Running a clinic is not commercial

activity: HC
private doctor's clinic is not a commercial establishment, the high court has held,
taking medical practitioners out of the purview of the
Bombay Shops and Establishments Act.
A division bench of Justices V M Kanade and P D Kode has struck down a 1977
amendment that included the medical practitioners' establishments. The
constitutional validity of the section, 2 (7), was challenged by an Andheri-based
gynaecologist, Dr Shubhada Motwani, prosecuted for not registering her clinic. The
punishment comprised a fine, calculated for each day of non-registration. She
moved court.
Her lawyer, S C Naidu, argued that a medical practitioner's clinic cannot fall within
the definition of commercial establishment as a doctor provides service to patients,
an activity that cannot be termed commercial. He argued that the amendment had
included in its ambit legal practitioners and CAs as well. Lawyers moved court, and
the HC held, in 1984, that the amendment was ultra vires (beyond the powers),
striking down their inclusion in the definition of commercial establishment. In 2006,
CAs were given relief.
In the Motwani case, the judges upheld Naidu's submission that an SC judgment of
May 2, 1968 (in Dr Devendra Surti vs State of Gujarat), where it was held that the
private dispensary of a doctor is not a commercial establishment, will apply.
"Therefore, the amendment incorporating medical practitioners within the definition
of commercial establishment will have to be held ultra vires and is accordingly struck
down," the HC judges said, directing that criminal prosecution initiated against
Motwani is quashed.
The Supreme Court in a recent judgement has clarified the ambiguity in
very clear words regarding use of residential premises by Doctors in the NOIDA
matter:
"This clinic would mean one as per the bye-laws. To put the
matters beyond ambiguity, we clarify that the doctor can have his clinic
with a table, a bed to examine the patient and such facilities which may be
necessary to provide first aid. A dentist may have a dental chair in his
clinic. Under this head, neither a polyclinic nor a nursing home can be
run in the residential area"

he High Court inter alia observed as under;

12. All the petitioners are qualified and registered medical practitioners. They have a
right to run their private medical clinics for giving professional advice to the patients. A
doctor's clinic run in a portion of the residential house, which may either be small and
sufficiently big but which may not occupy the entire area with a waiting hall, a
dispensary or even a small diagnostic facility may not convert the user of a premise
from a residential user to commercial user. A non-nuisance professional activity
running by doctors, lawyers, consultant, architect, chartered accountant,
property consultants, government guides may also fall in the same category
You may be in confusion that whether running your Yoga class or tuition class in your residential apartment is breach of
byelaw or not. It is true that a residential apartment cannot be used for commercial activities by a member or third-party.
Commercialization of residential apartment is often opposed by apartment owners association and its members. This may
be a shock for you to know that running your business or Yoga class in your residential apartment is not a commercial
activity and it is not a breach of byelaw. Presently, the rules allow 20% commercial use in residential units.

Yoga classes: In the case of Pant Nagar Anandlok CHS Ltd., at Ghatkopar, Mumbai, (Appeal No. 550 of

1985 decided on 24-11-1986 decided by the MSC Appellate Court) it was decided that carrying out activities like
conducting yoga classes in a residential flat does not constitute breach of bye-laws of a Co-op Housing Society. The
judge said, The professional activity of teaching certain arts would not in itself become commercial even though
some charges are levied in giving some performance.
Office of a Chartered Accountant: Phillipose & Co. v. the State of Karnataka, C.C. No. 21496 of 1987:

Case under Karnataka Shops and Commercial Establishments Act, 1961 office of the partnership firm of Chartered
Accountants is not a commercial establishment as CAs carry on a profession like lawyers or doctors which is not in
any way a trade or business. The judge observed: A profession is a vocation or occupation requiring special, usually
advanced education and skill. The work and skill involved in a profession is predominantly mental or intellectual
rather than physical or manual.
Business purposes: In the cases of Lakshman Sintre v. Balkrishna Shetye, BLR page 937 and B. R.
Oswas v. Laxmibai, BLR page 214 it was decided that when residential premises are used for dwelling as well as for
business, office purposes so however that the dominant user still remains residential, it would not be in breach of the
bye-laws and regulations of the society as there is no change of user involved.

