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State of Gujarat Vs. R.J. Oza - Court Judgment

LegalCrystal Citation
SubjectCompany;Civil
CourtGujarat High Court
Decided On
Judge
Reported in(1980)21GLR627
AppellantState of Gujarat
RespondentR.J. Oza
Cases ReferredNational Union of Commercial Employees and Anr. v. M.R. Meher Industrial Tribunal Bombay
Excerpt:
.....case (supra) cannot be satisfied by a corporate body which through its directors' individual skill and intelligence carries on a professional activity. in the context of the question whether that firm satisfied the test of an industry? to put it differently, the manner in which the activity in question is organised or arranged, the condition of the co-operation between the employer and the employees being necessary for its success and its object being to render material service to the community can be regarded as some of the features which render the carrying on of a professional activity to fall within the ambit of section 2(4) of the act. as is well-known, a limited company is a corporate body having a distinct legal entity. it is interesting in this connection to refer to..........for the clients which work was being done by the directors of the company by their personal skill, intelligence and study. it was contended that the persons approaching the company for advice and guidance would get the advice of the directors of the company with the aid of personal skill, intelligence, and integrity of the directors. it was also contended that the company is not a commercial establishment, but it is a professional establishment established for the purpose of doing the work by personal skill and intelligence of the directors of the company. the learned magistrate accepted this contention and acquitted the respondent. hence this appeal.2. for the purpose of this appeal, the conclusion has to be based only on the material that the respondent is a limited company i.e......
Judgment:

D.P. Desai, J.

1. This is an appeal against an order of acquittal in respect of an offence punishable under the Bombay Shops and Establishments Act, 1948 (the Act); and it raises the question whether the establishment of a company incorporated under the Companies Act, 1956 or under the relevant prior Legislation, carrying on the work of architect, would be a commercial establishment as defined by Section 2(4) of the Act so as to make it compulsory for it to get itself registered under Section 7(1) read with Section 7(2) of the Act The respondent limited company was prosecuted for contravention of Sections 7(9) and 51 of the Act and Rule 23(4) & (5) of the Rules framed under the Act. The substantial allegations in the complaint filed by the Shops Inspector of Baroda Municipal Corporation was that during his visit and enquiry on April 12, 1977 he found that this was an establishment which was not registered under the Act and that it had not maintained the muster-roll, salary register and earned leave cards of the employees. The defence of the company was that it was not a commercial establishment, because the company was carrying on profession of consulting engineers and preparing plans and designs for the clients which work was being done by the directors of the company by their personal skill, intelligence and study. It was contended that the persons approaching the company for advice and guidance would get the advice of the directors of the company with the aid of personal skill, intelligence, and integrity of the directors. It was also contended that the Company is not a commercial establishment, but it is a professional establishment established for the purpose of doing the work by personal skill and intelligence of the directors of the company. The learned Magistrate accepted this contention and acquitted the respondent. Hence this appeal.

2. For the purpose of this appeal, the conclusion has to be based only on the material that the respondent is a limited company i.e. a body corporate which through its directors or with the aid of its directors who are individuals having personal skill and intelligence carries on the work of giving advice and guidance as consulting engineers to the clients and prepares plans and designs for them. We will, therefore, have to proceed on the basis that the work for the clients is done by the directors of the company by employing their personal skill, intelligence and perseverance in engineering problems which include preparing plans and designs for the clients also.

3. If this activity was being carried on by an individual or a partnership, perhaps, in the absence of any other evidence, a finding could have been given limited to the facts of the case that the individual or the partner of the partnership is a professional establishment and is not a commercial establishment as per the law settled by the Supreme Court in Dr. Devendra v. State 10 G.L.R. page 156 (S.C.). We will refer to some of the important observations of the Supreme Court in that case bearing upon the question whether the activity carried on by a professional individual would amount to a commercial establishment. Before that, however, one important distinction in the present case as compared to Dr. Devendra's case (supra) must be pin-pointed. Here it is a corporate body which is incapable under the law to possess individual skill, intelligence or perseverance and in respect of which the question whether the establishment of that corporate body is a commercial establishment has to be answered. Having given my consideration to the problem, 1 have come to the conclusion that the test laid down in Dr. Devendra's case (supra) cannot be satisfied by a corporate body which through its directors' individual skill and intelligence carries on a professional activity.

