Interpretation of the term ‘Industry’ over the years by the Judiciary and Parliament: A Critical Analysis
This Blog is written by Anjana Vijay from University of Petroleum and Energy Studies, Dehradun. Edited by Karan Dutt.
The definition of “industry” has changed and expanded over time through legal actions and judicial decisions. The evolutionary process such as this was figuratively largely due to the lack of clarity on the purpose of the law as embodied in the law and the conflicting methods of judging in terms of the desire for that definition.
DEFINITION AND INTERPRETATION OF THE DEFINITION ‘INDUSTRY’
The Industrial Disputes Act, 1947 is an important law aimed at finding the right treatment for workers’ and industrial peace, which is essential to promoting the economic growth of any country. In terms of section 2 (j) of the Industrial Dispute Act, the industry is defined in two categories as, “any business, trade, practice, performance or calling of employers, and includes any call, service, employment, manual or industrial activity or labor activity”. It is important to note that the Industrial Dispute Act, 1947, applies throughout India. An industry exists only if there is a relationship between employers and employees i.e., the employer is involved in business, trade, manufacturing, production or calling of employers and the employee is employed in calling, working, employment, manual or industrial or avocation.
The first part of the definition describes the industry in terms of employers’ residency in relation to certain jobs. Tasks are defined by containing five key words, ‘business’, ‘trading’, ‘doing’, ‘doing’, or ‘calling’. These terms determine what the industry is and what the dictionary aims to convey.
IMPLICATION OF THE CHANGING APPROACH
The question of defining the term “industry” ‘has been confusing the courts since the enactment of the Industrial Disputes Act, 1947. Although the Act provides for the definition of ‘Industry’ in Section 2 (j), the definition is vague and does not require consistent interpretation. As a result, the judicial effort is aimed at flexible testing with reference to the values considered important in relation to work as an ‘industry’. The court-ordered cases, however, indicated that the trials were not the same. Courts have been guided by an artistic approach rather than a rigorous analytical approach: sometimes trials are freely conceived, sometimes small. The Industrial Dispute Bill (Amendment) Bill, 1982 aims to end the floating nature of the ‘industrial’ definition. In this process it reduced the concept of ‘industry’ and opened up the debate on the reduction of benefits and protection available to workers under the original definition.
The industry plays an important role in building the socio-economic structure. Therefore, the importance of labor and industrial laws in building the country’s economy cannot be overlooked. In our country, we are very much starting to develop industrial and technological development but just technological advances are likely to increase social inequality, because there must be protective laws needed to balance relationships.
The Supreme Court recently drew attention to the definition of the word “industry” in the 1947 Industrial Disputes Act. Errors and ambiguities in the interpretation have created serious problems in the machine for resolving existing industrial disputes. Because of the confusion, it was difficult to classify conflicts as industrial or non-industrial. The explanations provided under the actions in the previous sections were exhaustive and in this case, the Supreme Court has expanded the definition to provide a better and more appropriate definition of the best resolution of industrial disputes. It was argued that industrial judgment should not only focus on traditional meanings, but also on social and economic changes and developmental activities undertaken by the government.
Many such cases have tried to reclaim what was stored in previous sections and postpone limited and complete judgments. The decisions have simplified the work of the legislature by placing all emerging issues of industrial disputes in the appropriate sections. The vision of action and related decisions is industrial peace and the resolution of industrial disputes between employer and workers.
IMPORTANT CASE LAWS
• “ N. Banerjee Vs. P. R. Mukherjee”also known as the Budge Budge Municipality Case (West Bengal). This is the first time that the definition of industry has been defined, with the Budget Municipality appointing the Sanitary Inspector and the Head Head. The Workers’ Union has approached a court that has filed a lawsuit seeking reinstatement. In the High Court, the Municipality pleaded that it performs its functions under the West Bengal By-law and therefore, it is not an industry and therefore the dispute is not an industrial dispute. However, the court found that the definition was intended to include even those activities that could not be called a trade or business. It was argued that the Municipality is an industry as sanitation and conservation fall within the equality of trade and industry.
• Another case named “Corporation of city of Nagpur Vs. Its Employees” it is very important because it identifies key aspects of the sector such as the profit motive is not important to determine whether it is an industry or not.
• “State of Bombay vs. Hospital Mazdoor Sabha” bought hospitals within factories. The case involved workers’ compensation. Managers say the hospital is not involved in any trade or business and therefore should not be considered an industry. However, the court establishes a practical principle that any formal activity of producing or distributing goods and services made with the assistance of workers in the form of trade or business is an industry. Hospital services were held for public service and hospitals are therefore an industry under the Industrial Disputes Act.
• Another Case, “University of Delhi & Anr vs. Ram Nath”, here was a women’s college where bus services were provided, but due to some losses, it decided to suspend the facility. As such, they were setting up the center and removing drivers such as Ram Nath and Asgar which eventually led to a dispute. The university said it was not an industry. The court ruled that education was provided through unemployed teachers. The purpose of the legislature was not to include educational institutions in this field to extend benefits to drivers and others who do not provide basic services.
