Every State has formulated its own laws regulating the shops and
establishments. This article aims to understand the definition and scope of the
terms shops and commercial establishments under various State
Legislations. It determined the inclusion of educational institutions under
the act which in therein would help the educational institutions to know the
applicability of this act. It also attempts to compare several judicial
pronouncements delivered by different courts to derive a concrete conclusion
regarding the applicability of educational institutions under the act.
In India, economy is dominated by the labour class. Tracing back to the history,
labour class was often discriminated and exploited from a very long time. Due to
their poor and weak bargaining power, they were often subjected to humiliation.
It was the need to form a tripartite agreement for a better relation between
the government, employer and workmen.
The concept of trade unions have
also started to take a shape in the society. Trade unions were formed to provide
strengths to the workmen for collective bargaining. With time, India had also
adopted labour law for the protection and welfare of the workmen.
Shops and Establishments Law is one of the State labour law legislation enacted
by the State government. Every shops and establishments must follow the rules
provided under their state and also get themselves registered under the act
before 30 days of their establishment. It is a mandatory compliance that cannot
be avoided under any circumstances.
Once the application is submitted before the
State Labour Department, the officer must be satisfied that all the rules were
duly followed before granting the recognition to open their shops and
establishments. This act was adopted in order to regulate the working of
shops and commercial establishments that includes the rules for the payment of
wages to the employees, total hours of work per day, number of leaves
permissible, mandatory holidays, and even terms and conditions of the
Every business or establishments working for profits must attain
license under this act therein making the rules binding to them. Majorly all the
shops, restaurants, any place of public entertainment or public place, amusement
places, movie halls are all covered under this act. In the case of Parry and
Company Ltd v. Commercial Employees Association, the court explained the
objective of the act and emphasized the importance of the Labour
Commissioner in case of any dispute under the act. This commissioner is set up
to ensure that the rights of the employers and employees granted in the act are
Shops & Establishments Act is not a central legislation applicable to the entire
country. But every State government has formulated their own act that are little
different from state to state. The major intention and the crux of the statue
remains the same for every state. In this research, few major states like Kerala,
Delhi, Maharashtra, Tamil Nadu & Andhra Pradesh has been taken into
consideration in order the address the research questions.
The meaning of
commercial establishment has been analysed with the help of case laws in
order to understand the applicability of the act to educational institutions.
Different courts of different states have understood the definition of
commercial establishments in a different way and given a different
explanation and meaning to it.
Conclusion And Recommendation
Kerala Shops And Commercial Establishments Act 1960In Kerala, the Kerala Shops and Commercial Establishments Act 1960 was
adopted in order to regulate the working conditions of employees. The term
commercial establishment is defined under section 2(4) of the statute.
According to the definition provided under the act, any establishment that has a
characteristic of being commercial in nature is an industry or trading business,
banking sector or an insurance company.
It must be administrative in nature and
involves establishments like working spaces, hotel, cafe, restaurants, movie
theatre, or any kind of public entertainment that is controlled by government.
However, if any particular establishment is specifically mentioned in the
Gazette through a government notification, then it will also come under the
definition of commercial establishment.
The term shops is also defined under
section 2(15) that states that any premise that is associated with the trade or
business or a place where services is provided to customers are a part of shop.
Even the co-spaces like godowns or warehouses will also come under the meaning
In the case of Sarangadharan v Asst. Labour Officer, the court faced with
a crucial question that helped to understand the intention of the legislation
while defining the term commercial establishments.
Contention: Whether an educational institution that is affiliated to CBSE Board
comes under the purview of Kerala Shops & Establishment Act 1960 or not?
In this case, it was submitted that an educational institution is neither a shop
where any goods are being sold to the consumers, nor a commercial establishment
where any commercial transaction takes place.
The sole object of an educational
institution is to impart education to the children and there is no involvement
of commercial activity that takes place. Certain arguments were presented that
taking high school fee, donations, additional expenses are also another form of
commercial activities as it was not an educational institutions running for the
purpose of charity. Some element of commercial transaction is surely involved in
case of educational institutions.
With the plain reading and understanding of the terms shops and commercial
establishments it can be said that no trade or commercial business is
carried out by educational institutions that creates a nexus with the
customers. Reliance is placed on Ramanathan v State of Kerala, where
the court held that though a statutory power is given to the government to
declare anything as a part of this act, but still it must be come under the
definition of commercial establishments before extending the applicability of
Decision: The court held that the educational institution was under the control
of CBSE Board. Employing teachers and taking fees from the students will not be
a sufficient ground to call it as a shops or establishments under
the act. In no way there is a trade or business that is taking place that is
commercial in nature. Thus, educational institutions will not be governed
under the Kerala
Shops and Commercial Establishments Act 1960.