4. We will now come to the important observations of the Supreme Court in Dr. Devendra's case. There, the appellant before the Supreme Court was an individual who was practising as a doctor having his dispensary. The question posed by the Supreme Court was whether a doctor's dispensary is a commercial establishment within the meaning of the Act. The relevant provisions of the Act were referred to and it was found that Section 2(4) of the Act which defines 'commercial establishment' contained words of very wide import and may grammatically include even a Consulting room where a doctor examines rns patients with the help of a solitary nurse or attendant. But the Court interpreted the language of the said provision by adopting the principle of noscitur a socils. The docrine was held to mean that when two or more words which are susceptible of analogous meaning are coupled together they are understood to be used in their cognate sense; and the words take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general (vide paragraph 6). It was further observed in the same paragraph as under:

We are, therefore, of opinion that the professional establishment of a doctor cannot come within the definition of Section 2(4) of the Act unless the activity carried on was also commercial in character.... In our opinion, the correct test of finding whether a professional activity falls within Section 2(4) of the Act is whether the activity is systematically and habitually undertaken for production or distribution of goods or for rendering material services to the community or any part of the community with the help of employees in the manner of a trade or business in such an undertaking.

In the same paragraph an English decision reported as William Esoplen, Son, and Swainston, Ltd. v. Inland Revenue Commissioners (1919) 2 K.B. 731 was referred to; and the observations of Rowlatt, J. as under were reproduced:.but in my opinion the company is not carrying on the profession of naval architects within the meaning of the section, because for this purpose it is of the essence of a profession that the profits should be dependent mainly upon the personal qualifications of the person by whom it is carried on, and that can only be an individual.

Having reproduced these observations, the Supreme Court proceeded to say at page 162 as under:

It is, therefore, clear that a professional activity must be an activity carried on by an individual by his personal skill and intelligence. There is a fundamental distinction therefore between a professional activity and an activity of a commercial character and unless the profession carried on by the appellant also partakes of the character of a commercial nature, the appellant cannot fall within the ambit of Section 2(4) of the Act.

5. Then observations from an earlier decision of the Supreme Court reported as National Union of Commercial Employees and Anr. v. M.R. Meher Industrial Tribunal Bombay 1962 (3) Supp. S.C.R. 157 were reproduced. These observations related to a Solicitor's firm. In the context of the question whether that firm satisfied the test of an industry? It was said.

But, it must be remembered that the service rendered by a solicitor functioning either individually or working together with partners is service which is essentially individual; it depends upon the professional equipment, knowledge and efficiency of the solicitor concerned.

Similar line of reasoning as in Solicitor's case was adopted by the Supreme Court in construing the provisions of Section 2(4) of the Act; and the Court said at page 163:

Applying a similar line of reasoning, we are of opinion that the dispensary of the appellant would fall within the definition of Section 2(4) of the Act if the activity of the appellant is organised in the manner in which a trade or business is generally organised or arranged and if the activity is systematically or habitually undertaken for rendering material services to the community at lerge or part of such community with the help of the employees and if such an activity generally involves co-operation of the employer and the employees. To put it differently, the manner in which the activity in question is organised or arranged, the condition of the co-operation between the employer and the employees being necessary for its success and its object being to render material service to the community can be regarded as some of the features which render the carrying on of a professional activity to fall within the ambit of Section 2(4) of the Act.

6. In the present case, the commercial establishment is the office of the limited company situated in Yash Kamal building. As is well-known, a limited company is a corporate body having a distinct legal entity. The definition of the word 'employer' contained in Section 2(7) of the Act reads:

(7) 'Employer' means a person owning or having ultimate control over the affairs of an establishment:

Thus, there can be no difficulty in finding in the present case that the limited company is an employer. The word 'employee' is also defined in Section 2(6) as under:

(6) 'Employee' means a person wholly or principally employed, whether directly or through any agency and whether for wages or other consideration, in or in connection with any establishment; and includes an apprentice but does not include a member of the employer's family;

