MAIN POINT
Preparation of food items in the kitchen of the appellant-club amounts to “manufacturing process”. Kitchen being part of the club or its precincts, the entire club would fall within purview of the definition of ‘factory’ and shall be covered by ESI Act. It hardly matters whether the kitchen is run with any profit making motive or not.

JUDGMENT :

R. BANUMATHI, J.

Short point falling for consideration in this appeal is whether kitchen of the appellant-club and catering section thereon come within the meaning of “factory” and “manufacturing process” as defined in Employees’ State Insurance Act, 1948 (for short ‘ESI Act’).

2. The appellant-Delhi Gymkhana Club is a member club, duly registered under the Companies Act. Appellant club has a kitchen to cook food items to provide food and refreshment to its members. On 20.03.1975, a notification was issued by the Delhi Administration, in exercise of the powers conferred under Section 1(5) of the ESI Act, stating that the provisions contemplated under the Act shall be extended to the establishments specified in the Schedule thereon. In furtherance of the said notification, the respondent-ESI Corporation sought to apply the provisions of the Act on the appellant-club, on the ground that the preparation of food items amounts to “manufacturing process” and that the appellant–club is a factory/establishment covered under the provisions of the ESI Act. After issuing the show cause notice, ESI Corporation passed the order on 4.8.1986 under Section 45-A of the ESI Act, holding that M/s. Delhi Gymkhana Club Limited is covered under the provisions of Employees State Insurance Act, directing the appellant to pay Rs.6,82,655.40 as a contribution of insurance in respect of employees for the period from 1.02.1980 to 31.08.1985, along with interest @ 6% per annum.

3. Aggrieved, the appellant filed a petition in the ESI Court which, by a judgment dated 25.11.1986, while allowing the petition of the appellant-club, held that preparation of eatables does not fall under “manufacturing process” and hence, ESI Act is not applicable to the appellant-club and the appellant was not liable to pay contribution. Aggrieved by the same, respondent-corporation preferred appeal before the High Court. The High Court allowed the appeal and held that the kitchen is an integral part of the club and that cooking of foodstuffs amounts to ‘manufacturing process’ falling within the meaning of sub-section (14AA) of Section 2 of the ESI Act, thereby falling within the meaning of ‘factory’ as defined under Section 2(12) of ESI Act. Being aggrieved, the appellant-club is in appeal before us.

4. Contention of the appellant is that the Club is a non-profit organization, exclusively rendering facilities to its members and that the ESI Act is not applicable to them. It is contended that social security perks, better than the ones contemplated under the ESI Act, are already put in place for the benefit of employees. Contending that preparation of food items does not amount to ‘manufacturing process’ and that provisions of ESI Act are not applicable to the club, the appellant placed reliance on the decision of this Court in Indian Hotels Co. Ltd. Vs. I.T.O. (2000) 7 SCC 39, wherein it was held that preparation of foodstuffs in hotel kitchen is merely processing of food to make it edible and that there is no manufacturing process.

5. Per contra, learned counsel for the respondent submitted that the purpose is to extend the benefit of the scheme to the employees working in the appellant-club and while doing so, the object of welfare legislations, like the ESI Act, ought to be kept in mind. Refuting the appellant’s contention that preparation of foodstuffs in the kitchen does not amount to ‘manufacturing process’, the respondent placed reliance on the decision of this Court in G.L. Hotels vs. T.C. Sarin (1993) 4 SCC 363, wherein it was held that cooking forms part of manufacturing process, as it alters and treats or otherwise adapts an article of food or substance with a view to its use, sale, delivery or disposal in the club. It was submitted that the High Court rightly held that the kitchen of the appellant falls within the meaning of ‘factory’ as defined under Sect