Delhi Shops And Establishments Act 1954 The Delhi Shops and Establishments Act 1954 is enacted in Delhi for
regulating the working conditions of employees. According to section 2(5),
the term commercial establishments is defined as any kind of trade or business
activity that is carried out by an establishment. It also includes the
establishments that are registered as a society or under a charitable
In the case of Institute of Economic Growth v The Controlling Office under the
Payment of Gratuity Act, the court held that the educational
institutions that are operating for the private motive will not be excluded
from the definition of commercial establishments. Only the institutions that
are working for the purpose of charity will not be covered under this
definition. However, this stance was later changed in Mr. Tanmaya Mehta v. CBSE, where the
court tried to interpret the applicability of educational institutions under the
Contention: Whether a private institution under CBSE is a commercial
establishment under the act in Delhi?
In this case, there was an argument that private institutions sell certain
things to school students that includes NCERT books, school uniform and other
necessary stationary items. This activity was regarded as a commercial
activity that was going on inside the school premises. School was forcing
the parents to buy these necessary items from a specified vendor only. This
can be enough to make the educational institutions under the purview of commercial
However, the court emphasised on the Circular No. CBSE/AFF/CIRCULAR/10/2017
dated 19.04.2017 that was issued by the CBSE board to all affiliated schools. In
this circular it was specifically advised to all CBSE affiliated to not force
parents to buy belongings from a particular vendor. Also, it was specifically
stated that educational institutions are established for imparting education and
not to start a commercialization business with the students. In no way the sole
purpose of the educational institutions is defeated by any organisation. It was
expected by all the schools to strictly comply with the orders of CBSE board
passed through circulars.
Decision: The court explicitly held that main objective of the educational
institutions is to ensure quality education and it does not comes under the
definition of commercial establishments under the Delhi Shops and
Establishments Act 1954.
Maharashtra- Bombay Shops And Establishments Act 1948 The Bombay Shops and Establishments Act 1948 is a state act applicable to
all parts of Maharashtra. As per the definition of commercial establishments
provided under the act, it means that any establishment as a business of trade
or commerce will come under this act. Even the establishments that are
registered under societies act or work for no profit gain i.e. the charitable
institutions will also be covered under this act.
However, the act specifically
excludes public places and entertainment from the purview of the act.
The court interpreted the definition of commercial establishments to understand
In Principal, Bhartiya Mahavidyalaya, Amravati and another v
Ramkrishna Wasudeo LahudkaR, the petitioner was operating an educational
institution that was registered under the societies act. As per the definition
provided under the statute, all the establishments that are registered under the
Indian Societies Act are covered under the act.
However, section 4 of the act
gives a special power to the State Government to make certain exemptions of the
act by passing a notification through the gazette. Schedule II of the act
provides the list of exemption. Entry No. 6F specifically exempts educational
institutions from the definition of commercial establishments by focusing on its
main purpose of establishment.
Thus, if any establishment is specifically exempted by the government, then
it will not come under the purview of this act. However, later on the court
interpreted and strictly relied on the definition of commercial
establishments provided under the in the case of Shri Gurudeo
Ayurved Mahavidyalaya v. Madhav Narayan Makahode where it held that the
college registered under the Societies Act will be applicable under the Maharashtra
shops and establishments act.
Tamil Nadu Shops And Establishments Act 1947 According to section 2(3) of the Tamil Nadu Shops and Establishments Act
1947, commercial establishment means an establishment that is engaged in
any kind of business and run for profit. It also states that the government
may include certain establishment under the purview of the act by issuing a
notification through gazette. The court in the case of Mr. Balan Haridas v.
Mr. V. Subbiah had faced a challenge to decide whether educational
institutions will come under the applicability of commercial establishments.
The petitioner focused on the case of Manuelmony Matriculation School v. Principal
Labour Court where it was held that every educational institutions is
taking money from the students and work for profit motive, so it will come
under the commercial establishments. But court has given a different
interpretation that the main objective of educational institutions is to
provide a community service of education and it does not form an industry
involving the activities of trade, business or profession making it non-applicable under the act.
Also, the court emphasised on the definition of commercial establishment and
stated that is not as wide as the definition of industry as interpreted
in the Bangalore Supply case.