• “Management of Safdarjung Hospital v. Kuldip Singh, reversed the judgment of Hospital Mazdoor Sabha Case, and held that a place of treatment of patients run as a department of the government was not an industry because it was a part of the functions of the government. Charitable hospitals run by Government or even private associations cannot be included in the definition of industry because they do not undertake economic activities that are comparable to trade or business. If hospitals, nursing home or a dispensary is run as a business in a commercial way, there may be elements of industry. However, for professionals like Doctors, Lawyers, Teachers, material services do not arise as they are not engaged in occupation in which employers and employees co-operate. Hence, organizations like hospitals and educational institutions do not fall within the definition of Industry.
• “Secretary, Madras Gymkhana Club Employees Union vs. Management of the Gymkhana Club” has about 1,200 members of which about 800 were active members. To work for them they had 194 staff to provide a place for sports and games and recreation and entertainment facilities, but the bonus was not paid to the club staff, so they went to court, where the court ruled the club was not an industry.
One of the most landmark decisions made regarding this was the Bangalore and Sewerage Board V. A. Rajappa. The Bangalore Water Supply Case tried to restore what was held in the earlier phases and reversed the restrictive and comprehensive judgments. This decision simplified the task of legislature by placing all the emerging issues of industrial disputes into the right perspectives. The ideology behind the act as well as the decisions abiding by it is the industrial peace and resolution of industrial disputes between the employer and workmen.
FACTS OF THE CASE
The Appellant Board fined the respondent employees alleging for misconduct and various amount of fines were recovered from them for the same. Deprived by this, the respondent employees filed an application (no. 5/72) under Section 33C (2) of the Industrial Dispute Act.
They alleged that the fines that were imposed on them were against the principles of natural justice. On the other hand, the appellate board argued with a preliminary objection before the court that any statutory body providing the citizens with basic facilities shall not come under the definition of the industry under section 2(j) of the Industrial Dispute Act.
Thus the respondent employees were not workmen and the court shall not have the jurisdiction to decide the issues claimed by the employees. These objections of the appellate court were overruled for which the board decided to file two writ petitions in the Karnataka High Court at Bangalore.
The bench of the high court dismissed the same and held that the appellant board shall be considered as an “industry” under section 2(j) of the Industrial Disputes Act. There were appeals by special leave before a larger bench considering the chances of confusion and the need of a clear, comprehensive and conclusive definition of what shall come under the category of “industry” of the Industrial Disputes Act.
ISSUES AND JUDGMENT OF THE CASE
• The issue in the case was that whether Bangalore Water Supply and Sewerage Board would be included under the definition of ‘Industry’?
HELD: New dimensions to the definition of “industry” were introduced in the judgment wiping out all the errors and confusion in the original dimension of the term. It was held that Bangalore Water Supply and the Sewerage Board will fall under the definition of the “industry” of the Industrial Disputes Act. Also an elaborated definition of the same was given by the judges.
• What is the meaning of the term ‘industry’ under section 2(j) of the Industrial Disputes Act?
HELD: The term “industry” as defined in section 2(j) of the IDA has a wide aspect.
1. any systematic activity,
2. organized by co-operation between the employer and employees
3. for the production and/or distribution of goods and services calculated to satisfy human wants and wishes ,
Prima facie, there is an ‘industry’ in that enterprise.
1) the profit or gainful objective of the enterprise is irrelevant in determining the inclusion of any establishment within the definition.
2) the focus of the contentions are solely functional and the test on the basis of which it shall be decided whether or not it has to be included in the definition will have its emphasis on the employer-employee relations.
• Whether Charitable Institutions Are Industries?
HELD: Any philanthropic organization does not cease to be a trade or business as there are establishments who yield profit and siphon off them for altruistic purposes and also those who hire employees as in any other business and produce goods and services which are available to the lower strata of society at a low cost. All these business involve the hiring and cooperation between the employer and employees thus shall come under the said definition.
• Whether the clubs and other establishments who are not directly involved in profit making come under the same definition?
HELD: The only ground that could be included to extricate clubs from this definition is the absence of employer-employee relation. Often, workers from different strata come together to form a club to satisfy their cultural and recreational need with a self-serving mechanism. Such clubs do not have a limited membership and are open to other workers subject to their own rule. The central argument being that if a club has a dominant self-serving mechanism then a marginal element of employer-employee relation will not make it into a conventional club.
• Would schools, colleges, universities and research institutes be called an Industry?
HELD: The service of the schools, universities and others is a service to the community and are a contributor to the wealth of the nation thus will be considered as an industry.
• Whether Sovereign or Regal functions will be industry?
HELD: The sovereign and regal functions of the state are primary and inalienable including law making, maintenance of the law as well as judicial disposal which are outside the preview of industries.
• Whether the Municipal Corporations is an Industry?
HELD: The establishments which are analogous to the mutual relations, methods of employment and the process of cooperation amongst the employer-employee relations undertaken under the private, philanthropic or labour sector can be considered as an industry.
• Whether Hospital is Industry?
