What does not come under the definition of industry?

in Articles, Labour and Industrial Law, Study Materials

V. Chandra Sekhar, Student of Law, Damodaram Sanjivayya National Law University, Visakhapatnam

Change is a phenomenon that twists the very fabric of the society. When the world entered 19th century, the discovery era had just passed by and the era of invention had begun, and it was out of these inventions that companies were born. Out of a filament bulb Thomas Elva Edison set up the General Electric Company and from a car Henry Ford went on to set up The Ford Motor Company. Eventually Industries became a crucial part of our society; the rapidness took place after the kick start of the Industrial Revolution in England. Applying law to the concept of Industry, when a dispute arises in the industry there is law which is compiled with the rules and regulations to resolve the Issues. Coming to the Indian scenario there is Industrial Disputes Act, 1947, which controls the disputes arising in the Industries. The question raised was what comes under the definition of Industry. The literal meaning of the Industry is ‘economic activity concerned with the processing of raw materials and manufacture of goods in factories.’ As per Section 2(j) of the industrial disputes Act defines “Industry” means any business, trade, undertaking, or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen. The definition of industry is adapted from the Australian legislation, The Conciliation and Arbitration Act 1904 inscribed in section 4 which is interpretation section defines ‘industry’ as “Industry” means business, trade, manufacture, undertaking, calling, service, or employment, on land or water, in which persons are employed for pay, hire, advantage, or reward, excepting only persons engaged in domestic service, and persons engaged in agricultural, viticulture, horticultural, or dairying pursuits ((See http://foundingdocs.gov.au/resources/transcripts/cth6_doc_1904.pdf, Section 4 of the Commonwealth Conciliation and Arbitration Act, 1904)).

Development of Definition of Industry

The development of the definition of industry has developed in many stages, the definition of ‘industry’ has been interpreted many times, there was no fixed definition of industry and its scope has also not ascertained. First stage is 1953 to 1962 in this era the definition of industry has gone wide in nature. Cases which were decided in this time frame are as follows:

In Corporation of the city of Nagpur vs. Its employees ((AIR1960 SC 675)), The question raised in this case was whether the court had to consider the corporation would be an industry within the meaning of section 2(j) of industrial dispute act, 1947. Therefore the court could not press the expression ‘undertaking’ into service. But the municipal activity was brought within the ambit of words ‘business’ or ‘trade’  and distinction was drawn between the legal and municipal functions of the municipal bodies. The Supreme Court in this case made very significant observations while holding that court in this case made very significant observations while holding that corporation is an industry while engaged in the non-regal functions but while discharging regal functions of sovereign nature the position is totally different. The regal functions described as ‘primary’ and inalienable functions of the state, though delegated to the corporation, are necessarily excluded from the purview of the definition of industry.

In D.N.Banerji v P.R. Mukherjee ((AIR 1953 SC 58Z))the question that was raised was whether Municipality is an industry. The Supreme Court held though municipal activity could not be regarded as “business or trade” it would fall within the scope of the expression “undertaking” and it is an industry. Neither investment of capital nor profit making motive is essential to constitute an industry as they are generally necessary in a business. Hence, the non-profit undertakings of the municipality were included in the concept of an industry, even if there is no private enterprise.   A Public Sector such as railways, telephones, and the supply of power, light or water to the public may be carried on by private companies or business corporations and if this PSU (Public Sector Undertaking) is carried on by local bodies like a Municipality they do not cease to be an industry. The municipal undertaking engaged in public utility services without profit motive falls within the definition of industry.

In the 2nd Stage 1963 to 1978, the definition has undergone narrow interpretation in this era all the cases were held not to be industry.

In Madras Gymkhana club Employees’ Union vs. Gymkhana club (([1967] 2 LLJ 720, 729(SC), Per Hidayatulah J.)), the supreme court attempted to keep the two notions concerning the employees and the employees apart and expressed the opinion that the denotation of the term ‘Industry’ is to be found in the first part, relating to the employers and the connotation of the term is intended to include the second part relating to the workman and concluded that “non-profit making members’ club are not employed in trade or industry.” In this case the court held that the club is not an industry.

In this 1962 NNUC Employees V. IT ((AIR 1962 SC 1080))case the question was whether a solicitor’s firm is an industry or not. It was held that a solicitor’s firm carrying on the work of an attorney is not an industry, although specifically considered it is organised as an industrial concern. There are different categories of servants employed by a solicitor. “There is no interdependent or essential cooperation between the firm and its employees and the work done by the typist, or stenographer or by menial staff is not directly concerned with the services rendered by the solicitor to their client. Therefore solicitor firm was held not to be an industry ((Ibid)).”