In the present case irrespective of the question whether the directors are paid wages for their work, it is certain that they are employed for consideration, because they are interested in the profits of the Company. Therefore, the professional persons or individuals who utilise their individual skill and intelligence in the present case, are employees of the company. This being a limited company carries on its activity systematically or habitually for rendering services to the community at large or a part of such community with the help of employees and this activity involves co-operation of the employer and the employees. There can be no dispute about the fact that the activity of this limited company would be organised in the manner in which a trade or business is generally organised or arranged. The statement of the respondent Company at Exh. 17 also shows that the company is carrying on the profession of consulting engineers and of preparing plans and designs for its clients and the clients are advised and guided by the director's of the company with the help of their personal skill, intelligence and integrity.

7. We must not overlook the fact that the main question before us is whether the office of this limited company situated in Yash Kamal building is a commercial establishment? While examining this question we should keep in mind the corporate character of the company as distinguished from the individuals constituting it. Individual directors of the respondent Company who supply their professional skill, intelligence and integrity are not the company. Their individuality is lost in the corporate body for the present purpose. In the nature of things, a corporate body cannot possess professional skill and intelligence; and mere fact that its activity is being carried on by professional individuals with the aid of their personal skill and intelligence, cannot be helpful in a case of this type. It is not as if these directors of the Company who are professional individuals are being prosecuted in their individual capacity. Here the accused is a limited company. It is at this stage that we may recall the observations of the Supreme Court in Dr. Devendra's case (supra). After referring to William's case (supra), the Supreme Court said that it is, therefore, clear that a professional activity must be an activity carried en by an individual by his trrscnal skill and intelligence. In the present case the professional activity is carried on by the corporate body and not by an individual. It is interesting in this connection to refer to William's case (supra). The question there was whether the company in that case was carrying on a profession within the meaning of Section 39, para (c) of the Finance (No. 2) Act, 1915. Rowlatt, J. stated at page 734 as under:

It is said that it carries on a profession because the business it does is that of naval architects and because the members composing it aft three naval architects. In a sense it is true that the company deed the work of a naval architect, and for the work done the company alone would be responsible, and claims by creditors would be against the company. It is agreed that a naval architect is a professional man, and it is true, as Mr. Matter contended, that what has to be looked at is the character of the work generally, but in my opinion the company is not carrying on the profession of naval architects within the meaning of the (sic), because for this purpose it is of the essence of a profession that the profits (sic) be dependent mainly upon the personal qualifications of the person by (sic) is carried on, and that can only be an individual There can be no professional qualifications except in an individual. A company such as this can only do a (sic) work by sending a naval architect to its customers to do what they want done. As I think the company is not carrying on a profession the appeal must be dismissed.

These observations also bring out the essential (sic) between a corporate body carrying on professional activity and an Individual doing the same.

8. In the present case, we are not concerned (sic) an individual carrying on his professional activity by his personal skill and intelligence. We are of course, concerned with individuals who by their professional skill and intelligence are doing the work of a company. But these individuals are not carrying on this activity in their capacity as individual, but as part and parcel of the corporate body of which they are directors. In a case of this type, therefore, it cannot be said that the office of the corporate body is not a commercial establishment.

9. In this view of the matter, this appeal must succeed, and the accused respondent company must be found guilty under Section 7(1) read with Section 52(a) of the Act. The offence in this case consists of not sending necessary particulars in respect of the establishment of the respondent company as contemplated by Section 7(1) on the basis of which the establishment could have been registered under Section 7(2) of the Act. Contravention of Section 7(1) is made punishable by Section 52(a) of the Act.

10. On the question of sentence, as the offence is punishable with fine only, Mr. Shah for the respondent company did not want to lead any evidence. He, however, submitted that looking to the fact that this is the first offence and further to the fact that the question was a debatable question, a small amount of fine may be imposed. To an extent, Mr. Shah is right. In my opinion, therefore, fine of Rs. 50/- will meet the requirements of justice,

In the result, the appeal is allowed. The respondent company is convicted under Section 7(1) read with Section 52(a) of the Act and the order of its acquittal under that provision is set aside. It is sentenced to pay a fine of Rs. 50/- (Rupees fifty only) for the aforesaid offence.


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