Case Note & Summary
The dispute arose under the Delhi Shops and Establishments Act, 1954 when the Chief Inspector of Shops and Establishments directed the Federation of Indian Chambers of Commerce and Industry to register its establishment. The Federation refused, contending it was not an 'establishment' under Section 2(9) of the Act, which led to a complaint for prosecution of its Secretary before a Magistrate. The Federation then filed a writ petition in the Delhi High Court under Article 226 of the Constitution seeking to quash the Chief Inspector's order and prohibit the Magistrate from proceeding. The High Court held that the Federation's premises were not a commercial establishment because its advice was not tendered for consideration and it was predominantly charitable, not professional or business. The High Court rejected the argument that the activities were work in connection with trade or business in general, interpreting the latter part of the definition to refer only to particular business or trade carried on in the premises. A certificate under Article 133(1)(c) was granted for appeal to the Supreme Court. Before the Supreme Court, the appellants contended that the Federation's activities amounted to trade or business, making it a commercial establishment, and relied on Management of the Federation of Indian Chambers of Commerce and Industry v. R.K. Mittal, (1972) 2 SCR 353. The Supreme Court held that the question was one of drawing a correct inference from material already on record and allowed the new contention. It interpreted Section 2(5) to require premises where any trade, business or profession or work incidental or ancillary thereto is carried on. The registered office was clearly premises. The Court found that all activities of the Federation, as set out in its Memorandum of Association, were business activities carried on systematically, even though profits were ploughed back and not distributed to members. Applying Incorporated Council of Law Reporting for England and Wales, (1889) 2 QBD 279, the Court held that systematic activity can be a business activity even if no dividends are declared or profits shared. It further observed that since the Federation's activities amount to material services within the wider definition of industry, any premises where services are rendered to customers fall within the definition of a shop under Section 2(27). Therefore, it was immaterial whether the premises were a shop or commercial establishment for the application of the Act. The Court allowed the appeal, set aside the High Court judgment, and held that the premises of the Federation are a commercial establishment under Section 2(5) of the Act.
Headnote
A) Delhi Shops and Establishments Act - Interpretation of 'Commercial Establishment' - Section 2(5) - Definition requires premises where any trade, business or profession or work incidental or ancillary thereto is carried on - Court held that the registered office of the Federation is 'premises' and all its activities are business activities carried on systematically; the profit being ploughed back and not distributed does not negate business character - Held that the premises are a commercial establishment (Paras 1-10). B) Business/Trade - Profit Motive Not Essential - Systematic activity can be business even if no dividends declared or profits shared - Incorporated Council of Law Reporting for England and Wales, (1889) 2 Q.B.D. 279 applied - Court reasoned that a systematic activity can be a business activity even without distribution of profits - Held that the Federation's activities are in the nature of business or trade (Paras 9-10). C) Delhi Shops and Establishments Act - Shop vs Commercial Establishment - Section 2(27) - Premises where services are rendered to customers fall within definition of shop - It is immaterial whether the Federation's activities bring its premises within the ambit of a shop or commercial establishment for the application of the Act - Held that since the wider definition of industry includes material services, the premises are covered (Paras 11-12). D) Civil Procedure - New Plea on Appeal - Inference from existing record - Question of drawing correct inference from material on record does not require additional material - Court held that it is not proper to shut out the contention that activities amount to trade/business merely because the point was not properly put before the High Court - Held that the new contention can be raised (Paras 3-4).
Issue of Consideration
Whether the Federation of Indian Chambers of Commerce and Industry, New Delhi is a 'commercial establishment' within the meaning of Section 2(5) of the Delhi Shops and Establishments Act, 1954.
Final Decision
The Supreme Court allowed the appeal, set aside the judgment of the Delhi High Court, and held that the premises of the Federation of Indian Chambers of Commerce and Industry are a 'commercial establishment' within the meaning of Section 2(5) of the Delhi Shops and Establishments Act, 1954.
Law Points
- Commercial establishment requires premises where trade
- business
- profession or incidental/ancillary work is carried on
- systematic activity can be business even if profits are not distributed
- profit motive is not essential for business activity
- premises where services are rendered to customers fall within definition of shop
- application of Act is not affected by whether premises are a shop or commercial establishment
