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Judgment
A.K. Rajan, J.—This writ petition is filed against the order passed by the Industrial Tribunal in Industrial Dispute No.90 of 1989.
The reference for adjudication is ""whether the demand for payment of bonus to the workers at 8.33% for the years 1986-87 is justified; if not, to
what relief they are entitled"" and also for another issue. The other issue is not relevant for the present and hence it is not extracted.
The facts are as follows: The Christian Medical Hospital was founded about 90 years ago; Subsequently, medical college was stated. There are
3500 employees of various categories in the hospital. The employees of the Christian Medical College (hereinafter referred to as ""CMC""), claimed
that the provisions of the Payment of Bonus Act applies to them. The management contends that the Payment of Bonus Act has no application for
C.M.C. Hospital as it is exempted under subclauses (b) and (c) of Section Section 32(v) of the Act.
3.The employees'' contention is that the hospital manufactures more than 150 medicines and it is sold to the patients on commercial basis. Almost
about 98.6% of the total expenditure of the society is meted out by the income from the patients. The contribution made by the Council Members
to the society is only approximately 1.5% and therefore, the management is not a charitable institution and therefore, the workmen should be paid
minimum bonus as per the Payment of Bonus Act, inasmuch as the hospital is run on commercial basis.
The case of the management-institution is that Payment of Bonus Act has no application to it as it is an educational institution run by Christian
religious society. The Supreme Court of India has recognized the petitioner as an educational institution which is bound to run the hospital. The
object for which the hospital was founded is to manage and develop the Christian Medical College and Hospital where men and women shall
receive high education in arts and science as well as medicine and nursing. The college also conducts research. According to the University
regulation, hospital shall be attached to the medical college and therefore, hospital is an integral part of the educational institution. The Act is not
applicable to the petitioner as the Act exempts educational institution u/s 32(v)(b).
Further, Section 32(v)(c) excludes ""hospitals which are not run for profit."" Since, the hospital is not run for profit, it is exempted under this sub-
section as well. The medicines manufactured are sold only to the patients in the hospital and the income generated from such sales is ploughed
back to the resources of the institution. Hence, the preliminary issue, whether the Payment of Wages Act applies to the respondent institution has
to be decided first, in order to avoid unnecessary discussion on various issues.
After hearing both parties, the Tribunal held that Payment of Bonus Act is applicable to C.M.C. Hospital. Against this Award, this writ petition
has been filed.
Counsel for the petitioner pointed that Section 32 (v)(b) and ( c) of the Payment of Bonus Act reads thus:
Act not to apply to certain classes of employees:-Nothing in this Act shall apply to-
(v) a) .......
b) universities and other educational institutions.
c) institutions (including hospitals, chambers of commerce and social welfare institutions) established not for purposes of profit;
The counsel for the petition submitted that a reading of the above provisions makes it clear that the Payment of Bonus Act has no application to
any educational institution, because Christian Medical College Hospital is an educational institution. It has also been so held by a Division Bench of
this Court as well as by the Supreme Court and the respondent union was also a party to those proceedings. Therefore, the decision rendered in
that case is binding on the respondent also as res judicata; The respondent is also estopped from contending that the petitioner is not an
educational institution.
The counsel for the petitioner referred to the judgment of this Court between the parties which is also reported in Christian Medical College
Vellore Association (By Secretary) Vs. Government of India (By Secretary, Ministry of Law, Delhi) and Others, wherein in para-20, it has been
held as follows:
For the foregoing reasons, we are of the view that the Christian Medical College Hospital which is attached to the Christian Medical College is an
educational institution."" The counsel also submitted that this Court held in the same case that it is an educational institution entitled to the protection
of Article 30(1) of the Constitution; the question that the medical college hospital is a minority educational institution cannot be disputed and
therefore, in view of Section 32(v)(b), the provisions of the Payment of Bonus Act are not applicable to the Christian Medical College. The
counsel further submitted that the above finding of this Court has not been set aside by the Supreme Court, on appeals in the case of Christian
Medical College Hospital Employees'' Union and Another Vs. Christian Medical College Vellore Association and Others, even though the
conclusion arrived at by this Court that the provisions of the Industrial Disputes Act are not applicable to the minority educational institution was
over-ruled by the Supreme Court. Therefore, in so far as the finding that the Christian Medical College Hospital is an educational institution is
deemed to have been confirmed by the Supreme Court and therefore, the union cannot raise that plea once again.
