High Court · 2010

IN THE HIGH COURT OF JUDICATURE AT MADRASDated: 07.04.2010CoramThe Honourable Mr.Justice S.NAGAMUTHUW.P.No.23452 of 2003& W.P.M.P.No.28973 of 2003Pithavadian & Partners33 (Old No.14) College RoadChennai 600 006rep.by its PartnerMr.Parthasarathy.. Petitioner ..vs..Deputy DirectorRegional Office (Tamil Nadu)Employees State Insurance Corporation143, Sterling RoadChennai 600 034... RespondentPetition filed under Article 226 of the Constitution of India,praying to issue a writ of certiorari calling for the records ofthe respondent in Proceedings No.TN/Ins-V/51-75324-101/737/02 andquash its order dated 11.8.2003.For Petitioner : Mr.S.Ravindran* For Respondent : Mr.C.Sethu for Mr.K.C.Ramalingam---O R D E RThe petitioner is a partnership firm consisting ofprofessional Architects. Challenge in this Writ Petition is to anorder made under section 45 (A) of the ESI Act, 1948 passed by therespondent by his proceedings No.TN/Ins-V/51-75324-101/737/02 dated11.8.2003.2. Earlier, similar order under section 45(A) of the ESI Actpassed against the petitioner firm was challenged by the petitionerin W.P.No.34050 of 2002. The same was dismissed by a learnedSingle Judge of this court. Challenging the same, an Appeal was https://hcservices.ecourts.gov.in/hcservices/ preferred in W.A.No.3664 of 2002. In the said Writ Petition aswell as in the Writ Appeal, a legal question arose with regard tothe applicability of the ACT on the ground that the appellant is afirm of architects and not involved in any construction activities.The learned Single Judge did not agree with the said contention ofthe petitioner that the petitioner firm cannot be brought withinthe purview of the Act. However, the Division Bench set aside theorder of the learned Single Judge holding that sufficientopportunity had not been given to the petitioner to prove that thepetitioner is not indulging in construction activities and that ESIAct is not applicable to them. The matter was therefore remandedto the respondent.3. Thereafter, the respondent held enquiry into the matter asdirected by the Division Bench and has passed the impugned orderdated 11.8.2003. In the said order, the respondent hascategorically held that the petitioner is not carrying onconstruction activities. The relevant portion of the said findingof the respondent is extracted below:"It is also clear from the analysis of the writtensubmission made by the employer and also from the variousdocuments as stated above that the employer firm is notcarrying on any construction activities. "Having given such a finding, the respondent went on to analysewhether the petitioner firm would fall within the ambit of thedefinition of a 'shop'. At last, the respondent held that thepremises wherein economic activity is carried on leading to thesale or purchase of goods or services will have to be held as a"shop" for the purpose of ESI Act. Accordingly, the respondentheld that the petitioner firm is a firm of architects in whosepremises the economic activity of renderingprofessional/consultancy service is rendered through variousclients as described in the aforesaid paragraphs for considerationand the fees are paid to the firm by the respective clients whichamounts to sale of professional/consultancy services rendered inthe premises as stated above and hence the employer firm squarelyfits in well within the definition of 'shop'. On the abovefinding, the respondent directed the petitioner to pay a sum ofRs.2,77,974/- towards ESI Contribution. The petitioner isaggrieved by the same.4. According to the petitioner, the firm of architects willnot fall within the ambit of the term "shop" as contemplated underthe Act. But the learned counsel appearing for the respondent wouldsubmit that the Act is squarely applicable to the petitioner firm,since professional/consultancy service is rendered by thepetitioner firm for consideration. https://hcservices.ecourts.gov.in/hcservices/

5. The core question is whether the petitioner firm is a"shop" or not so as to bring the same within the ambit of the Act.6. In this regard, we may refer to Section 40 of the Act,which states that the principal employer shall pay in respect ofevery employee, whether directly employed by him or by or throughan immediate employer, both the employer's contribution and theemployee's contribution. The term 'principal employer' has beendefined in Section 2(17) of the Act as follows:'principal employer' means(i) in a factory, the owner or occupier of thefactory and includes the managing agent of such owner ofoccupier, the legal representative of a deceased owner oroccupier and where a person has been named as the managerof the factory under the Factories Act, 1948 (63 of 1948),the person so named.