EMPLOYEES STATE INSURANCE CORPORATION versus R.K. SWAMY AND ORS. ETC.

Citation: [1993] SUPP. 3 S.C.R. 461 · Decided: 28-10-1993 · Supreme Court of India · Bench: KULDIP SINGH, S.P. BHARUCHA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

EMPLOYEES STATE INSURANCE CORPORATION 
A 
v. 
R.K. SWAMY AND ORS. ETC. 
OCTOBER 28, 1993 
B 
[KULDIP SINGH AND S.P. BHARUCHA, JJ.) 
Employees' State Insurance Act, 1948: Section 1(5)-Notification ex-
tending the provisions of the Act to 'Shops'-Applicability of Notification to 
advertising agencies and steamship Company-Held activities carried on by 
advertising agencies and steamship Company are covered by 'shops'-Doctrine C 
· of contemporaneous exposition-Applicability of. 
Inte1]Jretation of Statutes-Beneficent legislation-Inte1]Jretation of. 
Words and phrases-'Shop'-Meaning of. 
D 
By a Notification, issued under Section 1(5) of the Employees' State 
Insurance Act, 1948, the Government of ·Maharashtra extended the 
provisions of the Act to hotels, restaurants, shops, cinemas and newspaper 
establishments. Thereafter, the appellant-Corporation in"'-,rmed one of the 
respondent, who was carrying on advertising agency, that it Was covered E 
by the Notification and was, therefore, required to comply with the 
provisions of the Act and to make contributions thereunder. The respon-
dent filed an application before the Employees' State Insurance Court 
contending that it was not covered by the notification but the same was 
dismissed on the ground that the activities carried on by the respondent F 
were covered by shop and consequently he was covered by ~e Notification. 
On appeal a Single Judge of the Bombay High Court reversed the 
order of the Employees' State Insurance Court. Further appeal preferred 
by the appellant-Corporation was also dismissed by a· Division Bench of 
· the Bombay High Court holding that (I) the respondent in the course of G 
its business did not sell any unit of work or unit of commodity to any 
·particular person, not even to its client; (ii) even if it was accepted that a 
shop meant a place where goods and services were sold, it could not 
legitimately be held that the premises in which an advertising agency 
conducted its business was a place where services were sold. 
H 
461 
462 
SUPREME COURT REPORTS (1993] SUPP. 3 S.C.R. 
A 
In the connected appeals the High Courts of Madras and Kerala also 
B 
held that advertising agencies were not shops for the purposes of app~ica­
tion· of the Act. The other connected appeal had been filed by a steamship 
Company against the decision of the High Court of Madras which held 
that the activities of the Steamship Company were covered by shop. 
In appeals to this Court, it was contended on behalf of the appel-
lant-Corporation that (i) a shop was a place where services were rendered 
for consideration and that an advertising agency being a place where 
services .were rendered for consideration, it was a shop; and (ii) the Act 
was a piece of beneficial legislation and the court ought to interpret it as 
C to bring employees into its fold rather than the other way around. 
Relying on the case of Hindu lea Band v. Regional Director, 
Employees' State Insurance Corporation, Jaipur, A.l.R. (1987) S.C. 1166, it 
was contended on behalf of the advertising agencies that it was the r.etail 
activity of the business which was emphasised in that case and an adver-
D tising agency was not a retail establishment. 
On behalf of the advertising agencies involved in Madras cases it 
was contended that the correspondence which had taken place between the 
Government of Tamil Nadu and the appellant-Corporation in the course 
E of consultation required by Section 1(5) showed that larger area of com-
mercial activity was not intended to be covered by the word 'shop'. It was 
used to bring into the coverage of the Act small retail establishment. 
F 
Allowing the appeals preferred by the Employees' State Insurance 
Corporation and dismissing the appeal preferred by the steamship Com-
pany, this Court. 
HELD : 1. Clients call on an advertising agency to initiate campaigns 
for promotion of their products. The advertising agency gives advice in 
this behalf and as to possible expenses. ThP. advertising agency prepares 
G and presents alternative campaigns for the client to choose from. For such 
purpose it prepares the necessary art work and the appropriate words to 
go with it. It employs specialists in these fields. The advertising agency is 
paid for the service it renders to the client. It also receives commission 
from the media through wh"m advertising is done. Thus, it sells the 
H campaign to the client and receives the price thereof. Indubitably, the price 
STATEI

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