Holding

The entire hotel is a factory under the Employees' State Insurance Act, 1948 because the kitchen's manufacturing activity is integral to and broadly connected with the hotel's other services.

Summary

The Employees' State Insurance Corporation demanded contributions from several hotels for the period 1970‑1978, treating the hotels as factories under the Employees' State Insurance Act, 1948 because cooking in their kitchens was a manufacturing process. The hotels contended that only the kitchen should be deemed a factory and that the rest of the premises were unrelated. The Bombay High Court dismissed the hotels' writ petitions, holding the entire hotel to be a factory. On appeal, the Supreme Court affirmed that the kitchen’s manufacturing activity is integral to the hotel business and has a broad connection with the other hotel services, so the whole hotel falls within the definition of "factory" in Section 2(12) of the Act. The Court also observed that definitions in social‑welfare statutes are artificial and should be interpreted broadly to extend coverage, and it held that the Article 32 writ petitions filed against the same High Court judgment while a special leave petition was pending were not maintainable. Consequently, the appeals and the writ petitions were dismissed.

Issues considered

Whether a hotel, whose kitchen conducts a manufacturing process of cooking, qualifies as a "factory" under Section 2(12) of the Employees' State Insurance Act, 1948.
Whether the activities in the rest of the hotel premises must be directly connected to the kitchen activity to bring the entire premises within the definition of "factory".
Whether Article 32 writ petitions challenging the same High Court judgment are maintainable when a special leave petition is pending.

Legislation cited

Constitution of Indias. Article 226, s. Article 32, s. Article 33, s. Article 34, s. Article 35, s. Article 36
Employees' State Insurance Act, 1948s. 1(4), s. 1(5), s. 2(12), s. 2(14-AA), s. 26, s. 38, s. 39/2(K)
Factories Act, 1941s. 2(k)

Subjects

Employees' State Insurance Actfactory definitionmanufacturing processhotelstatutory interpretationsocial welfare legislationArticle 32 writ petitionspecial leave petition

Judgment

A G.L. HOTELS LTD. ETC.
v.
T.C. SARIN AND ANR. •
AUGUST 25, 1993

B [P.B. SAWANT AND YOGESHWAR DAYAL, JJ.]

Employee's State Insura11ce Act, 1948/The Fact01ies Act, 1948: Sections
1(4), 1(5), 2(12), 2(14-AA), 26, 38, 39/2(K)--Employees State Insurance I'
Fund-Conllibutions--'Factory'-'Hotc/'-'Kitchen'-'Manufacturing process'
C in the fo1111 of cooking and preparing food being canied_ on ill kitchen-Held,
Kitchell is a facto1y-Activity canied mt in kitchen has connection with ac-
tivities canied 011 in rest of hotel premise;~Kitchen being an integral part of
hotel-business, e11tire hotel falls within deffriition of facto1y. ·

Constitution of India, 1950: Articles 32-136, 226-Special leave petition
[) agaimt High Cowt judgment-Writ petition against veiy same judgment
dwi11g pende11cy of SLP.-He/d, not mai11tai11able.

Inte1pretation of Statutes: Social Welfare Legislations-Inteipretation
of-Held, expressions like 'facto1y', 'indust1y' cannot be tested on anvil of their
E conunon usage.

The Employees' State Insurance Corporation raised a demand for
contributions from the appellant-hotel for different periods between 1970 ,.,
till 11.11.1978, treating them as factories within the meaning .of the
Employees' State Insurance Act, 1948. The appellants challenged the
F demand by filing writ petitions before the High Court. However, in view of
the hotels being treated as 'establishments' and covered by Section 1 (5) of
the Act from 12.11.1978, there was no dispute with regard to the contribu-
tions payable ou or from that date. The writ petitions were dismissed. The
appellants Jiled the appeals by special leave.

