Cooperative Housing Society Managing Flats Is Not Engaged In Trade Or Business—Cannot Be Forced To Comply With Labour Laws: Bombay High Court

“Residential Housing Society Not An Industry Or Establishment—Industrial & Gratuity Laws Inapplicable”, In a landmark ruling that settles a recurring legal issue in labour law disputes involving cooperative housing societies, the Bombay High Court has held that a residential cooperative housing society, formed solely to manage the affairs of its members, is neither an ‘industry’ under the Industrial Disputes Act, 1947, nor an ‘establishment’ under the Maharashtra Shops and Establishments Act, 2017. Consequently, such societies are not liable under the Payment of Gratuity Act, 1972, and labour courts have no jurisdiction to entertain monetary claims under those laws against them.

Justice Sandeep V. Marne in a pair of writ petitions titled Apsara Co-operative Housing Society Ltd. v. Vijay Shankar Singh, where the Court decisively quashed proceedings initiated by an ex-employee of the society seeking gratuity, bonus, and leave wages, and clarified the legal position governing such residential entities.

“Labour Court Had No Jurisdiction—Society Not Engaged In Commercial Activity”

The petitioner, a cooperative housing society registered under the Maharashtra Cooperative Societies Act, had approached the High Court challenging two orders dated 17 January 2024 passed by the 10th Labour Court, Mumbai (also acting as the Controlling Authority under the Gratuity Act). The society’s challenge was simple—it did not carry on any systematic commercial activity, and hence, it was not amenable to proceedings under the Industrial Disputes Act (ID Act) or the Payment of Gratuity Act (PG Act).

Rejecting the Labour Court’s refusal to dismiss the claim at the threshold, the High Court observed: “The Labour Court has egregiously erred in dismissing Petitioner’s application... Even if the Respondent leads evidence, he would still not be able to demonstrate that the Petitioner-Society runs any activity akin to an industry.”

“Cooperative Societies Serving Only Members Cannot Be Called Industries”

The ex-manager of the society, drawing a salary of ₹90,000, had filed applications under Section 33-C(2) of the ID Act (for computation of unpaid dues) and under the PG Act (for gratuity of ₹4.67 lakh). The core argument from the society was that it was formed solely for managing residential premises and amenities for its members, and had no commercial motive or profit-oriented activity that could attract the definitions of “industry” or “establishment” under the relevant laws.

Justice Marne agreed, stating: “A cooperative housing society which merely manages the building and is formed for collective ownership... does not carry on any trade or business and would not qualify as an industry.”

The Court stressed that the nature of services rendered by the society—to maintain lifts, plumbing, garbage disposal, etc.—were not for commercial exploitation but purely for personal convenience of members.

“Presence of Clubhouse or Mobile Towers Doesn't Turn Residential Society Into Commercial Industry”

The ex-employee had argued that the society had commercial features like a clubhouse and had leased space to telecom companies for antennas, thus making it a commercial enterprise.

The Court rejected that logic outright: “Mere installation of telecommunication antennas for reducing monthly maintenance charges of members cannot be treated as a systematic activity for treating it as an ‘industry’... Clubhouse is for personal use of members.”

It clarified that unless outsiders were allowed, or if the society operated banquet halls or restaurants for profit, such facilities would not change the essential residential nature of the society.

“No Gratuity Liability as Society is Not an Establishment Under Shops Act”

Turning to the question of gratuity, the Court analysed Section 1(3)(b) of the PG Act and Section 2(4) of the Maharashtra Shops and Establishments Act, which make the Act applicable only to “establishments” carrying on trade, business, or profession.

It ruled that the housing society was not an establishment within the meaning of the Shops Act, and therefore, the PG Act did not apply either.

“A singular residential bungalow is not an establishment. A collective body of flat owners managing their own premises also does not become one,” the Court declared, in a key holding that draws a clear line between domestic/residential operations and commercial establishments.

The Court relied heavily on its own earlier rulings in Dalamal House, Shantivan-II, Arihant Siddhi, and on the Supreme Court’s judgment in Mgt. of Som Vihar Apartment Owners Housing Maintenance Society Ltd., where it was held that “personal services rendered to members by employees do not constitute industrial activity.”

“Labour Rights Flow from Employer’s Legal Status—Not From Sympathy”

The respondent argued that security guards employed through contractors received statutory benefits like bonus and gratuity, and hence he, too, as a direct employee, should get the same.

The Court rejected the analogy: “The contractors are themselves commercial entities and thus covered by statutory obligations. The housing society, however, is not in trade or business. Labour rights are not based on sympathy but on statutory applicability.”

Court Quashes Labour Court and Gratuity Authority Orders—Dismisses All Claims

Finding the legal position settled and unequivocal, the Bombay High Court set aside the Labour Court’s refusal to dismiss the claims and ruled:

“The Petitioner-Society is neither an ‘industry’ within the meaning of Section 2(j) of the ID Act nor an ‘establishment’ within the meaning of Section 2(4) of the Maharashtra Shops Act. The proceedings... are not maintainable and liable to be dismissed.”

The ex-manager’s claim for ₹3.87 lakh under ID Act and ₹4.67 lakh under Gratuity Act were both dismissed

High Court’s Verdict Reinforces That Housing Societies Managing Residential Premises Are Outside Labour & Gratuity Jurisdiction

In reaffirming the principle that residential cooperative housing societies are not commercial entities, the Bombay High Court has clarified that they cannot be forced to follow industrial labour law compliance mechanisms, unless they engage in commercial operations.

This ruling offers long-awaited clarity for thousands of housing societies across Maharashtra and other states, which routinely face claims from employees invoking the Industrial Disputes Act or the Payment of Gratuity Act, despite the absence of any trade or commercial activity.

Date of Decision: 05 January 2026