For example, the MSC Apellate Court ruled favour of a certain resident in Ghatkopar, Mumbai in 1986,
stating that carrying out activities such as yoga classes in a residential flat does not constitute a breach of
the bye-laws of a co-operative housing society. The ruling basically meant that the professional activity of
teaching certain arts would not be viewed as commercial activity, even if certain charges are levied.

In a case filed under the Karnataka Shops and Commercial Establishments Act, 1961, it was ruled that the
use of a residence as an office by chartered accountants, lawyers and doctors would not be considered as a
commercial activity. The premise of this ruling was that the work and skill involved in such a profession is
predominantly mental or intellectual rather than physical or manual.

You may be in confusion that whether running your Yoga class or tuition class in
your residential apartment is breach of bye-law or not. It is true that a residential
apartment cannot be used for commercial activities by a member or third-party.

Commercialization of residential apartment is often opposed by apartment owners

association and its members. This may be a shock for you to know that running your
business or Yoga class in your residential apartment is not a commercial activity and
it is not a breach of bye-law.

Yoga classes: In the case of Pant Nagar Anandlok CHS Ltd., at

Ghatkopar, Mumbai, (Appeal No. 550 of 1985 decided on 24-11-1986
decided by the MSC Appellate Court) it was decided that carrying out
activities like conducting yoga classes in a residential flat does not
constitute breach of bye-laws of a Co-op Housing Society. The judge said,
The professional activity of teaching certain arts would not in itself
become commercial even though some charges are levied in giving some
performance.

Office of a Chartered Accountant: Phillipose & Co. v. the State of

Karnataka, C.C. No. 21496 of 1987: Case under Karnataka Shops and
Commercial Establishments Act, 1961 office of the partnership firm of
Chartered Accountants is not a commercial establishment as C.As carry
on profession like lawyers or doctors and do not carry on trade or
business. The judge observed: A profession is a vocation or occupation
requiring special usually advanced education and skill. The work and skill
involved in a profession is predominantly mental or intellectual rather
than physical or manual.

Can residential premises be used for professional or business office purposes?

YES.
It is generally believed that only a part of the flat can be used
for professional purposes and that no part of the flat can be used
for business officepurposes. However the decided case laws on the subject
speak otherwise.

The crux of the judgments on user of residential flats is that even if the
entire flat is used by a professional person for the practice of his
profession, there is no change of user to a commercial one and there
cannot be a prohibition for the same. If the flat is partly used for business
office, then also if the dominant user is residential, there is no violation of
the provisions relating to the change of user.
Distinction between business and profession:
The Constitution of India, while ensuring under Article 19(1)(g) to all
citizens the right to practice any trade, business or profession, has
maintained a clear distinction between carrying on a trade or business as
against practising a profession. The reason underlying the distinction is
that unlike in a trade or business, a profession is practised without any
underlying profit motive. What a practicing professional renders to his
clients is his services essentially based on his qualification, personal skill
and intellectual capacity. Earning of fees is considered only an incidental
part.
The Supreme Court also has in several judgments maintained the abovecited distinction between trade and business on one hand and the practice
of profession on the other.
The legality of user of premises is governed by the local laws applicable in
various states in respect of Shops and Establishments; for example in
Mumbai, the same is governed by the Bombay Shops and Establishments
Act, 1948.
Case law on firm of lawyers :
In V. Sasidharan v. Peter and Karunakar, (1984) 65 FJR 374 (SC), the
question for decision before the Supreme Court was whether the office of
a lawyer or of a firm of lawyers is or is not a commercial establishment
within the meaning of the Kerala Shops and Commercial Establishments
Act. The SC held that it does not require any strong argument to justify
the conclusion that the office of a lawyer or a firm of lawyers is not a
shop.
The Supreme Court has also, in several judgements, reiterated this
fundamental distinction. In National Union of Commercial Employees v.