G The appellants did not dispute before this Court that kitchen is a
factory for the purpose of the Act. But they contended that the activities
carried on in the rest of the part of the premises of the hotel must have a
connection n'ith the activity carried on in the kitchen and since there was
no such connection, the definition of 'factory' should not be extended to
H ·the other premises of the hotel.
808
G.L. HOTELS v. T.C. SARIN 809

One of the hotels whose writ petition was dismissed by the High A
Court, filed a special leave petition. During the pendencY. of the special
leave petition, the hotel also filed writ petitions under Article 32 of the
Constitution against the very same judgment of the High Court.

Dismissing the appeals, this Court
B
HELD : 1.1. Manufacturing process in the form of cooking and
preparing food is carried on in the kitchen and the kitchen being a part
of the hotel or of the precinct of the hotel, the entire hotel falls within the
purview of the definition of 'factory' given in Section 2(12) of the
Employees' State insurance Act, 1948. [812-B] C

1.2. Manufacturing activity has a broad connection with the activities
carried on in the rest of the premises of the hotel. Kitchen is an integral
part of the hotel-business. Those who occupy a hotel do depend on the food
and the beverages which are prepared in its kitchen. The lodging and D
boarding are essential components of the services rendered by the hotel.
Hence it cannot be denied that the activity in the kitchen has a connection
with the activities carried on in the rest of the hotel premises. (813-C-D)

Nagpur Electric Light & Power Co. Ltd. v. Regional Director Employees
State Insurance Corporation etc., (1967) 3 S.C.R. 921, referred to. E

2. The definition of certain premises as a factory or of certain
activities as an industry etc. given in social welfare legislations are neces-
sarily artificial and cannot be tested on the anvil of the common usage of
the terms defined. The object is to extend the welfare coverage to as large F
a section of the individuals as possible. [813-E)

3. The writ petitions under Article 32 of the Constitution against the
' very same judgment of the High Court against which special leave petitions
had been ·filed, are not maintainable. (814-E)
G
CIVIL APPELLATE/ORIGINAL JURISDICTION : Civil Appel-
late Nos. 1144-45 & 1147 of 1982.

From the Judgments and Orders dated 30.9.80, 12-11-80 and 18-11-
80 of the Bombay High Court in Appeals Nos. 533, 545 and 546 of 1980. H
810 SUPREME COURT REPORTS [1993) SUPP. 1 S.C.R.

A AND r
Civil Appeal Nos. 1148-49 of 1982.

WITH

Writ Petition (C) Nos. 9728-29 of 1983.
B
Soli J Sorabjee, U.A. Rana, Rajiv Tyagi, Ms. Nisha Bagchi and R.F.
Nariman for the appellants. t
N.N. Goswami, Ms. A. Subhashini and A.K. Srivastava for the
respondents.
c
The following Order of the Court was delivered :

C. A. Nos. 1144-45, 1147-48/1982

The point involved in all these appeals is whether the hotels run by
D the appellants are factories within the meaning of the provisions of Section
2 (12) of the Employees' State insurance Act, 1948 [hereinafter referred to
as the 'Act'] and, therefore, covered by Section 1 (4) of the Act.

The State Insurance Corporation had raised a demand for contribu-
tion from the appellant-hotels for different periods between 1970 till
E ll.11.1978 treating them as factories within the meaning of the Act. It may
be noted here that there is no dispute with regard to the contribution
payable on and from 12.11.1978 since a notification has been issued treating
the hotels as "establishments" from that date and, therefore, they are since
covered by Section 1 (5) of the Act.

F The main contention of the appellants before us was that the entire
premises of a hotel cannot be treated as a "factory" within the meaning of
the said section merely be cause the process of cooking food is carried on
in its kitchen which forms only a part of the said premises. It was not
disputed before us, though it appears it was vehemently argued before the
G High Court, that kitchen is a factory since a manufacturing process within
the meaning of Section 2 (K) of the Factories Act is carried on there. The
argument was that the activities which are carried on in the rest of the
premises of the hotel must have a connection with the activity carried on
in the kitchen, and since there is· no such connection, the definition of
"factory" should not be extended to the other premises of the hotel. The
H definition of "factory" given in Section 2(12) of the Act reads as follows:
G.L. HOTELS v. T.C. SARIN 811

2. "Definition. - In this Act, unless there is anything repugnant in A
the subject of context, ............................................................... .