(ii) in any establishment under the control of anydepartment of any Government in India, the authorityappointed by such Government in this behalf or where noauthority is so appointed, the head of the Department(iii) in any other establishment, any personresponsible for the supervision and control of theestablishment.The term 'factory' has been defined in Section 2(12) of the Act asfollows:"factory" means any premises including the precinctsthereof:/a) whereon ten or more persons are employed or wereemployed for wages on any day of the preceding twelvemonths, an in any part of which a manufacturing processis being carried on with the aid of power or isordinarily so carried on, orb) whereon twenty or more persons are employed orwere employed for wages on any day of the precedingtwelve months, and in any part of which a manufacturingprocess is being carried on without the aid of power oris ordinarily so carried on,but does not include amine subject to the operation ofthe Mines Act, 1952 (35 of 1952) or a railway runningshed.Surely, the petitioner firm is neither a factory nor anestablishment. Regarding this legal position, there is nocontroversy before me.7. However, under section 1(5) of the Act, the appropriateGovernment has been empowered to extend the provisions of the Act https://hcservices.ecourts.gov.in/hcservices/ or any of them to any other establishment or class ofestablishments, industrial, commercial, agricultural or otherwise.The said provision reads as follows:"(5) The appropriate Government may, in consultation withthe Corporation and where the appropriate Government is aState Government with the approval of the CentralGovernment, after giving six months' notice of itsintention of so doing by notification in the OfficialGazette, extend the provisions of this Act or any ofthem, to any other establishment or class ofestablishments, industrial, commercial, agricultural orotherwise:Provided that where the provisions of this act havebeen brought into force in any part of a State, the saidprovisions shall stand extended to any such establishmentor class of establishments within that part if theprovisions have already been extended to similarestablishment or class of establishments in another partof the State.8. In exercise of this power conferred under section 1(5) ofthe Act, the Government of Tamil Nadu issued G.O.Ms.No.1088,Labour and Employment Department dated 22.12.1976, wherein clause 3of the said Government Order reads as follows:"3. The following establishments whereon twenty or morepersons are employed or were employed for wages on anyday of the preceding twelve months, namely:-1. Hotels2. Restaurants3. Shops4. Cinemas including theatres5. Newspaper Establishments as defined in Section 2(d) of the Working Journalists (Conditions of Service)and Miscellaneous Provisions Act, 1955 (Central Act 45 of1955).The contention before this Court in this Writ Petition is that thepetitioner firm is a 'shop' as contemplated in the said GovernmentOrder. Curiously, the Government Order has not defined the term'shop'. Therefore, what is a 'shop' in terms of the G.O needs tobe looked into.9. For this purpose, the learned counsel appearing for thepetitioner would rely on the judgment of this court in L.M.Chitale https://hcservices.ecourts.gov.in/hcservices/ & Son vs. Commissioner of Labour and others reported in 1963 (2)LLJ P.747. That was a case under the Tamil Nadu Shops andEstablishments Act. In the said Act, the term 'shop' has beendefined to mean as follows:"any premises where any trade or business is carried on,or where services are rendered to customers, and includesoffices, store-rooms, godowns and warehouses, whether inthe same premises or otherwise, used in connection withsuch business, but does not include a restaurant eating-house or commercial establishment."10. While interpreting the above provision, this Court hasheld as follows:"The office of a chartered architect is not a premiseswhere any trade or business is carried or, where servicesare rendered to customers within the meaning of Section 2(16) of the Madras Shops and Establishments Act. Thereis a fundamental difference between a profession and atrade or business. That seems to be implicit in thereference to "profession, occupation, trade or business"found in Art.19 of the Constitution. It is normallyunderstood that trade or business is carried on with aprofit motive. Even though a profession or an occupationis carried on for the purposes of earning a livelihood,it would certainly be far from correct to say that aprofit motive underlies the carrying on of theseactivities. Section 2(16) of the Act defining a shop isrestricted in its scope. It clearly envisages anactivity which, as commonly understood, is associatedwith the carrying on of trade or commerce and cannot takein establishments where professional services arerendered."11. Relying on the above, the learned counsel for thepetitioner would submit that architects are governed by theArchitects Act, 1972. They are also further governed by theArchitects (Professional Conduct)Regulation, 1980. Under the Act,an architect is a professional and he is neither a businessman nora trader. It is in this context only this Court held in the saidjudgment that a person, who is rendering professional servicecannot be termed as a businessman so as to bring his office withinthe ambit of the term 'shop' as contemplated under the Tamil NaduShops and Establishments Act. In my considered opinion, aprofessional like a Doctor, Advocate and an Architect, who