that a society formed primarily for the collective management of residential flats does not qualify as an "industry" under the Industrial Disputes Act, 1947, or an "establishment" under the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017.

Background of the Dispute

The litigation arose from a dispute between Apsara Co-operative Housing Society Ltd. and its former Building Manager, Vijay Shankar Singh. Following the termination of his services in October 2022, Mr. Singh filed two separate applications: one before the Labour Court for recovery of bonus and leave wages, and another before the Controlling Authority seeking payment of gratuity.

The Society challenged the maintainability of these proceedings, arguing that it is not an "industry" or "establishment" as it does not engage in systematic commercial or trading activities. The Labour Court initially rejected the Society’s request for dismissal, prompting the current petitions before the High Court.

The Core Arguments

Counsel for the Petitioner-Society relied on a line of precedents, including the Supreme Court’s decision in Management of Som Vihar Apartment Owners Housing Maintenance Society Limited , to argue that such societies are created for the personal benefit of members rather than commercial gain. They contended that minor revenue-generating activities, such as permitting the installation of telecommunication towers, are merely ancillary to the Society's primary objective of managing the premises and do not convert it into a commercial enterprise.

Conversely, the Respondent argued that the Society performs functions akin to an industry, citing the presence of a clubhouse and commercial activities on the premises. He asserted that an evidentiary trial was necessary to determine the nature of the Society's operations.

Legal Analysis and Judicial Reasoning

Justice Marne observed that the test for an "industry" or "establishment" hinges on the predominant nature of the activity. Elaborating on the law, the Court noted:

> "Carrying on some form of trade or business is essential for a cooperative society to partake character of an industry. A cooperative housing society which merely manages the building and is formed for collective ownership of land and building, does not carry on any trade or business and would not qualify as an industry."

The Court further clarified that the mere presence of commercial amenities, like mobile towers or clubhouses used by residents, does not constitute a "systematic commercial activity." Importantly, the Court distinguished the Society's role from professional agencies: while professional contractors hired by the Society may be considered commercial entities, the Society itself acts as a non-commercial collective of the flat owners.

Key Observations

The judgment underscores the distinction between collective residential management and industrial enterprise:

• "It is clear when personal services are rendered to the members of a society and that society is constituted only for the purposes of those members to engage the services of such employees, we do not think its activity should be treated as an industry."
• "Merely because the Petitioner has installed telecommunication towers on its building or because it earns some income through such installation, the same would not ipso facto convert activity of the society into a systematic commercial activity."
• "There is neither an object of profit nor a risk of making loss in the maintenance activities of the society."

Final Decision and Implications

The High Court set aside the interlocutory orders of the Labour Court and the Controlling Authority, dismissing both applications filed by the respondent for lack of jurisdiction.

This decision provides substantial relief to urban cooperative housing societies, confirming that they remain outside the ambit of industrial adjudicatory bodies when their primary functions are limited to the maintenance and administration of residential complexes. For employees of such societies, this ruling clarifies that they may need to seek remedies through civil forums or other appropriate legal channels rather than labour courts.