Educational Institutions Comes Within The Meaning Of 'Establishments' Under Section 1(5) Of The ESI Act, 1948 : Calcutta HC [Read Judgment]

The appeals were filed based on the judgement and order passed by a Single Bench of the Calcutta High Court in the writ petition filed by the respondent.

In this case, the appellants i.e., OM Dayal Educational & Research Society & Ors., alleged that they are a charitable and educational society which manages Delhi Public School Ruby Park, Kolkata and Delhi Public School, Durapur. They challenged two notifications published in the Kolkata Gazette dated August 28, 2006 and February 10, 2011 by the Labour Department, Government of West Bengal, where it says, exercise of powers conferred under subsection (5) of Section 1 of the Employees' State Insurance Act, 1948 (hereinafter "the said 1948 Act"), inter alia with approval from the Central Government, the Labour Department extended the provisions of the said 1948 Act to, educational institutions (including public, private, aided or partially aided) run by individuals, trusts, societies, or other organisations. The appellants alleged that they have also paid certain sums to the Employees' State Insurance Corporation pursuant to the said notification.

In the judgement issued by the Single Bench of the Calcutta High Court based on the writ petition, it was stated that the argument that institutions of the appellants were a 'commercial establishment' under Section 2(2) of the West Bengal Shops and Establishments Act, 1963 and carrying on business, trade, profession, or any work in connection with, or incidental to, or ancillary to any business, trade, or profession, could not be accepted.

The court in this appeal, interpreted the word 'establishment' and also 'institution' to see how it exactly fits within the meaning of the word 'establishment'.

The court relied upon the Black's Law Dictionary where it is defined,

" institution.(14c)….3. An established organisation, esp. one of a public character, such as a facility for the treatment of mentally disabled persons…." (emphasis added)

The court also relied on Judicial Dictionary (15th edn., 2011, Vol 1) to examine the meaning of the word 'institution', where it says:

"Institution. According to the dictionary meaning, the term 'institution' means 'a body or organization of an association brought into being for the purpose of achieving some object'. Oxford English Dictionary defines an 'institution' as an 'establishment, organisation or association, instituted for the promotion of some object, especially one of public or general utility, religious, charitable, educational, etc.'. Other dictionaries define the same word as organised society established either by law or the authority of individuals for promoting any object, public or social. [K V Krishna Rao v SubCollector, Oagole AIR 1969 SC 563, (1969)1 SCJ 687, (1969) 2 SCA 255, (1969) 1 SCWR 999, (1969) 1 Mad LJ 83, (1969) 1 Andh WR 85]."(emphasis added)

The court further relied on The Major Law Lexicon (4th edn., 2010, Vol 3), where the 'institution' is defined as :

"Organization, particularly one concerned with the promotion of specific subject or some public object (e.g. the Royal United Services Institution)" "It is a little difficult to define, the meaning of the term 'institution' in the modern acceptation of the word. It means, I suppose, an undertaking formed to promote some defined purpose having in view generally the instruction or education of the public. It is the body (so to speak) called into existence to translate the purpose as conceived in the mind of the founders into a living and active principle. Lord Mancnaghten in Mayor, etc. v. Mcadam, 1896 AC 500." (emphasis added)

Taking into account these dictionary meanings read with the test put forth by the apex court in Bangalore Turf Club case where it says, an establishment includes an institution which is engaged in the act of achieving a certain purpose, mostly a public purpose (including charity and education), and in the process is engaged in employing persons for providing a good or service to the community, the court said:

Nowhere is this more firmly established than in the specie put forth as belonging to the genus 'establishment' in Section 1(5), which include establishments that are 'industrial', 'commercial', 'agricultural', "or otherwise". The word 'otherwise' here has clearly been placed to specify that the genus of establishments is not restricted to those organisations which are industrial, commercial or agricultural only but also includes organisations which can otherwise fall within the broad definition of the words "establishment or class of establishments"—which, as we have shown, includes institutions of a charitable nature or educational institutions.

The court while allowing the appeal and setting aside the judgement and order of the Single Bench of the Calcutta High Court said,

The impugned notifications extend the application of the said 1948 Act to, inter alia, educational institutions (including public, private, aided, or partially aided) run by individuals, trusts, societies or other organisations. Such organisations and institutions are by definition institutions either of a charitable nature or educational institutions, which are bound to be employing teachers and staff for imparting education. Hence, they are most certainly within the meaning of 'establishments' under Section 1(5) of the said 1948 Act.

Hence the court added that the appellants being a charitable and educational society that runs two schools, most certainly falls within the ambit of the said notification and also within the meaning of establishments under Section 1(5) of the said 1948 Act