aregoverned by respective statutes and professional conductRegulations cannot be equated to businessman or traders. As held https://hcservices.ecourts.gov.in/hcservices/ by this Court, there is a world of difference between a professionand trade or business as found in Article 19(2) of theConstitution.12. Though an attempt is made by the learned counsel for therespondent that the term 'shop' as defined in the Tamil Nadu Shopsand Establishments Act cannot be imported to the ESI Act, I findit very difficult to accept the said contention. As there is nodefinition of the term 'shop' either in the ESI Act or in the Orderissued by the Government as referred to above, it is absolutelynecessary to draw analogy from the definition given in similarenactments. Therefore, I have no hesitation to hold that theservice to their clients that too for consideration cannot betermed either as a trade or a business. Thus, in my view, anArchitect is pure and simple a professional. 13. The learned counsel for the petitioner relied on anotherjudgment of the Karnataka High Court in M/s.Singhvi Dev and UnniChartered Accountants vs. the Regional Director, ESI Corporationand others reported in 2010 LLR 275, wherein the Karnataka HighCourt has also held that the Chartered Accountants firm cannot bebrought within the meaning of the word 'shop' so as to cover underthe ESI Act to be applicable to the said firm. The said view takenby the Karnataka High Court fully fortifies the view which I haveheld in this judgment. Thus, I am in full agreement with the viewtaken by the Karnataka High Court.14. The learned counsel for the petitioner has relied upon ajudgment of the Hon'ble Supreme Court in V.Sasidharan andM/s.Peter and Karunakar and others reported in 1984 (2) LLJ 385,wherein the question, which arose for consideration was whether thefirm of lawyers can be brought within the definition of 'commercialestablishment" as defined in the "Commercial Establishments Act,1960. In the said judgment, the Hon'ble Supreme Court hascategorically held that the expression 'shop' includes offices,warehouses, store rooms or godowns which are used in connectionwith trade or business. The Supreme Court further proceeds to say"it does not require any strong argument to justify the conclusionthat the office of the Lawyer or of, firm of lawyers is not a'shop' within the meaning of Section 2(15) of the Act. Whatevermay be the popular conception or misconception regarding the roleof today's lawyers and the alleged narrowing of the gap between aprofession on the one hand and a trade or business on the other, itis trite that traditionally Lawyers do not carry on a trade orbusiness to customers. The concept as well as the phraseology ofthe definition of 'shop' is inapposite in the case of Lawyers'Office or the office of the firm of Lawyers". The law laid downby the Hon'ble Supreme Court in the above judgment squarely https://hcservices.ecourts.gov.in/hcservices/ applies to the facts of the present case. Applying the saidprinciple again, I have to hold that the firm of architects, whichis more or less equivalent to the firm of lawyers cannot be broughtwithin the ambit of the term 'shop' for the purpose of the ESI Act.15. However, the learned counsel appearing for the respondentwould rely on three judgments of the Hon'ble Supreme Court tosubstantiate his contention that the architects firm is a shop forthe purpose of the ESI Act. The first one is Employees' StateInsurance Corporation vs. R.K.Swamy and others reported in (1994) 1SCC 445, wherein the meaning of the term 'shop' came to beconsidered by the Hon'ble Supreme Court. In that case, theGovernment Order referred to above issued by the Government ofTamil Nadu came to be challenged. While upholding the saidGovernment Order, the Hon'ble Supreme Court held that 'Shop' is aplace where services are sold on retail basis. The Supreme Courtfurther held that the word 'shop' has acquired expanded meaning.It held that advertising agency, which is paid by his clients forthe services it renders, is a 'shop'. Relying on this, learnedcounsel for the respondent would submit that here in this case alsosince the services are rendered by the architects forconsideration, the firm would come within the ambit of the term'shop'. But, I am not impressed by the said argument. As I havealready stated, the judgment of the Hon'ble Supreme Court is inrespect of an advertising agency. A person, who is involved inadvertisement business cannot be termed as a professional. Eitherhe must be termed as a trader or a businessman. It is in thiscontext only the Hon'ble Supreme Court held that an advertisingagency, which is paid by his client for the services rendered is a'shop'. The Hon'ble Supreme Court had no occasion to consider inthe said judgment as to whether a professional, who is governed bya Statute like a Doctor or an Advocate or an Architect is alsogoverned by the term 'shop'.16. The next judgment relied on by the learned counsel for therespondent is Kirloskar Consultants Ltd. vs. Employees' StateInsurance Corporation reported in (2001) 1 SCC 57. That was acase where the appellant