Income From Telecom Tower Doesn't Turn Housing Society Into 'Industry', Upkeep Staff Not Entitled To Gratuity: Bombay High Court
Mere installation of telecommunication antennas on the terrace and employing workers to manage the affairs of the society, does not make a cooperative housing society an 'industry' or an 'establishment' under the Industrial Disputes Act (ID Act) or the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, respectively, held the Bombay High Court on...
Mere installation of telecommunication antennas on the terrace and employing workers to manage the affairs of the society, does not make a cooperative housing society an 'industry' or an 'establishment' under the Industrial Disputes Act (ID Act) or the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, respectively, held the Bombay High Court on Monday (January 5).
Therefore, a worker appointed for the upkeep of such housing society or to manage the work of the said society cannot claim pending dues and gratuity under the ID Act or the Payment of Gratuity Act, 1971, ruled the court.
Single-judge Justice Sandeep Marne therefore quashed and set aside order of a Labour Court in Mumbai, which allowed an application filed by a manager of a housing society, who contended that since the society could be easily categorised as an industry or an establishment, and that his services were suddenly terminated, it ought to pay him gratuity and also dues totalling to nearly Rs 4.6 lakhs.
The former manager, who earned Rs 90 thousand per month salary, argued that the society had installed telecommunication towers and was earning revenue from the same and also had a 'club' facility in its premises thus it was indulging in 'trade and commercial' activity and therefore it could be easily held to be an 'industry.'
Rejecting the argument, Justice Marne pointed out that carrying on some form of trade or business is essential for a cooperative society to partake character of an industry and a cooperative housing society which merely manages the building and is formed for collective ownership of land and building, does not carry on any trade or business and would not qualify as an industry.
In Maharashtra, the judge pointed out, the activities of construction, sale, management and transfer of flats used to be governed by the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963 (MOFA), which is now replaced by , which is a Central Legislation.
It is incumbent for promoter/developer to transfer the title in the land and the building in favour of collective body of flat purchasers, which can be a cooperative society, association of apartments or a company, under the Real Estate (Regulation and Development) Act 2016 (RERA), the judge pointed out.
"Thus one of the objectives behind formation of such collective body like a society is to secure title in the land and building, which is collectively owned by all the flat purchasers. Once such collective body like a society is formed, it also looks after maintenance of the building. Thus the collective body of flat purchasers is not formed with the objective of carrying on any trade or business," the judge observed.
With the rise of construction of apartments in urban areas in India, professional management of the buildings became imminent, the judge said in the order, adding, "Gone are the days where smaller buildings were used to be managed through a watchman or caretaker or a security guard. Today's modern commercial and housing complexes require efficient management in various areas such as maintaining cleanliness, garbage collection, lift operations, parking management, electricity/plumbing maintenance, club house maintenance, managing sporting activities, etc. All these facilities are provided in a building for personal use by members"
Since members find it difficult to themselves maintain these facilities, various personnel are required to be employed to look after and maintain those facilities, the judge explained.
"It therefore cannot be contended that the activity of maintaining those facilities is a commercial activity. Usually a cooperative housing society or co-operative commercial premises society do not have income generation sources and are largely dependent on monthly contribution by members. However, few buildings do have some commercial exploitation opportunities such as renting out some of the premises in the building for putting up hoardings or for telecommunication towers, etc. Though some income may be generated through these activities, it does not mean that the activity of earning remuneration through such exploitation acquires a characteristic of a systematic trading or commercial activity for such society. Such activities help reduce monthly contributions by the members and are not aimed at or performed with the objective of running a systematic trade or business activity as an industry," Justice Marne explained.
Further, the court emphasised that it is another thing if a co-operative housing society or association of apartments is found to be engaged in any systematic commercial activity such as running of a store /restaurant or running a club house for outsiders, operating banquet hall for commercial exploitation by outsiders, etc. and if any employees are appointed to exclusively look after those commercial activities.
In such a case, if it is proved that the employees look after the commercial activities undertaken by the society, such activity may come in the definition of the term 'industry'. However mere employment of employees by cooperative housing society or association of apartments for offering services to the members would not bring activities of such society into the definition of the term 'industry' within the meaning of Section 2(j) of the ID Act.
"Mere installation of telecommunication antennas by the Petitioner-Society for reducing monthly maintenance charges of its members cannot be treated as a systematic activity for treating it as an 'industry'. Similar is the position in respect of club house of the Petitioner-Society. It is not the contention of the Petitioner that membership in the club house is allowed for outsiders. Club house is being operated for personal use of the members and merely because operation of the club house involves incurring of large-scale expenditure, it would still not mean a systematic commercial activity for treating the same as an 'industry'." Justice Marne held.
As regards, whether a housing society could be defined as an 'establishment' or not, the judge explained that when a residential flat in a building is not an 'establishment' within the meaning of Section 2(4) of the Maharashtra Shops Act, an entity formed by all the residents for collective management of their houses would also not be an establishment within the meaning of Section 2(4) of the Maharashtra Shops Act.
"Merely because house owners come together and decide to manage their houses and building collectively and for that purpose, employ workers/employees, association of house owners would not be an 'establishment' within the meaning of Section 2(4) of the Maharashtra Shops Act. In my view, therefore, provisions of PG Act would not apply to co-operative society or co-operative commercial premises/ societies," the judge held.
With these observations, the court allowed the housing society's plea against the order of a Labour Court.
Appearance:
Advocates Mahesh Shukla, Udaybhan Tiwari and Niraj Prajapati appeared for the Petitioner.
Advocate Ashish Nagwekar for the Respondent.
Case Title: Apsara Co-operative Housing Society Ltd. vs Vijay Shankar Singh (Writ Petition No 3908 of 2025)