HELD: The hospitals run by the government come under the sovereign functions of the state with the main objective of providing free service to the patients will not be considered as an industry. Rest all other public and private hospitals whether charitable or commercial will be under the definition of industry if they fulfill the triple test.
Thus all the aforesaid if fulfill the triple test, cannot be exempted from the definition of industry under section 2 (j).
After the Bangalore Water Supply Case the Supreme Court gave a principle called as he “triple test” –
• There should be systematic activity/ work.
• Co-operation between employer and employee relations.
• For the production and/or distribution of goods and services calculated to satisfy human wants and wishes.
The following points were also emphasized in this case:
1. Industry does not include spiritual or religious services.
2. Absence of profit motive or gainful objective is irrelevant, be the venture in the public, joint, private or other sector.
3. The true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer- employee relationship
3. If the organization is a trade or business it does not cease to be one because of philanthropy animating the undertaking.
Therefore, the consequences of the decision in this case are that professions, clubs, educational institutions co-operatives, research institutes, charitable projects and other kindred adventures, if they fulfill the triple test stated above cannot be exempted from the scope of section 2(j) of the Act.
The decision of the five-judge Supreme Court bench to review the definition of this “industry” is a request for the resignation of an official and the legislature. Following the verdict in the case, a matter arose before the State of Uttar Pradesh V. Jai Bir Singh in the case of whether the explanation given by the Bangalore Water Supply Case should continue or not. Employers in many institutions and departments of public works are outraged by the decision of the Bangalore Water Supply Case and suggest that they be excluded from this definition under section 2 (j). After that the amendment was passed but was not notified.
Following the trial of the water supply in Bangalore, there is still a tense situation related to the monarchy, with previous decisions clearly stating that the monarchy was not included in the definition. Although there is a system in place, it is still difficult to determine the cause. Such a dispute arose from the Chief Conservator of Forest v. Jagannath Maruti Kondare and State of Gujarat v. Pratamsingh Narsingh Parmar where previously the forest department of the State of Maharashtra was held as a factory and in this case was held that forest department of the State of Gujarat is not an industry.
The latest developments came when Justice N. Santosh Hegde held that the official’s failure to notify the amendment needed to be reviewed. The government had explained before the courts that the 1982 amendment had not been made in view of the fact that there were no other mechanisms for resolving grievances of employees in institutions that were not included in the proposed amendment.
There is a need on the one hand to protect the legitimate interests and democratic rights of workers in these fields, and on the other hand, to reduce the space for industrial disturbance in these important sectors to protect the public interest. All of these factors are important enough to ensure a separate law for these services. However, other observations made by Hegde Bench in support of the official review of the 1978 decision in very different lines are strongly opposed. Hegde Bench’s decision defines what we call the “restrictions and difficulties used by the legislature and the executive in implementing amended industrial law” in the definition of “industrial” in the 1978 judgment. This also ignores the explanation given by the Government for not using limited enforcement amendments.
The Supreme Court states that “over-interpretation of industrial meaning could be a barrier to private businesses in India where public service opportunities are scarce”. However, economic theory or decades of market economic growth in developed countries does not prove that the protection of workers’ basic rights is an obstacle to progress.
The Supreme Court reversed the legal order and thus prevented an unnecessary upheaval initiated by the court in the area of labor law by ruling in the Bangalore Water Supply case. Seven judges of the Supreme Court have given a very broad definition of “industry” under the Act and since then, the case has been used as a national law. Parliament, which amended the “industrial” definition in 1982, limited the broad definition given by the Bangalore Water Supply case. The new definition sought to exclude institutions such as hospitals, service centers, education, science and research or training institutes, community-based institutions, charitable resources. It has also been suggested that the functions of the monarchy, including functions such as atomic energy, space and defense research, be excluded. In each of these institutions, a separate framework has been proposed to deal with grievances, but following this legislative process, successive governments have been reluctant to implement the law by issuing only notice. The broad definition of “industry” has provided an opportunity for both the employer and the employee to raise issues which means that one is trying to get out of this definition, to get out of the hands of the said Act, and the other to enter into it. The current law is the translation of the first paragraph (j) of the Rajappa Case. Focusing only on the merits of the case is an excellent decision considering the social and economic culture in our country. This decision is very clear as it seeks to bring more jobs within the Industrial Dispute Act 1947. In fact, the country’s employees are in much better positions now, than they would have been amended S. 2 (j) was informed. This is because the amended S. 2 (j) amendment does not include other categories of employment that clearly fall into the Rajappa case.
 State of Bombay vs. Hospital Mazdoor Sabha- AIR 1960 SC 610.
 AIR 1953 SC 58.
 1960 AIR 675.
 AIR 1960 SC 610 (J J Hospital Mumbai Case).
 1963 AIR 1873.
 Bangalore Water-Supply and Sewerage Board V. R. Rajappa, AIR (1978) S.C. 610.
 S.N. Mishra, Labour and Industrial Laws, Ed., 25th, 2009, New Delhi, Central Law Publications, P.25.
 AIR 1996 SC 2898.
 (2001) 9 SCC 713.