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1993 Supreme(Kar) 315
Karnataka High Court
Bangalore Club - Appellant
Versus
Senior Labour Inspector, Bangalore - Respondent
Decided On : 12-17-93
W.P. : 2295 of 1986
MOHANDAS N.HEADE, N.DEVDAS
The main legal point established in the judgment is that the activities of a club, such as supplying goods and providing amenities to its members, must involve trade or business with non-members to qualify as a commercial establishment under the Karnataka Shops and Commercial Establishments Act, 1961.
Headnote:
Club - Societies Registration Act - Karnataka Shops and Commercial Establishments Act, 1961 - Section 2(i), 2(e), 2(u) - The court discussed the nature of activities carried out by the club, the definition of establishment under the Act, and the element of trade or business in the transactions between the club and its members. The court emphasized that the club's activities, such as providing amenities and services, were based on contracts with its members and did not involve trade or business with non-members.
Fact of the Case:
The petitioner, Bangalore Club, contended that it should not be considered a shop or commercial establishment under the Karnataka Shops and Commercial Establishments Act, 1961, as its activities, such as supplying goods to members, were based on joint ownership and contracts with members.
Finding of the Court:
The court found that the activities of the club, including supplying refreshments to members, did not constitute trade or business with non-members, and therefore, the club could not be classified as a commercial establishment under the Act.
Issues: The main issue was whether the activities of the club, such as supplying goods and providing amenities to its members, qualified it as a shop or commercial establishment under the Karnataka Shops and Commercial Establishments Act, 1961.
Ratio Decidendi: The court held that the club's activities were based on contracts with its members and did not involve trade or business with non-members, and therefore, the club could not be classified as a commercial establishment under the Act.
Final Decision: The court quashed the communication making the provisions of the Act applicable to the club and restrained the respondent from giving effect to the impugned notice. The petition was allowed, and the rule was made absolute accordingly.
( 1 ) THE petitioner is the Bangalore Club which is a member club but not registered under the Societies Registration Act. The contention advanced on behalf of the petitioner is that the members of an unregistered Club are the joint owners of all the properties of the club, when they supply goods to their members, there is no contract between the two parties as in the eye of law, anouregistered Club and its members, constitute a single entity and further while so supplying goods, there is no transfer of absolute or general property, in the things supplied, by one person to another. It is submitted that the true legal effect of supply of an article by the club to one of its members is the release of joint right of all the members in his favour. It is therefore contended that the petitioner in carrying on its activities for recreation or entertainment such as outdoor and indoor games, library and health club facilities or in providing other facilities for the benefit and the convenience of members or to their guests will not constitute it as a shop or a commercial establishment for the purpose of the Karnataka Shops and commercial Establishments Act, 1961. As to the nature of the activities carried on useful reference may be made to the decision rendered in Cosmopolitan Club v Deputy Commercial tax Officer. In that decision it was held that clubs of this type as the petitioner are 'social or members' not conducted for gain or for profit, but with the objective of providing amenities to its members for meeting in the Club premises, for recreative and social activities varying from strenuous games to pastimes of less vigorous character, for social intercourse, for interchange of ideas on variety of topics, serious and light, ranging from ethics and philosophy to the prattle of idle gossip. In that decision it was further elaborated that the necessity to sustain and refresh members of a club indulging in these generally wholesome social and recreative activities by a supply of refreshments both liquid and solid. The expenses of the Club are met from the contributions made by the members in the shape of entrance fees and periodical subscriptions and other charges. These clubs which are member clubs consists of different kinds of members who are resident members, temporary members, visiting members, lady members and so on. Incidental to the objects of the club they maintain establishments for preparing and supplying to their members refreshments. It also maintains Bars for the benefit of their members. Goods are purchased for the consumption of their members out of the club's funds. Only members or their guests are supplied with refreshments and drinks. The members are charged for the supplies made. No sale is effected to non-members. Normally cash transactions are not permitted. The value of the articles supplied is ordinarily charged in the monthly bills of the members. The prices of the articles are fixed by the committee of the club.
( 2 ) UNDER the Act an establishment is defined under Section 2 (i) to mean a shop or a commercial establishment. Again shop or commercial establishments are separately defined. A commercial establishment is defined under Section 2 (e) which means (i) commercial or trading or banking or insurance establishment; (ii) an establishment or administrative service in which persons are engaged or employed in office work; (iii) a hotel, restaurant, boarding or eating house, a cafe or any other refreshment house; (iv) a theatre or any other place of public amusement or entertainment; and (v) all the establishments as the State Government may by notification declare to be a commercial establishment for the purposes of the Act.
( 3 ) A shop is defined under Section 2 (u) of the Act. (i) where any trade or business is carried on; (ii) or where services are rendered to customers and includes officers, storerooms, godowns and warehouses. The other part of definition may not be relevant for the
