M.P. Shops & Establishments Act specifically exempts clubs which are not residential: SC

Read Judgment: P.b. Nayak & Ors. vs. Managing Director, Bhilai Steel Plant & Ors 

Pankaj Bajpai

New Delhi, November 5, 2021: The Supreme Court has opined that if there is genuinely a club where the members assemble not for the purpose of wholly or principally having their meals or refreshment but in connection with other activities and any meals, refreshment and drinks are also served, then the employees working in connection would not get the protection under the Madhya Pradesh Shops & Establishments Act, 1958. 

This is inevitable as harmonizing of the provisions of Section 3(j) under which legislature has carved out an exemption in favour of clubs not being residential by not applying the provisions of the Act must be given effect to, added the Court. 

A Division Bench of Justice K.M Joseph & Justice Pamidighantam Sri Narasimha, therefore, observed that the Appellate Authority glossed over the vital clue provided by the inclusion of the residential club as a residential hotel, as the inquiry conducted by the Appellate Authority was predominantly based on the definition of the word ‘restaurant or eating house’ as per Section 2(23) of the Act. 

Going by the background of the case, the Appellant (P.b. Nayak) invoked the jurisdiction of Appellate Authority u/s 58(2) of 1958 Act, complaining that their services were terminated illegally by the Respondent (Bhilai Steel Plant Club), which complaint was accepted and the Appellate Authority directed the Respondent to reinstate the appellants with full back wages from April 15, 1997 till the date of reinstatement. 

In the alternative, the Respondents were directed to pay compensation to each of the appellants as calculated in the order without reinstatement. However, this order stood quashed by the High Court after finding that the Act could not be made applicable in view of the exemption available u/s 3(j) of the Act. 

After considering the facts and evidence, the Top Court proceeded to observe that the respondent club cannot be characterized as premises which were ‘wholly or principally’ used for the business of supply of meals and refreshment to the public. 

In the first place as already noticed, the members of the Club and their guests and family members cannot be described as the ‘public’, added the Court.

Speaking for the Bench, Justice Joseph noted that the fact that by catering services, food and refreshment and even liquor as are permitted in Clubs under law was being provided would not make it a case where the club became premises in which the supply of meals and refreshments was ‘wholly or principally’ carried out.

Justice Joseph highlighted that a club, which is not a residential club, may have been within the ambit of the word ‘establishment’ but for the fact that the word ‘residential hotel’ takes within its sweep only residential club.

“Even though, the Appellate Authority was called upon to deal with Section 2(22) of the Act, defining the words ‘residential hotel’, we find that the Appellate Authority confined itself only to the definition of the words ‘restaurant or eating house’ as defined in Section 2(23) of the Act. The Appellate Authority has proceeded to finally find that an establishment of bar, restaurant and for service to the members of the club, would definitely not be a club withing the meaning of Section 3(j) of the Act. Therefore, the finding of the Appellate Authority completely overlooked the invaluable input provided by the definition of the words ‘residential hotel’ as contained in Section 2(22) of the Act”, observed the Top Court. 

Hence, the Top Court refused to interfere in the findings of the High Court.