In Osmania University vs. Industrial Tribunal Hyderabad (([1960] I LLJ 593 [AP])), a dispute having arisen between the Osmania University and its employees, the high court of Andhra Pradesh after closely examining the Constitution of the University, held the dispute not to be in connection with an industry. The correct test, for ascertaining whether the particular dispute is between the capital and labour, is whether they are engaged in co-operation or whether dispute has arisen  in activities connected directly with, or attendant upon, the production or distribution of wealth ((S.N. Mishra, Labour and Industrial Laws, Ed., 25th, 2009, New Delhi, Central Law Publications, P.30)).

Case Analysis of Bangalore Water-Supply and Sewerage Board V. R. Rajappa ((AIR (1978) S.C. 610)).

After the BWSSW case everything under the sun is considered as industry the working principle came into prominence which is regarded as crucial test which determines the organisation whether it is an ‘industry’ or not. In the second stage of all the cases which delivered that all organizations are not industries’ overruled after the Bangalore water supply case.

Facts of the case

The appellant Board raised a preliminary objection before the Labour Court that the Board, a statutory body performing what is in essence a regal function by providing the basic amenities to the citizens, is not an industry within the meaning of the expression under section 2(j) of the Industrial Disputes Act, and consequently the employees were not workmen and the Labour Court had no jurisdiction to decide the claim of the workmen. This objection being over-ruled, the appellant Board filed two Writ ‘Petitions before the Karnataka High Court at Bangalore. The Division Bench of that High Court dismissed the petitions and held that the appellant Board is “industry” within the meaning ‘of the expression under section 2(i) of the Industrial, Disputes Act, 1947. The appeals by Special Leave, considering “the chances of confusion from the crop ‘of cases in an area where the common man has to understand and apply the law and the desirability that there should be, comprehensive, clear and conclusive declaration as to what is an industry under the Industrial Disputes Act as it stands” were placed for consideration by a larger Bench

Issue

Whether Bangalore Water Supply and Sewerage Board will fall under the definition of ‘Industry’ and what is an ‘Industry’ under Section 2(j) of the Industrial Dispute Act?

Judgment

It held that the Bangalore Water Supply and Sewerage Board will fall under the definition of the industry and by justifying this it gave an elaborating definition of industry.

‘Industry’, as defined in Section 2(j) and explained in Banerjee, has a wide import. (a) Where (i) systematic activity, (ii) organized by co-operation between employer and employee, (the direct and substantial element is chimerical)(iii) for the production and/or distribution of goods and services calculated to satisfy human wants and wishes (not spiritual or religious but inclusive of material things or services geared to celestial bliss e.g. making, on a large scale, Prasad or food), prima facie, there is an ‘industry’ in that enterprise.

(b) Absence of profit motive or gainful objective is irrelevant, be the venture in the public, joint private or other sector.

(c) The true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer-employee relations.

(d) If the organisation is a trade or business it does not cease to be one because of philanthropy animating the undertaking.

Although Section 2(j) uses words of the widest amplitude in its two limbs their meaning cannot be magnified to overreach itself.

(a) ‘Undertaking’ must suffer a contextual and associational shrinkage as explained in Banerjee and in this judgment, so also, service, calling and the like. This yields the inference that all organized activity possessing the triple elements, although not trade or business may still be ‘industry’ (provided the nature of the activity, viz. the employer employee basis, bears resemblance to what we find in trade or business. This takes into the fold of ‘industry’ undertakings, callings and services adventure ‘analogous’ to the carrying on of trade or business. All features, other than the methodology of carrying on the activity viz. in organizing the co-operation between employer and employee may be dissimilar. It does not matter, if on the employment terms there is analogy.

Application of these guidelines should not stop short of their logical reach by invocation of creeds, cults or inner sense of incongruity or other sense of motivation for or resultant of the economic operations. The ideology of the Act being industrial peace, regulation and resolution of industrial disputes between employer and workmen, the range of this statutory ideology must inform the reach of the statutory definition.

Analysis

In the present case the court by applying liberal interpretation gave a wider meaning to the definition of industry so as to include all kinds of activities wherein there is an employer and employee relationship.

Triple Test

After the Bangalore Water supply case the Supreme Court came up with a working principle called as ‘triple test’

  • There should be systematic Activity
  • Organised by Co-operation between employer and employee,
  • For the production and/or distribution of goods and services calculated to satisfy human wants and wishes ((Bangalore Water-Supply and Sewerage Board V. R. Rajappa, AIR (1978) S.C. 610)).

The following points were also emphasised in this case ((S.N. Mishra, Labour and Industrial Laws, Ed., 25th, 2009, New Delhi, Central Law Publications, P.25)):

  1. Industry does not include spiritual or religious services or services geared to celestial bliss
  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
  4. 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 fulfil the triple test stated above cannot be exempted from the scope of section 2(j) of the Act.