[12] "factory" means any premises including the precincts thereof-

[a] whereon ten or more persons are employed or were
employed for wages on any day of the preceding twelve B
months, and in any part of which a manufacturing process is
being carried on with the aid of power or is ordinarily so
carried on, or.

[b] whereon twenty or more persons are employed or were
employed for wages on· any day of the preceding twelve C
months, and in any part of which a manufacturing process is
being carried on without the aid of power or is ordinarily so
carried on,

but docs not include a mine subject to the operation of the Mines D
Act, 1952 or a railway running shed;"

The "manufacturing process" as defined in Section 2 [14AA] of the
Act read with section 2 [K] of the Factories Act, 194S is as follows:

"2. Interpretation. - In this Act, unless there is anything repugnant E
in the subject or context,-

[k] "Manufacturing process" means any process for -

[i] making, altering, repairing, ornamenting, finishing, pack-
F
ing, oiling, washing, cleaning, breaking up, demolishing or
otherwise treating or adapting any article or substance with
a view to use, sale, transport, delivery or disposal or.

[i] pumping oil, water, sewage or any other substance; or G
[iii] generating, transforming or transmitting power, or

[iv] composing types for printing, printing by letter-press,
lithography, photogravure or other similar process or book-
binding; or H
812 SUPREME COURT REPORTS 11993] SUPP. 1 S.C.R.

A [v] constructing, rece>nstructing, repairing, refitting, finishing
or breaking up ships or vessels, or

[vi] preserving or storing any article in cold- storage;"

Since the manufacturing process in the form of cooking and prepar-
B ing food-is carried on in the kitchen and the kitchen is a part of the hotel
or a part of the precinct of the hotel, the High Court has held that the
J
entire hotel falls within the purview of the said definition. We do not see
any infirmity in the conclusion arrived at by the High C~urt although we
agree with Shri Sorabjee that the reasons given by the Court in support of
C the conclusions are not all valid. The unity of ownership which is adverted
to by the High Court in this connection does not appear to be relevant to
the point in issue.

Shri Sorabjce further contended that. if such wide interpretation is
given to the definition of "factory", students' hostels, gymkhanas and clubs
D would all be covered by the definition. Hence it is necessary to read down
the definition and apply it only to those premises where the activities
carried on have a connection with the activity in the kitchen. In this
connection, he invited our attention to certain observations in Nagpur
Elecllic Light & Power Co., Ltd. v. Regional Director Employees State
E Insurance Cmporation etc., [1967] 3 SCR 92. At page 96 of the said
judgment, the Court has observed as follows:-

"In view of s.2 (k) (iii), the process of transforming electrical energy
from a high to a low potential and the process of transmitting the
energy through supply lines are both manufacturing processes. In
F a part of the premises occupied by the company, the two processes
are carried on with the aid of power by means of electrical gadgets
and other devices. On the premises more than twenty persons
were and are wo~king. No part of the premises is used for purposes
unconnected with the manufacturing processes. The premises
therefore constitute a factory within the meaning of s.2(12) of the
G
Employees' State Insurance Act, 1948."

