The definition of “industry” has evolved and expanded significantly over a period of time by the legislative acts and judicial decisions. The journey of such evolution has been symbolic primarily because of lack clarity in the legislative intent as embodied in the law and conflicting judicial approaches regarding the ambit of such definition. This paper shall be classified into four parts[1].

Part I

Section 2 (j) of the Industrial Disputes Act, 1947[2] can be divided into two components. The first component enumerates as the statutory meaning of ‘industry’[3]; the second component provides as to what does an industry includes[4] within its definition. This definition is not exhaustive and cannot be treated as restricted in any sense has therefore been subjected to immense judicial scrutiny. The landmark judgement is the Bangalore Water Supply case, enlarged the definition to a large extent and over-ruled case precedents which were a part of narrow interpretation, that is to say, before the Bangalore Water Supply case clubs[5], hospitals[6], universities[7], solicitor firms[8], government departments were excluded from the definition of industry but after the Bangalore judgement they have been declared as industry. The triple test of the Bangalore case forms the quintessential part of the amended definition of industry in 1982. The triple test provides that a) systematic activities b) organized by cooperation between employer and employees c) for the production of goods and services calculated to satisfy human wants and wishes would constitute industry. However, this test was subjected to exceptions, namely, industry does not include spiritual or religious services; absence of profit motive or gainful objective is irrelevant (although an organisation will not cease to be a trade or business because of philanthropy animating the undertaking) The main test is the nature of activity with emphasis of employer-employee relationship therefore all organized activities that satisfy the triple test will constitute industry including  undertakings, callings and services, adventures’ analogous to the carrying on of trade or business. Thus, professions, clubs, educational institutions, cooperatives, research institutes, charitable projects and (vii) other kindred adventures will not be exempted from Section 2(j) of the Act, 1947 provided the triple test is fulfilled. The Apex Court also enunciated the dominant nature criterion or test according to which  a limited category of professions, clubs, co-operatives little research labs, and even gurukulas may qualify for exemption if substantively no employees are hired but only in minimal matters some marginal employees are hired without disturbing the non-employee character of the unit. Also, lawyers volunteering to run a free legal services clinic or doctors serving in their spare hours in a free medical centre or if such services are supplied at a nominal cost and the those who serve are not paid remuneration based on master servant relationship then such an institution would not constitute industry even if servants, manual or technical, are hired.

PART II

In the aftermath of the Bangalore case, the legislature intervened and amended the definition of industry which although re-iterated the ratio of the Bangalore case but also excluded certain public utility services and welfare activities from its domain. The amendment (not yet enforced) provided that any systematic activity carried on by co-operation between an employer and his workmen (including independent contractor) for the production, supply or distribution of goods or services with a view to satisfy human wants( excluding spiritual or religious activities). The definition precludes hospitals or dispensaries; educational, scientific, research or training institutions; institutions owned or managed by organisations substantially engaged in any charitable, social or philanthropic service; khadi or village industries; any activity of the Government relatable to the sovereign functions of the Government including all the activities carried on by the departments of the Central Government dealing with defence research, atomic energy and space; number of individual employed in a profession or co-operative society or a society are less than ten. Further clarity in the definition of industry was enunciated in the case of Physical Research Laboratory case[9] in which it was held that a research institute, of the Government department, was not an industry although it carried out systematic activities with the help of employees but did not produce or distribute services to satisfy human wants and therefore there was absence of commercial motive. Also, the Apex Court has held that the Bangalore case is the law of the land and the proposed amendment is not binding yet (as it has not been enforced) therefore the Telecommunication Department of the Government is an ‘industry’ because it is engaged in a commercial activity and do not discharge any of the sovereign functions of the State[10]. Similarly, the functions which are carried on by All India Radio and Doordarshan cannot be said to be confined to sovereign functions as they carry on commercial activity for profit by getting commercial advertisements telecast i.e. except the sovereign function all other activities of employers would be covered within the sweep of term ‘industry’ as defined under Section 2(j) of the Act, 1947[11].

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It is noteworthy to mention that a different and contradictory position was taken by Bombay Telephone Canteen Employees’ case[12] (followed the Theyyam Joseph’s case[13]) which the two judge bench observed that if the ratio of Bangalore case is strictly applied then it would yield catastrophic consequences and held that Telephone Nigam of Government is not an ‘industry’ because it is discharging sovereign functions. Along the same lines the Supreme Court faced a dilemma in the Coir Band case[14] primarily because on one hand if the function of the Coir Board is emphasized i.e. to promote coir industry, open markets for it and provide facilities to make coir industry’s products more marketable then it could be held that it is not an industry as its predominant purpose is merely to promote coir business. On the other hand if the tests laid down in the Bangalore case are applied then it is an organization where there are employers and employees to do some useful work for the benefit of others then the inevitable conclusion is that it is an industry. The Court resolved its dilemma by following the former reasoning and observed that not every organization which does useful service and employs people can be labelled as industry. The Court was also of the view that the Bangalore case provides a sweeping definition of industry which is not contemplated by the Act, 1947 and therefore  that the matter must be placed before the Hon’ble the Chief Justice of India to consider whether a larger Bench should be constituted to re-consider the decision of Bangalore case. In the recent watershed judgement in Jai Bir Singh case[15] the Supreme Court expressed its concern regarding the excessive pro-workmen interpretation given in the Bangalore case as it inadvertently overlooked the interests of the employer and ignored the main object of the Act, 1947 (regulation of employer-employee relationship by keeping in view interests of the employers, who has put his capital and expertise into the industry and the workers who by their labour equally contribute to the growth of the industry). Therefore, the Court observed that there was dire need to re-examine such a sweeping definition of industry and allow legislature to draft a more comprehensive definition that adheres to the demands of employers and employees in the public and private sectors.