The counsel for the respondents submitted that the question that was determined by the Supreme Court is,
whether the Act which is passed with the twin object of preventing industrial disputes and the settlement of such issues between employers and the
employees is applicable to the educational institutions which are protected by Article 30(1) of the Constitution of India.
The counsel for the respondent further submitted that the decision of this Court has merged with the decision of the Supreme Court. The only point
that was determined between the parties is that whether Industrial Disputes Act was applicable to the C.M.C. or not. The argument of the
petitioner that a Christian Medical College is an educational institution has been decided finally and therefore, it acts as res judicata on the
respondent, is not correct. According to the counsel for the respondent the decision of the Supreme Court, is that even assuming Christian Medical
College is a minority educational institution within the meaning of Article 30, Clause-1 of the Constitution, the provisions of the Industrial Disputes
Act are applicable to it. The Supreme Court did not decide whether Christian Medical College Hospital was an educational institution. Though
there is a finding to that effect by this Court, that finding has merged with the judgment of the Supreme Court and therefore, since the Supreme
Court has not decided that issue, the finding of the Madras High Court cannot be said to exist independently of the decision of the Supreme Court.
Therefore, it is not correct to say that there is a binding decision between the parties with respect to the issue that Christian Medical College is an
educational institution. Therefore, this Court has to decide the issue independently based on the arguments presently advanced.
The Supreme Court in paragraph-6 of the judgment referring to the finding of this Court inter alia observed that the Christian Medical College
Hospital which is attached to the Christian Medical College was an educational institution; observed in paragraph-7 that the principal question
which arises for determination, as the applicability of the Industrial Disputes Act to the educational institutions. In paragraph-11 of the judgment it is
observed that,
the question now is whether the Act, if it is made applicable to the minority institutions protected by Article 30(1) of the Constitution of India
would not in any way abridge the right of the minority concerned to establish or administer an educational institution.
When all these passages are read together, it is clear that the only question that was determined by the Supreme Court was whether
application of the Industrial Disputes Act to the minority educational institutions would in any way abridge the rights of the minorities institution
guaranteed under Article 30(1) of the Constitution. In paragraph-18 of the judgment, the Supreme Court; concludes as follows:
Accordingly, we are of the view that the provisions of Section 9(A), 10, 11A, 12 and 33 of the Act are applicable to the minority institutions like
the Christian Medical College and Hospital at Vellore Also.
Relying on the last sentence in paragraph-18, the counsel for the petitioner argued that this is a definite finding by the Supreme Court that Christian
Medical College Hospital is a minority educational institution and it cannot be contended that the Supreme Court has not decided that issue.
The Supreme Court in this paragraph refers to various contentions as to whether minority educational institutions are also bound by the
enactments which are intended for the general health as well as other general laws, such as filing of a suit for recovery of money from the minority
institutions etc. The Supreme Court held that,
the right guaranteed under Article 30(1) is not violated, if a minority school is ordered to be closed when an epidemic breaks out in the
neighbourhood, if a minority school building is ordered to be pulled down when it is constructed contrary to town planning law or if a decree for
possession is passed in favour of the true owner of the land when a school is built on a land which is not owned by the management of a minority
school. In the same way, if a dispute is raised by an employee against the management of a minority educational institution such dispute will have
necessarily to be resolved by providing appropriate machinery for that purpose.
....................
Similarly, Section 9-A of the Act, which requires the management to issue a notice in accordance with the said provision in order to make changes
in the conditions of service which may include changes in the hours of work, leave rules, introduction of new rules of discipline etc., cannot be
considered as violative of the right guaranteed under Article 30(1) of the Constitution of India.
Finally, the Apex Court concludes,
Accordingly, we are of the view that the provisions of Section 9A, 10, 11A, 12 and 33 of the Act are applicable to the minority educational
institutions like the Christian Medical College and Hospital at Vellore also.
