LABOUR LAW PROJECT

“GOVERNMNET DEPARTMENT AS AN INDUSTRY”

SUBMITTED TO:
Dr. Vikas Bhati
(ASSISTANT PROFESSOR OF LAW)

PROJECT SUBMITTED BY:

RISHI SEHGAL
Semester VI, Section B

ENROLL. NO. 150101112

ROLL NO. 115

DR. RAM MANOHAR LOHIYA NATIONAL LAW

UNIVERSITY.

LUCKNOW, UTTAR PRADESH

 TABLE OF CONTENTS

LITERATURE REVIEW .......................................................................................................... 2

CHAPTER 1: INTRODUCTION .............................................................................................. 3

CHAPTER 2: DEFINITION OF THE TERM “INDUSTRY” .................................................. 5

CHAPTER 3: WHETHER GOVERNMENT DEPARTMENT IS AN INDUSTRY? ............. 9

CHAPTER 4: CASE LAW AND ITS ANALYSIS ................................................................ 13

CHAPTER 5: CONCLUSION ................................................................................................ 16

BIBILIOGRAPHY .................................................................................................................. 18

1
 LITERATURE REVIEW

1. V. Chandra Sekhar, What does not come under the definition of industry? Vol II Lex-
Warrier Onl.

In this article the author has done a complete overview of the issue. He has done an analysis of
what the term industry means under Labour Law and how the courts in India have interpreted
this term. The author has also dealt with through the different case laws as to what other entities
can be brought under the term industry.

2. What Constitutes An “Industry”? – An Analysis In Context Of Labour Laws Of India,

Sneha Bhawani

In this article the main focus of the author has been to evaluate critically the definition of
industry under the various Labour acts. The article of the author is divided into 4 parts with
Part 1 explaining the definition of industry as provided in the Industrial Disputes Act, 1947
along with case laws. Part II has dealt with explain the definition of industry as provided in the
Industrial Disputes (Amendment) Act, 1982 along with relevant case laws. Part III throws 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 provides a critical analysis of the definition of
industry and suggest possible changes for its effective implementation.

3. Industry under Industrial Disputes Act, 1947, Palak Verma and Aditya Tomar

In this article the authors have discussed the scope of term ‘industry’ as it appears in the
Industrial Disputes Act, 1947. Further, through judicial decisions, they authors have analyzed
whether charitable institutions, hospitals and legal firms can be brought under the term
industries.

2
 CHAPTER 1: INTRODUCTION

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.

“Until specific legislative mandates emerge from Parliament the court may mould the old, but
not make the new law. Interstitially, from the molar to the molecular is the limited legislative
role of the Court, as Justice Holmes said” This was observed by Justice Krishna Iyer in Gujarat
Steel Tubes Ltd. v. Mazdoor Sabha1, but, only if he could have kept his words in words in
Bangalore Water Supply and Sewerage Board v. A. Rajappa,2 where he actually drafted a new
‘definition’ of the term ‘industry’ assuming the role of a crusader-legislator. The broad sweep
of the judgment brought within the Industrial Dispute Act several institutions like educational
institutions, solicitor’s offices, State departments and even charitable institutions.

The attention of the Supreme Court has recently been drawn to the definition of the term
“industry” as stated in the Industrial Disputes Act, 1947. The uncertainty with regard to the
definition assumes great importance as the machinery for the settlement of industrial disputes
can only be set in motion when there exists a dispute relating to “industry”. However, it is next
to impossible to classify a dispute as industrial or non-industrial without being certain of what
exactly the term “industry” encompasses within its scope.

1
Gujarat Steel Tubes Ltd. v. Mazdoor Sabha, 1980 S.C.R. (2) 146.
2
Bangalore Water Supply and Sewerage Board v. A. Rajappa, A.I.R. 1978 S.C. 610.

3
One of the most momentous decisions in this regard was Bangalore Water Supply and
Sewerage Board v. A. Rajappa which overruled numerous other decisions of the Supreme
Court but simplified the task for the legislature by placing major issues in the right perspective,
major policy issues being best decided by the legislature and not by the judicial process. It is
the analysis of this very judgement which is the subject of this paper.

The world is whirling forward holding the standard of “advancement” as industrialization.

Industry involves an employer and employee, and progress postulates harmony and justice in
industrial relations. Whether the system is capitalist or socialist, if friction and break-down
afflict the smooth working of an industry, flames of “strike” and “lock-out” will spoil or stall
production and victimize the society which is the ultimate beneficiary of the industrial
discipline and the consequent flow of goods and services.

The Industrial Disputes Act was enacted with the purpose of providing machinery for the
settlement of industrial disputes which had become a common feature due to industrial unrest
in the post-war time where problems arose out of constant strife between the employers and
employees. The consequence was a fall in production.

The object of labour legislations is to ensure fair wages and to prevent disputes so that
production may not be adversely affected.3 The objects of the said Act are laid down as:4

(i) Promotion of measures for security, amity and good relations between the employer and
the employee.

(ii) Investigation into and settlement of industrial disputes between the employers and the
employees, employers and employers, and employees and employees.

(iii) Prevention of illegal strikes and lock-outs.

(iv) Relief to workers in the matters of lay-off and retrenchment.

The function of law is to intervene and, by a just process, resolve the dispute.

The term industry is defined in Section 2 (j) of the Industrial Dispute Act in these words,
industry means any business, trade, undertaking, manufacture or calling of employees and
includes any calling, service, employment, handicraft or industrial occupation or avocation of
workman. The definition has undergone variegated judicial interpretations. A definition is
ordinarily the crystallization of legal concepts promoting precision and rounding off blurred
edges but the definition in Section 2 (j) viewed in retrospect has achieved the opposite.