provided under a roof the services ofseveral different professionals like Engineers, Architects,Financial Consultants and Management Consultants, guidance andadvice to other companies, Corporations, boards and even localauthorities on how best to manage their business for optimumutilisation of plant, machinery and other infrastructure. Theappellant Kirloskar Consultants Limited was registered as acommercial establishment under the provisions of the Shops andEstablishments Act. The Hon'ble Supreme Court had adopted thesame logic made in R.K.Swamy and others mentioned above to holdthat the business carried on by the appellant therein is ofconsultancy services to its customers in respect of industrial, https://hcservices.ecourts.gov.in/hcservices/ technical, marketing and management and preparation of projectreports by engaging the services of architects, engineers and otherexperts. In substance, the nature of activities carried on by theappellant is commercial or economical and would amount to partingwith the same at a price. Hence, it was held by the Hon'bleSupreme Court that the said concern was a shop. Here again, as Ihave already stated, there was no occasion for the Hon'ble SupremeCourt to consider whether the firm of professionals will fallwithin the ambit of the shop. In this case also, the Hon'bleSupreme Court had to hold that the consultancy services, which areindustrial, technical, marketing and management activities willmake the establishment as a shop.17. The third judgment relied on by the learned counsel forthe respondent is Southern Agencies, Rajahmundry vs. A.P.Employees'State Insurance Corporation reported in (2001) 1 SCC 411. In thatcase, the appellant was a partnership firm engaged in retail saleof steel furniture, fans and similar items. It had itsadministrative office and sale office at Rajahmundry. The natureof the activities carried on by the appellant in that case wasconsidered to be commercial or economical. In those circumstances,the Supreme Court held that the said concern would also fallwithin the definition of the expression 'shop'. Thus, the saidjudgment also has no application to the facts of the present case.18. As a matter of fact, a question arose before the Hon'bleSupreme Court in M.P.Electricity Board vs. Shiv Narayan (2005 (7)SCC 283) as to whether the legal profession is a commercialactivity wherein after having referred to the dictionary meaning ofthe terms "commercial" and "professional" and after having a surveyof many previous judgments has ultimately held in para 14 of thejudgment as follows:"14. A professional activity must be an activity carriedon by an individual by his personal skill andintelligence. There is a fundamental distinction,therefore, between a professional activity and anactivity of a commercial character. Considering a similarquestion in the background of Section 2(4) of the BombayShops and Establishments Act, 1948 (79 of 1948), it washeld by this Court in Devendra M. Surti (Dr.) v. State ofGujarat that a doctor’s establishment is not covered bythe expression “commercial establishment”.19. As it has been held by this Court in L.M.Chitale's casecited supra and the Hon'ble Supreme Court in Shiv Narayan's case,a profession is totally different from a trade or business. Anarchitect is not doing either a trade or a business and he is https://hcservices.ecourts.gov.in/hcservices/ governed by a separate enactment and also governed by separateRules. An Architect is pure and simple doing a profession.Therefore, the firm of architects cannot be held to be a 'shop' soas to bring the firm within the ambit of the ESI Act in terms ofthe Government Order referred to above. At the same time, apartform doing the professional work, if the firm of architects isinvolved in any trade or business such as construction work, saleof goods etc., then the firm would certainly fall within the ambitof the Act. In the instant case, the respondent, in the impugnedorder itself, has held that there is no such commercial activityundertaken by the petitioner. In view of the above, the impugnedorder passed by the respondent is not sustainable and the same isliable to be set aside.20. In the result, the Writ Petition is allowed and theimpugned order is set aside. It is submitted by the learnedcounsel for the petitioner that pursuant to the order impugned inthis Writ Petition, some amount has been paid by the petitioner. Inview of the quashing of the impugned order, the respondent shallrepay the said amount to the petitioner after the period oflimitation for appeal is over. No costs. The connectedMiscellaneous Petition stands closed.Sd/Asst.Registrar19.4.2010* Corrected order to be issuedSd/-Asst. Registrar11.5.2010/true copy/Sub Asst.Registrarajr https://hcservices.ecourts.gov.in/hcservices/ ToDeputy Director)Regional Office (Tamil Nadu))To be substituted toEmployees State Insurance Corporation )the order already143, Sterling Road)despatched onChennai 600 034)28.4.2010)+1cc to M/s.T.S.Gopalan & co. for) Petitioner Sr 22871)+1cc to Mr.K.C.Ramalingam, Advocate )for Respondent Sr 22876)KJ(CO)km/20.4.KJ(CO)km/12.5.W.P.No.23452 of 2003