PART III

The careful analysis of definition of industry as provided in Section 2(l) in the Labour Code on Industrial Relations Bill, 2015 suggests that the legislature has incorporated the elements of Bangalore case by explicitly ignoring the concerns raise in the Coir Band and Jair Bir Singh case. It states that any systematic activity carried on by co-operation between an employer and his workmen (including independent contractor) for the production, supply or distribution of goods or services with a view to satisfy human wants would constitute industry irrespective of whether any capital has been invested for carrying on such activity or whether such activity is carried out with or without profit motive. It excludes agricultural operations unless such operations are integrated with an activity which substantially would constitute industry. This definition is identical to the one proposed by the amendment in 1982, the only difference between the two is that the former exempted certain public utility services and welfare functions of the state from being covered within the definition but the latter does not explicitly provide for any such exemptions. The primary reason for drafting such an expansive definition implies that the intention of the legislature is to protect the workmen who have been excluded by a narrow definition at least till such alternative statutory regimes are enacted.

Part IV

The preceding three parts have elucidated the gradual evolution in the definition of industry. This paper takes into consideration the rationale of the Government, which also forms the foundation of the definition provided in the Draft Code Bill, 2015, for not implementing the amended definition of 1982 i.e. there is no alternative machinery for redressal of the service disputes of the employees of the categories exempted from the definition[16]. However, this paper is of the view that there is need to remove the inhibitions and difficulties faced by the executive in implementing the law, that is to say, the legislature should draft a concise definition with certain restrictions and exemptions; for such exempted categories new legislations should be carved to address any redresses of the employees. It is conceded that demands of the competing sectors have to be taken into account but that should not act as an excuse for non-implementation of legislative intent by the executive. Therefore, the judgement of the Coir Band and Jai Bir Singh seems to be the correct position that such sweeping definition of industry in the Bangalore case needs to crystallised and refined taking into consideration the interests of workmen and employers equally and for achieving the object of the Act, 1947 i.e. growth of industry by harmonisation of employer-employee relation. Similarly, the overarching definition of industry provided in the Draft Code Bill, 2015 which merely reiterates the Bangalore case with no specific exceptions requires modification along the same lines so that floodgates to litigation are not opened.

About the author

SNEHA BHAWNANI

This article is written by Sneha Bhawnani, a student of O.P.  Jindal Global University.

 

 

 

 

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Endnotes

[1] Part I shall explain the definition of industry as provided in the Industrial Disputes Act, 1947 along with case laws. Part II shall explain the definition of industry as provided in the Industrial Disputes (Amendment) Act, 1982 along with relevant case laws. Part III shall throw light on the definition of industry as provided in the Labour Code on Industrial Relations Bill, 2015 and provide analysis of the same. Part IV shall attempt to provide a critical analysis of the definition of industry and suggest possible changes for its effective implementation.

[2] Hereinafter referred as the Act, 1947

[3] It relates to the activities of employer- ( i) business, (ii) trade, (iii) undertaking, (iv) manufacture or (v) calling of employers

[4] Nature of work done by employees or workmen – (i) calling, (ii) service, (iii) employment, (iv) handicraft, or (v) industrial occupation, or (vi) avocation of workmen

[5] Cricket club of India v Bombay Labour Union (1969 AIR 276)

[6] Management of Safdarjung Hospital v. Kuldip Singh (AIR 1970 SC 1406); Dhanrajgiri Hospital v. Workmen (AIR 1975 SC 2032)

[7] University of Delhi Vs. Ram Nath (1963 AIR 1873)

[8] National Union of Commercial Employees v. M.R. Meher (AIR 1962 SC 1080) ; Osmania University v Industrial Tribunal Hyderabad (AIR 1960 AP 388)

[9] Physical Research Laboratory v K.G. Sharma 08/04/1997

[10] General Manager, Telecom vs S. Srinivasa Rao & Ors decided on 18/11/ 1997

[11] All India Radio v Shri Santosh Kumar & Anr, Etc (05/02/1998)

[12] Bombay Telephone Canteen  v Union Of India & Anr decided on 09/07/ 1997

[13] It was held that functions of the Postal Department are part of the sovereign functions of the state and it is, therefore, not an ‘industry’ within the definition of Section 2(j) of the Industrial Disputes Act, 1947.

[14] Coir Board, Ernakulam Cochin & Anr v Indira Devi P.S. & Ors on 04/03/1992

[15] State of U.P vs Jai Bir Singh Appeal (civil)  897 of 2002 decided on 05/05/2005

[16] Aeltemesh Rein v. Union of India, [1988] 4 SCC 54]

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1 COMMENT

  1. […] Law has put in some obligations on the employer which are envisaged under the provisions of The Industrial Disputes Act, 1947 (hereinafter referred as ID Act) in order to prevent such disruption among the employees. The ID Act is applicable to all the industries as defined in Bangalore water supply case (see it’s analysis here). […]

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