Therefore the ratio decidendi in this decision of the Supreme Court is only the applicability of the Industrial Disputes Act to the minority
educational institutions in general and in particular to the C.M.C. The reference to Medical College at this place is only illustrative. It cannot be said
that it is a ratio decidendi in this case that Christian Medical College is a minority educational institution. Therefore, the argument of the petitioner
that there is a finding by the Supreme Court that C.M.C., is a minority educational institution does not appear to be correct.
At the same time, the argument of the counsel for the respondent that the decision of the Madras High Court has merged with the decision of
the Supreme Court also does not appear to be correct. The doctrine of merger would apply only to the proposition or finding that provisions of
Industrial Disputes Act are not applicable to the minority educational institution.
This Court in its decision in 1983, II, L.L.J. 372, in paragraphs-18, 19 and 20 as follows:
The history of the Christian Medical college and Hospital, Vellore and the objective of its founder as stated earlier leave no doubt that the
objective in the starting of the Christian Medical Hospital is the imparting of education of the highest grade in art and science of medicine and
nursing or in one or any one of the other related professions, to equip them in the spirit of Christ for service in the relief of suffering and promotion
of health. It is also in evidence that all the doctors in the Christian Medical College Hospital are teaching staff, except the trainees (house-
surgeons). It may be there are other employees like sweepers, cooks, stenographers, clerks, cashiers, technicians, accountants, ward attenders,
electricians, etc., who may be termed as lay assistants but since it is the co-ordinative effort of all concerned that makes the institution as a teaching
hospital, the employment of such persons would not in any way affect the institution being an educational institution.
The course and pattern of medical education, the requirements under the Medical Council Act and the regulations made thereunder and the
university regulations, the need for an attached teaching hospital, the objectives of the founder and the history of the petitionerassociation and the
college and hospital leave no doubt in our mind that the primary purpose of the attached teaching hospital is teaching and training medical students.
This finding of this Court has neither been approved nor disapproved by the Supreme Court as it has not decided that issue. Only in cases where
the appellate Courts decide an issue, the conclusion of the lower Court on the same issue can be said to have merged in the judgments of the
higher forum. Since the Supreme Court has not decided the issue whether C.M.C., is an educational institution, the argument of the respondent that
the judgment has merged with the judgment of the Supreme Court cannot be accepted.
The counsel for the petitioner submitted that the finding of this Court that the petitioner is an educational institution is binding on the respondent
as res judicata. This argument also cannot be accepted. The only issue that was before the Court was ""whether Industrial Disputes Act was not
applicable to C.M.C."" That C.M.C. Was an educational institution was only an observation not germane to the issue before the Court.
The Industrial Tribunal rejected the contention of the writ petitioner based on Section 32(v)(b) of the Act; In paragraph-9 of its order, relying
on the decision of this Court in the case of Tamil Nadu State Housing Board Vs. K. Sabanayagam and Govt. of Tamil Nadu, ""that Payment of
Bonus Act applies where Industrial Disputes Act applies."" The Tribunal has not given any finding that C.M.C., is or is not an educational institution.
The counsel for the respondent referred to the judgment of the Supreme Court in the case of the Workmen of Tirumala Tirupati
Dewasthanams v. The Management 1980 Vol.I, L.L.J. 211wherein the Supreme Court held that the Payment of Bonus Act applies to the
workmen of the Transport department of the Tirupati Dewasthanam. The counsel submitted on the same analogy that the Act is applicable to the
petitioner institution also.
