The Bombay High Court ruled that a Cooperative Housing Society (petitioner) is neither an ‘industry’ within the meaning of Section 2(j) of the Industrial Disputes Act (ID Act) nor an ‘establishment’ within the meaning of Section 2(4) of the Maharashtra Shops Act (MS Act), making the provisions of the Payment of Gratuity Act, 1971, (PG Act) inapplicable to it.
The Court explained that a cooperative housing society or an association of apartments formed for collective management of affairs of the building cannot be said to be engaged in a business, trade or commerce. It is only those societies or associations that carry out some form of trade, business or commerce that would be covered by the definition of the term ‘establishment’ under the Maharashtra Shops Act and would be liable to pay gratuity if 10 or more employees are employed.
As in the present case, the petitioner society does not carry out any trade or business, the Court discarded the contention of the ex-Manager of the society (respondent) that the employees of contractors engaged by the petitioner society, like security guards, housekeeping staff, must also receive all the statutory benefits, terming it to be misplaced.
The Court clarified that merely because the contract workers are deployed by the contractor to work for the petitioner society, the same would not convert the petitioner into an industry or establishment when it does not carry on any trade, commerce or business activity. Therefore, the Court dismissed the proceedings filed by the respondent under Section 33-C(2) of the ID Act and under the PG Act before the Labour Court and the Controlling Authority, respectively, as not maintainable.
A Single Judge Bench of Justice Sandeep V. Marne observed that a residence or house is not an ‘establishment’ within the meaning of Section 2(4) of the Maharashtra Shops Act. If employees are engaged to look after the maintenance of a residential bungalow, the said bungalow will not be an establishment within the meaning of Section 2(4) of the Maharashtra Shops Act.
The Bench explained that the activity of the owner of that bungalow, who resides therein, in engaging employees/workers to look after the bungalow, has no connection with any commerce, trade, business or profession. Thus, if a singular bungalow is not an establishment, then multiple bungalows, managed through a collective body like a co-operative society, would not become an establishment within the meaning of Section 2(4) of the Maharashtra Shops Act.
Similarly, the Bench stated that when a residential flat in a building is not an ‘establishment’ within the meaning of Section 2(4) of the Maharashtra Shops Act, an entity formed by all the residents for the collective management of their houses would also not be an establishment within the meaning of Section 2(4) of the Maharashtra Shops Act. Merely because house owners come together and decide to manage their houses and buildings collectively and for that purpose, employ workers/employees, the association of house owners would not be an ‘establishment’ within the meaning of Section 2(4) of the Maharashtra Shops Act.
Therefore, pointing out that the activity of business, trade or commerce is essential for coverage of any entity in the definition of the term ‘establishment’ under the Maharashtra Shops Act, the Bench concluded that the provisions of the PG Act would not apply to a co-operative society or co-operative commercial premises/ societies.
Briefly, the petitioner is a cooperative housing society registered under the Maharashtra Co-operative Societies Act, 1960, and the respondent is an ex-Manager of the society. The respondent was appointed as Building Manager on August 05, 2013, and his services were terminated by the petitioner on October 15, 2022. Following his termination, the respondent applied under Section 33-C(2) of the Industrial Disputes Act, towards unpaid bonus and leave wages. At the same time, the respondent also applied under the Payment of Gratuity Act, seeking payment of gratuity for 9 years of service.
The petitioner contested both applications, arguing that it is neither an ‘industry’ under the ID Act nor an ‘establishment’ under the Maharashtra Shops and Establishments Act, 2017. As the Labour Court and the Controlling Authority rejected the petitioner’s applications for dismissal, the petitioner was constrained to approach the High Court.
Appearances:
Advocates Mahesh Shukla, Udaybhan Tiwari, and Niraj Prajapati, for the Petitioner
Advocate Ashish G. Nagwekar, for the Respondent