The observation in aforesaid paragraph namely "no part of the
premis~" is used for purposes unconnected with the manufacturing proces-
ses" has been strongly relied upon by Shri Sorabjee to contend that accord-
H ing lo this Court the rest of the premises of the hotel must be shown lo
G.L HOTELS v. T.C. SARIN 813

•. be connected with the kitchen-activities and unless it is so shown, the rest A
of the hotel-premises cannot be covered by the said Act. There is no doubt
that in the course of explaining the activity which was under consideration

-
in the said judgment the Court has made the observation in question to
show how in fact, even the activities carried on in the rest of the premises
were also connected with the manufacturing process. The observation is,
however, not the basis of the conclusion arrived at there. The observation
B
has to be understood in the context in which it was made and cannot be
interpreted to mean that in every case, such a connection has necessarily
to be established in all respects. It is I.,.·ell.ough,
·~ ' •
according to us, that the
manufacturing activity has a broad cpnnedipn .....,.. with the activities carried on
in the rest of the premises, For example, in· tJ1e present case, it cannot be C
denied that kitchen is an integral part of the hotel-business. Those who
occupy hotel do depend upon the food and the beverages which are
prepared in its kitchen. It is not possible to conceive of a hotel without a
kitchen. The lodging and boarding are both essential components of the
se[vices rendered by a hotel. Hence it cannot be denied that the activity in D
did "'kitchen has a connection with activities carried on in the rest of the
h6ie1 premises. It should not further be forgotten that the definition of
certain premises as a factory or. of certain activities as an industry etc. given
in social welfare legislations like the present, are necessarily artificial. The
object is to extend the welfare coverage to as large a section of the
individuals as possible. Such definitions cannot be tested on the anvil of E
the common usage of the terms def:ned. The present is an illustration of
the kind. At the same time, the contention advanced by Shri Sorabjee
cannot be dismissed lightly and may have to be seriously considered in
appropriate cases. We are not accepting it in the present case because as
pointed out above, it cannot be said that the kitchen activity has no relation F
at all with the activities in the other premises of the hotel. In the cir- ·
cumstances, we dismiss all the appeals with costs.

WP. No. 9728-2911983

In addition to the challenge which we have dealt with in the above G
appeals, in the present writ petitions, a contention is raised by Shri R.F.
Nariman appearing for the petitioner that as far as the petitioner in the
present petitions is concerned, it is not liable to pay interest on the amo~t"
due till 20.10.1983. The argument is that the first notice which was sertved
on the petitioner on 29.8.83 confined its demand only to the amount of Rs. H
814 SUPREME COURT REPORTS [1993] SUPP. 1 S.C.R.

A 1,65,000 which was found due in respect of the employees in the kitchen t
who were no more than 171 in number. Jt is only for the first time on
20.10.83 that demand was made for contribution in respect of the

B
employees in rest of the premises of the hotel. The contention, therefore,
is that even according lo the Corporation, employees other than engaged
in kitchen were not covered by the Act till 20.10.83 and hence the interest
can start running only from the date of demand which is 20.10.1983 and
-
not before that. j

It is interesting to note that the present petitioner had filed a writ
petition in the High Court challenging the original notice of demand dated
C 29.8.1983 on the only ground that petitioner's hotel was not covered by lh•
Act. That petition was dismissed. Nearly two years after the said decision,
the petitioner filed a special leave petition which is pending in this Court.
However, along with the petition, the petitioner also filed the present writ
petitions. Learned Counsel for the petitioner was unable to explain as lo
how the present writ petitions under Article 32 were maintainable against
D the very same decision of the High Court. It is in these writ petitions that
by an amendment, the petitioner has challenged for the first time the
second notice dated 20.10.1983 demanding the contribution on behalf of
the employees other than those engaged in the kitche.n. This demand of ,
course was with interest from 12.2.1976. Since we are of the view that the
E writ petitions themselves are not maintainable, the plea cannot be enter-
tained. We therefore, dismiss the writ petitions as being non-maintainable
and decline to go into the question raised as to whether the demand for
interest on the additional contribution from 12.2.1976 is valid or not. The
writ petitions are accordingly dismissed with costs.

F CA. No. 1149/1982
Civil appeals is permitted to be withdrawn with no order as to costs.

R.P. Appeals dismissed.