Horse-racing clubs in India have been declared to be “shops” by the Supreme Court.
A three-judge bench led by Justice H L Dattu interpreted the provisions of the law to rule that horse-racing clubs shall come under the definition of a “shop” so as to bring them under the ambit of the Employee’s State Insurance (ESI) Act and cover their employees under various social security schemes.
“The activities of the appellant Turf Clubs is in the nature of organised and systematic transactions, and further that the said Turf Clubs provide services to members as well as public in lieu of consideration. Therefore, the Turf Clubs are a ‘shop’ for the purpose of extending the benefits under the ESI Act,” said the court.
Answering a reference from a two-judge bench on the point of law, the larger bench, also comprising Justices R K Agrawal and Arun Mishra, said a conventional interpretation of the term “shop” shall denude employees of such clubs of various benefits in cases of sickness, maternity, accidents etc, and hence the term required a liberal meaning.
Under the ESI Act and the consequent notifications, only the establishments declared as shops could be covered, warranting such organisations to make necessary contributions towards the ESI schemes.
“Since the ESI Act is passed for conferring certain benefits to employees in case of sickness, maternity and employment injury, it is necessary that the ESI Act should receive a liberal and beneficial construction so as to achieve legislative purpose without doing violence to the language of the enactment,” noted the bench.
It underlined activities of a horse-racing club and services being provided by them to examine if these could be related to services provided by a shop. The court noted that horse-racing clubs conduct racing, which is an activity of entertainment, and also provide various services to the members and spectators such as enjoy racing and betting, for a consideration. Stating that these commercial and organised activities for providing certain goods and services by the clubs are squarely on the lines of a shop and hence they would be accountable under the ESI Act.
The bench also said that such an interpretation would not run against the scheme of the legal provisions in the Factories Act or the Minimum Wages Act, for the ESI Act had different scope and interpretation.
The court ruling came on cases involving the Bangalore Turf Club Limited and the Royal Western India Turf Club, which are two of the five ‘Turf Authorities of India’. Their counsel argued that a club would not be covered under the scope and purview of ‘shop’ since a shop has to be a building where goods are sold or kept for sale.