The Supreme Court has held in the case of Tirumala Tirupati Dewasthanam as follows:
The Tirumala Tirupathi Devasthanam, a vast and unique religious organisation in the country, is certainly not founded for making profit and
attracts people who want to offer worship to Shri Venkateshwara but then the specific question with which we are concerned is whether the
transport operation by the administration falls within the category of institutions within the meaning of S.32(5)(c). Is the Transport Department so
merged in and integrated with the Devasthanam as to be incapable of; independent identity. Is the Transport Industry run by the Devasthanam
sufficiently spread as to be treated as an institution in itself? There is no doubt, as the Tribunal has rightly held, that it is an industry but the further
question arises whether it is an institution in the context and within the text of the Payment of Bonus Act. This question has not been properly
appreciated by the Tribunal. Secondly, assuming that it is an institution, it does not necessarily follow that S.32 is excluded. On the other hand,
there must be profit that the Transport Department (a) is an institution; and is established not for the purpose of the profit. The Tribunal has not
correctly appreciated the import of this latter requirement. It has been found that profits made in some years are ploughed back whether that may
mean. It is also found that the motive for running the industry of transport was to afford special facilities for the pilgrims. These by themselves do
not clinch the issue whether the institution has been established not for the purposes of profit, nor are we satisfied that merely because in the
administrative report of the Dewasthanam, there is mention of the transport establishment as remunerative enterprise, that is decisive of the issue.
The Supreme Court has held that even if T.T.D. is an institution, it does not necessarily follow that the Act is not applicable in view of Section 32.
It also held that the mere fact that the profit is ploughed back by itself has not clinched the issue whether the institution has been established ""not for
the purpose of profit."" Merely because in the administrative report of the Dewasthanam, there is a mention about the produce as a remunerative
enterprise, it does not decide the issue. The Supreme Court finally held that the Tribunal has to decide,
whether the Transport Department, having regard to the features of the administration, the sources of its finance, the balance sheet that is drawn
up and the disposal of the profits, can be considered to be an institution in itself, whether it has nexus with the Dewasthanam or not. The fact that it
is run by the Dewasthanam, does not keep it out of its being an institution.
The Supreme Court also held,
If we may tersely put it, the dominant purpose of the Transport Department will be the decisive factor.
The decision of the Supreme Court in this case is that if the transport department run by the Dewasthanam can be considered as an institution by
itself, then it must be bound by the provisions of the Payment of Bonus Act.
A reading of the judgment would show that merely because a profit making department is attached to or controlled by any institution, which is
exempted from the provisions of Payment of Bonus Act, it does not clinch the issue. The dominant purpose of that department will be the decisive
factor. Therefore, relying upon this judgment, the counsel for the respondent contended that the dominant purpose of C. M.C. Hospital is to run
the hospital and not to run the educational institution and therefore, the provisions of Section 32(v)(b) are not applicable to C.M.C.
From the decision of the Supreme Court in the case of Tirumala Tirupati Dewasthanam, it is clear that even in the case of the religious
institution like Tirumala Tirupati Dewasthanam, the dominant purpose of a department is the decisive factor for concluding whether the Payment of
Wages Act applies or not. Therefore, even assuming that the petitioner is an educational institution, if the hospital is a separate department, then the
Act will be applicable to the hospital.
It is to be noted that recently, the Supreme Court has held in between Christian Medical College and the Employees'' State Insurance
Corporation reported in 2000-I-L.L.J. 18, ""that Equipment Maintenance Department"" of Hospital is a factory under E.S.I. Act and therefore,
E.S.I. Act was made applicable to the petitioner. Further in the same decision, the Supreme Court has referred to another decision of the Supreme
Court in the case between Andhra University Vs. Regional Provident Fund Commissioner of Andhra Pradesh and Others, where the Departments
of Publication and Press were liable under the Employees'' Provident Funds and Miscellaneous Provisions Act. In that case, the contention of the
University that for the purpose of determining of applicability of the Act, the entire University must be treated as an establishment was rejected.
The Supreme Court in that case held,
In construing the provisions of the Act, we have to bear in mind that it is a beneficient piece of social welfare legislation aimed at promoting and
securing the well-being of the employees and the court will not adopt a narrow interpretation which will have the effect of defeating the very object
and purpose of the A ct. Once it is found that there is an establishment which is a factory engaged in an industry specified in Schedule I and
employing 20 or more persons, the provisions of the Act will get attracted to the case and it makes no difference to this legal position that the
establishment is run by a larger organisation which may be carrying on other additional activities falling outside the Act.
The Supreme Court also rejected the view taken by the Calcutta High Court, that,
if the University as an establishment does not come under the provisions and/or the purview of the Act, the different branches or departments of
the University which the University is empowered and/or entitled to maintain under the provision of the Visva Bharati Act cannot be brought within
the mischief of the Act.