Industrial Tribunal, (1962) 22 FJR 25, the Court held that the services
rendered by a firm of solicitors were only in the individual capacity of the
partners and very dependent on their professional equipment, knowledge
and efficiency.
Case law on private dispensary:
In yet another case of Dr. Devendra M. Surbi, (AIR 1969 SC 63 6T),
the Supreme Court had occasion to examine the definition of
Commercial Establishment in S. 2(4) of the Bombay Shops and
establishments Act, 1948. Construing the word Profession appearing in
association with the words Business and Trade in the said subsection, it
held that a private dispensary of a medical practitioner did not come
within the definition of Commercial Establishment.
In Dev Brat Sharma v. Dr. Jagjit Mehta, C.A. No. 4216 of 1988, the Supreme
Court held that the user of residential premises under tenancy for the
purpose of a doctors clinic did not tantamount to change of user.
West Bengal Govt. tried amendment of Shops and Establishments Act :
The same conclusion was reached in the case of Dilip Kumar v. Chief
Inspector, (Shops and Establishments), (1986) 69 FJR 100 (Cal.). In this
case, the question for consideration was whether the inclusion of the
office of a legal practitioner in the definition of
Commercial Establishment by an amendment in 1981 of the West Bengal
Shops and Establishments Act was in order. The Court held that the legal
profession could not be equated or placed at par with a shop or an
establishment and that the inclusion amounted to an unreasonable
restriction violative of Article 19(1)(g) of the Constitution.
Yoga classes :
In the case of Pant Nagar Anandlok CHS Ltd., at Ghatkopar, Mumbai,
(Appeal No. 550 of 1985 decided on 24-11-1986 decided by the MSC
Appellate Court) it was decided that carrying out activities like conducting
yoga classes in a residential flat does not constitute breach of bye-laws of
a Co-op Housing Society.

The cases were filed by the society against one of its members and his
wife, seeking a declaration that the yoga activities of the member were
violative of the bye-laws and were illegal. It was stated in the complaint
that the society received complaints from its members that because of the
yoga classes, there was a lot of harassment to the neighbors, the
members of the society and to the public at large. The sandals, chappals
and shoes in the passage caused obstruction for use thereof by the
members of the society.
The ailing persons, who could benefit from yoga were some-times referred
to her by doctors. On an average, in a day 30 to 40 persons used to attend
the yoga classes which she taught between 7.30 a.m. to 7.30 p.m.
The judge said, The professional activity of teaching certain arts would
not in itself become commercial even though some charges are levied in
giving some performance.
Drawing analogy from earlier verdicts, the Judge, in the case in question,
decided that there was no breach of bye-laws or regulations of the society.
The Court also directed the Respondent Society to pay Rs.100/- as costs of
the appeal to the appellant.
Office of a Chartered Accountant :
Phillipose & Co. v. the State of Karnataka, C.C. No. 21496 of 1987: Case
under Karnataka Shops and Commercial Establishments Act, 1961 office
of the partnership firm of Chartered Accountants is not
a commercial establishment as C.As. Carry on profession like lawyers or
doctors and do not carry on trade or business.
The judge observed: A profession is a vocation or occupation requiring
special usually advanced education and skill. The work and skill involved
in a profession is predominantly mental or intellectual rather than
physical or manual.
Business purposes :
In the cases of Lakshman Sintre v. Balkrishna Shetye, BLR page 937 and B.
R. Oswas v. Laxmibai, BLR page 214 it was decided that
when residential premises are used for dwelling as well as for business

office purposes so however that the dominant user still

remains residential, it would not be in breach of the bye-laws and
regulations of the society as there is no change of user involved.