What Does Not Come Under the Definition of ‘Industry?’

  • In State of Rajasthan v. Ganeshi lal, it was held that the law Department was not an Industry . In accordance with the Industrial Disputes Act, 1947, in this case, the respondent was  working as a peon for a  Public Prosecutor as a temporary employee on a contract basis. The issue before the court was with regard to his termination. But the court went on to hold that the accepted concept of an industry cannot be applied to the Law department of the Government. Though the  labour Court and the high Court did  not even go into o the details of why a law department cannot be considered as an industry, but was nevertheless held to not be an industry.
  • “Forest department is not an industry” was the ratio decidendi of State of Gujarat v. Pratam Singh Narsingh Parmar. The case explicitly mentions that ordinarily a department of the government cannot be held to be an industry but  rather it is part of the sovereign function and it would be for the person concerned who claims the same to also prove it.
  • The Census department of Government of India, will not come within the purview of ‘industry’ as defined under the Industrial Disputes Act. The same was  held in the case of  Md. Raj Mohammad v. Industrial Tribunal –cum-Labour court, Warangal.  The facts of the case are that the petitioner was appointed as a Tabulator on a consolidated pay of Rs. 280.00 per month, and he worked continuously at the office of the Regional Joint Director of Census, Khammam from April 24, 1981 to February 27, 1982. All of a sudden the Regional Joint Director, Census Operations, Khammam Region prevented him from attending to his duties thereby violating the provisions of Section 25-F of the Industrial Disputes Act and neither the petitioner was given notice nor retrenchment compensation, though he worked continuously for a period of 240 days. After termination of his service, the petitioner approached the respondent on several occasions to provide him with the job but his efforts went in vain. Since the date of his termination, the petitioner could not secure any alternative job and due to unemployment and financial distress he could not approach the Tribunal immediately and as such, there was a delay in approaching the Industrial Tribunal and same needs to be viewed leniently. He approached to the tribunal for the reinstatement and the same was delivered. But with regard to the first aspect , the Labour Court relied upon the principles laid down by the Hon’ble Supreme Court in Himanshu Kumar Vidyarathi and others v. State of Bihar and  held that the Census Department is not an industry and disengagement of the petitioner from service cannot be construed to be a retrenchment under the Industrial Disputes Act.
  • An employer, who having installed a  Photostat machine in a room of 12’’ x 8’ and working himself with the help of an operator and the shop itself being small in nature would not come within the purview of ‘industry’ as defined under the industrial disputes act. This was held in Soni Photostat Centre v. Basudev Gupta .
  • The brief facts of the case as they appear from record are that the petitioner had a Photostat machine installed in a room of 128 square feet. The shop was registered with the Director of Industries bearing a  Registration No. SSI 53612. There were two electrostat machines in the shop. One of the machines was used for work and the other was used for display to secure orders for sale of the electrostat machine on commission. It is alleged that the workman required an experience certificate for applying for job elsewhere and the same was given to him on 8.12.1990 by the proprietor of the shop. Thereafter the workman worked in the petitioner’s establishment as helper till 10.12.1990. The petitioner alleged that after taking experience certificate, he left the job himself for better prospects. The main issue raised in this case was whether the Photostat centre comes under the definition of ‘industry’. It was delivered that, “a single lawyer, a rural medical practitioner of urban doctor with a little assistant and/or menial servant may play a profession but may not be said to run an industry”. That is not because the employee does not make a contribution nor because the profession is too high to be classified as a trade or industry with its commercial connotations but because there is nothing like organised labour in such employment.
  • District Literary Samiti, as constituted under a scheme implemented by the government for eradication of literacy, will not be ‘industry’ as defined by I.D Act and the same was held in Project Director, District Literacy Samiti v. Ms. Mamta Srivastava and another . The facts of this case are that a Ms. Mamta Srivastava was working in the applicant’s establishment. Her services were terminated and, therefore, an industrial dispute was raised before the Competent Authority. Conciliation having failed the matter was referred to the Labour Court. The issue raised was whether the DLS will come under the definition of Industry. Ultimately, the writ petition was heard and subsequently held that the applicant’s establishment is not an ‘industry’ and, therefore, the Industrial Disputes Act is not applicable.
  • The Diocese of Church was  held to be not an ‘industry’ in the case of Diocese of Amritsar of Church of North India and others v Buta Anayat Masih and others. In the mentioned case the Respondent joined the petitioners’ church as an Evangelist on a monthly salary and was terminated from the same. The  Respondent filed a suit for reinstatement, continuity of service and back wages before the Labour Court.  According to him the termination of service, notice, charge-sheet and enquiry, were bad in law  and the Labour Court accepted reference and contention of the respondent on basis of evidence, granted reliefs and passed an ex-parte order. The application for setting aside the  ex-parte award was filed beyond a period of 30 days and after the  publication of award , the  application was rejected. And this was the contention of the current petition – Whether the writ Petition filed by Petitioner was maintainable?
  • In order to decide whether the petitioner was covered under the  term industry in accordance to the Act and whether the evangelist was a worker, the court sought help from a judicial precedent in , Bangalore Water Supply and Sewerage Board v. A. Rajappa and others, and went onto hold that any systematic activity, organized by co-operation between employer and employee for production/or and distribution of goods services to satisfy human wants and wishes was industry as covered under definition of the Act but those services calculated to serve human wants and wishes which were spiritual and religious could not be termed as industry and as the  respondent was working for the  petitioner for activities that involved spirituality, the  petitioner could not thereby be termed as an industry.
  • “A ‘temple’ is not an ‘industry”. And it was held in Indravadan N. Adhvaryu v. Laxmidevnaryan Dev Trust.   The facts of this case are that the petitioner, who was working in Dholera Swaminarayan Temple of the respondent Trust raised an industrial dispute before the Labour Court, Nadiad, on the ground that his service has been terminated without following the provisions of Section 25F of the Industrial Disputes Act. But the court observed that such a submission cannot be accepted as the temple run by the Trust is not involved in any business or undertaking any manufacturing activity to include it within the definition of ‘industry’.
  • In Shrimali v. District Development Officer, wherein there was an undertaking of famine and draught relief works by State government for  introducing certain schemes to provide relief and some works were also provided to the affected people, instead of distributing doles. The question that arose was   whether such functions were sovereign functions. It was held that it would be difficult to hold such an undertaking as an industry.