The Supreme Court observed,
We have no hesitation to hold that the aforesaid view expressed by a learned Judge is not correct or sound and that the said decision does not lay
down correct law.
That is, though the E.S.I. Act was not applicable to University as such, yet the Act was held applicable to a department or a branch of the
University.
In another case between the same parties, reported in 2000 (3) M.L.J. 84, a Division Bench of this Court upholding the decision of the single
Judge, held that, even though the hospital is attached to the college, it does not cease to be a hospital for the purpose of Minimum Wages Act. The
Division Bench concluded,
the fact that the University regulations stipulates the inclusion of practical training as part of the educational requirement of medical students does
not in any way make the Christian Medical College Hospital any less a hospital.
The institution-C.M.C. Hospital was registered under the Societies Registration Act, 1860. ""Christian Medical College Vellore Association"" is
the name of the registered society. It is this society that runs the Christian Medical College as well as the hospital. Christian Medical College is one
of the institution. Hospital is another institution-a branch or department of the society. Therefore, in view of the decision of the Supreme Court in
Thirumala Tirupati Dewasthanam case, referred to supra, the Hospital is an independent and separate department.
Payment of Bonus Act will not apply to a University or an educational institution as per Section 32(v)(b); also, the Act will not be applicable to
an institution established not for profit as per Section 32(v)(c). Therefore, if C.M.C. Hospital is considered as an educational institution, then, no
further enquiry need be held; automatically, the institution goes out of the purview of this Act, in view of sub-section (b) of Section 32(v). If it is
held that C.M.C. Hospital is not an educational institution, then, the question of applicability of Section ""c"" has to be considered. If the hospital and
college exist as separate units, then, in so far as the college is concerned, the Act will not be applicable, because Section 32(v)(b) is applicable to
the educational institutions. This Act cannot be held to be applicable to hospital only if the hospital is established not for the purpose of profit.
Industrial Tribunal has elaborately dealt with this question whether the hospital is run for profit. It has referred to the evidence adduced before it
and on that basis, it has come to the conclusion that 98% of the income of the association is derived only from the hospital. Therefore, the Tribunal
has come to the conclusion that the hospital is run for profit. There is no reason to interfere with this finding of the Tribunal. Hence, that finding is
legal and valid. Therefore, to the hospital, the exemption granted under sub-section ""c"" of Section 32(v) is not available as rightly held by the
Tribunal; in so far as the hospital is concerned, this is a separate department by itself. Though Medical College must have a hospital also, such a
hospital can be a separate department.
Further, the hospital also manufactures drugs and it is sold to its patients. These activities cannot be said to have been established not for the
purpose of profit. Therefore, in so far as the hospital is concerned, it is a separate department of the society and it exists independent of the
medical college. Merely because the profits of the hospital are ploughed back, it does not cease to be a profit making body. The Tribunal found on
facts that the free treatment is given for a small per centage of people. In view of the fact that almost 98 per cent of the expenditure of the society is
meted out by the income from the hospital, the hospital is running for making profit. Therefore, the provisions of Section 32(v)(c) also is not
attracted. Therefore, the Payment of Bonus Act cannot be said to be inapplicable to the C.M.C. Hospital.
The counsel for the respondent submitted that some of the staff members are allotted duties in the hospital as well as in the college and they are
inter-changed from time to time. Such interchanging of postings temporarily will not alter the position. Petitioner shall have independent employees
for the hospital and the college. In that case, the provisions of Section 32(v)(b) will be applicable to the Medical College.
The Tribunal has rightly concluded that Section 32(v)(c) has no application to the C.M.C. Hospital. In so far as the decision of the Tribunal,
that the provisions of Payment of Wages Act would be applicable, when Industrial Disputes Act is applicable is set aside. A combined reading of
Section (v)(b) and (c) would make it clear that the Payment of Wages Act will not be applicable to Christian Medical College. Therefore, in so far
as the medical college excluding hospital is concerned, the Act will not be applicable.
In the result, the writ petition is allowed in part in so far as it relates to the Medical College. The writ petition is dismissed in so far as it relates
to the C.M.C. Hospital. In the circumstances, no costs.