Andhra Pradesh Shops And Establishments Act 1988 The Andhra Pradesh Shops and Establishments Act 1988 have been enacted in
the state for regulating the working conditions of employees working in
shops and establishments. Section 2(5) of the act defined the term
According to the statute, it means that any establishment that is engaged in
the activities related to trade, commerce and performing some kind of
business or profession will be covered in the act. However, no further
explanation is given to this definition. It was important to understand and
interpret the wide applicability of this act.
The courts often faced the contention regarding the applicability of
educational institutions under this act. In contrast to other states like
Andhra Pradesh High Court in the case of Secretary, Siddhartha Academy of General and Technical Education,
Vijayawada v. Appellate Authority has held that any educational
institutions will be covered under the shops and establishments act only if
a central notification is issued by the government.
The court in this case also relied on a Supreme Court decision laid down in
Ruth Soren v Managing
Committee, where it was held that the educational institutions are not
covered under the shops and establishment act. So, it is the sole discretion of
the Andhra Pradesh government, if they want to include the educational
institutions under the scope of the shops and establishments act or not. Such
government notification can also be revised with time to time.
As the shops and establishment act is a state legislation, every state have
formulated their own rules and regulation that gives us different meaning and
interpretation. After discussing few major state laws on the applicability to
the educational institutions, it can be concluded that different states have
inculcated different meaning of the term commercial establishments. Even the
state courts have given a different interpretation on determining whether
educational institutions will be covered under the act or not.
For instance, in
states like Kerala, Tamil Nadu and Andhra Pradesh, a limited scope is given to
the definition of commercial establishment. It does not include the
establishments that are registered under the societies act or are established as
charitable institutions. But in contrast, states like Delhi and Maharashtra have
specifically included those establishments under the purview of their shops and
After comparing the several judgements by different states,
it can be stated that different states have given their own views and
interpretation. High Courts in Kerala, Delhi and Tamil Nadu have taken a stance
by looking into the main objective of the educational institutions and
restricted its applicability under the shops and establishments act.
However in Maharashtra, the Bombay High Court has held that the educational
institutions will be covered under the definition of commercial establishments
as they take money from the students and are operated for the profit motive. In
contrast, the Andhra Pradesh High Court has specified that it will be on the
decision of the state government if they want to include a specific
establishment under this act by issuing it in an official gazette.
Thus, it can be said that a general view and a straight answer with a yes or no
cannot be given for the research questions. Being a state legislation, it is
obvious that different interpretation and applicability will be deduced by the
state government along with the judiciary. However, according to me, in
practicality there are educational institutions that are focusing more on
private gains. Even then it cannot be said that these educational institutions
are carrying out activities related to trade, business or
Articles and Websites:
- Andhra Pradesh Shops and Establishments Act 1988
- Bombay Shops and Establishments Act 1948
- Delhi Shops and Establishments Act 1954
- Kerala Shops and Commercial Establishments Act 1960
- Tamil Nadu Shops and Establishments Act 1947
- Notification dated 09/08/2012 regarding to add in the schedule under
Delhi Shops and Establishment Act, 1954. | Labour Commissioner |,
(last visited Feb 26, 2021)
- Overview of Labour Law Reforms PRSIndia,
https://www.prsindia.org/billtrack/overview-labour-law-reforms (last visited Feb
- Prasannan Parthasarathi, Indian Labor History, International Labor and
Working-Class History 127“135 (2012)
- Shops and Establishments Act¯: All You Need to Know QuickBooks,
(last visited Feb 26, 2021)
- The Shops & Establishments Act in India - An Overview, https://www.professionalutilities.com/advice/licenses-shop-and-establishment-license.php
(last visited Feb 25, 2021)
- What Was The Intent Behind Enactment Of The Shops And Establishment Act? iPleaders,
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https://blog.ipleaders.in/labour-laws-in-india/ (last visited Feb 25, 2021)
- Prasannan Parthasarathi, Indian Labor History, International Labor and
Working-Class History 127“135 (2012)
- Shops and Establishment Act, V Skills, https://www.vskills.in/certification/tutorial/shop-and-establishment-act/ (last
visited April 25, 2021)
- Shop and Establishment Act India - IndiaFilings - Learning Centre,
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- 2001 SCC OnLine Ker 425
- 1991 (1) KLT 89
- 2010 SCC OnLine Del 1161
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Award Winning Article Is Written By: Ms.Nisha Agarwal
Authentication No: JL3481933553-14-0721