Recent Developments

After the Bangalore Water supply case, there is still chaotic situation related to the sovereign functions, as per the previous decisions it is clearly mentioned that sovereign activities are excluded from the definition. Despite having the working principle there is still problem in deciding the problem. Such conflict arose in Chief Conservator of Forest v. Jagannath Maruti Kondare and State of Gujarat v. Pratamsingh Narsingh Parmar, where in the former case forest department of State of Maharashtra was held to be an industry and in the later case it was held that forest department of State of Gujarat is not an industry. Constitutional Bench of five judges in State of UP v. Jai Bir Singh (([2005] 5. SCC 1)), In this case it was held that a caveat has to be entered on confining ‘sovereign functions’ to the traditional so described as ‘inalienable functions’ comparable to those performed by a monarch, a ruler or a non-democratic government. The learned judges in the Bangalore Water Supply a Sewerage Board case seem to have confined only such sovereign functions outside the purview of ‘industry’ which can be termed strictly as constitutional functions of the three wings of the State i.e. executive, legislature and judiciary. The concept of sovereignty in a constitutional democracy is different from the traditional concept of sovereignty which is confined to ‘law and order’, ‘defence’, ‘law making’ and ‘justice dispensation’. In a democracy governed by the Constitution the sovereignty vests in the people and the State is obliged to discharge its constitutional obligations contained in the Directive Principles of the State Policy in Part – IV of the Constitution of India. From that point of view, wherever the government undertakes public welfare activities in discharge of its constitutional obligations, as provided in part-IV of the Constitution, such activities should be treated as activities in discharge of sovereign functions falling outside the purview of ‘industry’. Whether employees employed in such welfare activities of the government require protection, apart from the constitutional rights conferred on them, may be a subject of separate legislation but for that reason, such governmental activities cannot be brought within the fold of industrial law by giving an undue expansive and wide meaning to the words used in the definition of industry.

Conclusion

In the current scenario industries’ have become one of the most vital parts of the society’s smooth run, when there is no harmonious relation between workmen and employee it leads to dysfunction. When the law itself is not clear regarding the term ‘industry’ it will definitely affect the industry on a large scale. The law in force presently is the interpretation of the original Section 2(j). Focusing solely on the merits of the case it is judgment which has taken into consideration. The decision is distinctly pro-labour as it seeks to bring more activities within the fold of the Industrial Dispute Act 1947. In practical terms, the labour forces of the country are much better position now, than they would have been had the amended S. 2(j) been notified. This is because the amended S. 2(j) excludes some categories of employment which squarely comes within the fold of Rajappa’s case. But at the same time, a glance at the judgment would suggest that it is actually a different law altogether as compared to the original S. 2(j). The question really is whether the judiciary is entitled to embark on such an expedition. Even in a democracy, following the theory of separation of powers, the judiciary has implied authority to fill in the gaps left by the legislature. After the Jai Bir Singh case there is no such astonishing judgement, which has altered the definition. A crucial step should be taken to clear the lacunae.