Starting from D.N. Banerjee v. P.R. Mukherjee5 and passing through various cases Supreme
Court has given conflicting decision regarding definition of the term industry. In some cases
Supreme Court has, having liberal attitude, given a very wide interpretation and in some cases
a narrow interpretation has been given. A bench of seven Judges in Bangalore Water Supply

3
Banaras Ice Factory Ltd. v. Its Workmen, A.I.R. 1957 S.C. 168.
4
Workmen of Dimakuchi Tea Estate v. Management of Dimakuchi Tea Estate, A.I.R. 1958 S.C. 353.
5
D.N. Banerjee v. P.R. Mukherjee, A.I.R. 1953 S.C. 58.

4
and Sewerage Board v. A. Rajappa , wherein the question was whether the activity of the Board
fell within the ambit of ‘industry’, it went haywire and far beyond the confines of the case in
the name of judicial activism to bring every conceivable activity in the sweep of the industry.
The meaning which was given to the term ‘industry’ is so wide and wild that it covers perhaps
any systematic activity under the sun leading to obscurity.

Bangalore Water Supply and Sewerage Board v. A. Rajappa, still holds the field as it was the
largest Judge Bench decision on the issue but there are cases which have, though not
permissible under the doctrine of ‘precedent’, decided in contrary to the decision of the
Bangalore Water Supply case. A five judge Bench of the Supreme Court has decided to refer
the matter of reviewing the Bangalore Water Supply case to a larger Bench.

CHAPTER 2: DEFINITION OF THE TERM “INDUSTRY”

According to section 2(j) of the Act: “Industry means any business, trade, undertaking,
manufacture or calling of employees and includes any calling, service, employment, handicraft
or industrial occupation or avocation of a workman.” In the Bangalore Water Supply case, a
seven-judge bench was constituted especially to examine the definition of “industry” and lay
down the law on the subject. The Bench was presided over by Justice V. R. Krishna Iyer who
assumed the role of a crusader-legislator and drafted a new definition of the term “industry”.
Their ruling was a result of the various disputes arising in establishments that are not
manufacturing industries but belong to categories of hospitals, educational and research
institutions, Governmental departments, public utility services, professionals and clubs. The
definition was accordingly expanded to cover those establishments which involved an
employer-employee relationship, irrespective of the objectives of the organization in question.

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 employees6, 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’

6
Corporation of the city of Nagpur v. Its employee,s A.I.R. 1960 S.C. 675.

5
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. Mukherjee7 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 club8, 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 “non­profit 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. IT9 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 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 industry6.”

In Osmania University vs. Industrial Tribunal Hyderabad10, 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.

7
D.N.Banerji v. P.R. Mukherjee, A.I.R. 1953 S.C. 582.
8
Madras Gymkhana club Employees’ Union v. Gymkhana club, A.I.R 1967 S.C. 720, 729.
9
N.N.U.C. Employees v. I.T., A.I.R. 1962 S.C. 1080.
10
Osmania University v. Industrial Tribunal Hyderabad, [1960] I L.L.J. 593 [AP].

6
Case Analysis of Bangalore Water-Supply and Sewerage Board V. R. Rajappa11.

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 overruled,
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.

11
A.I.R. 1978 S.C. 610.

7
(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.

‘Undertaking’ must suffer a contextual and associational shrinkage as explained in Banerjee

case 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 Cooperation between employer and employee.

* For the production and/or distribution of goods and services calculated to satisfy human
wants and wishes12.

The following points were also emphasised in this case:

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.

12
Bangalore Water-Supply and Sewerage Board v. R. Rajappa, A.I.R. 1978 S.C. 610.

8
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 cooperatives, 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

CHAPTER 3: WHETHER GOVERNMENT DEPARTMENT IS AN INDUSTRY?

According to Bangalore Water Supply and Sewerage Board v. A. Rajappa13 sovereign

functions of the State cannot be included in industry. They can aptly be termed as the primary
and inalienable functions of a constitutional government. Services governed by Articles 309 to
311 of the Constitution of India, by the enactments dealing with the Defense Forces and other
legislation dealing with employment under statutory bodies may, expressly or by necessary
implication, exclude the operation of the Industrial Disputes Act, 1947. The functions which
are strictly performed by State are inalienable functions of Government such as maintaining
law and order, making laws, defense, and justice dispensation. It is only these functions where
the State enterprise can escape from the coil of industrial law.

But present stage is a stage of welfare State where State has to perform so many functions for
the welfare of citizens. At the stage of laissez faire, maintenance of law and order and defense
were the only functions to be performed by States and the traditional concept of sovereign
functions was including only maintenance of law and order and defense of State. But in a
welfare State government has to perform so many functions, apart from maintenance of law
and order and defense of State, as enshrined under the Directive Principles of State Policy in
part IV of the Constitution of India. Every democratic state in the welfare society has to achieve
a goal of wellbeing of its citizens and part IV requires State to achieve the goal. It imposes a
duty on the State to undertake many activities and therefore the extent of sovereign functions
may not be confined to the three wings but there may be other functions which are inalienable.
In view of the constitutional duty imposed on State to undertake many activities as provided
by Part IV of the Constitution of India, the extent of sovereign functions may not be confined
to aforesaid functions in as much as other functions may also be inalienable and they would
not be, undertaken by any private agency in a meaningful way.

In Shrimali v. District Development Office14, wherein there was an undertaking of famine and
draught relief works by State government by introducing certain schemes to provide relief and
some works were also provided to the affected people, instead of distributing doles. The
question arose that whether such functions be sovereign functions. It was held that it would be
difficult to hold the undertaking to be an industry. What really follows from this judgment is

13
A.I.R. 1978 S.C. 610.
14
Shrimali v. District Development Office, (1989) 1 G.L.R. 396.

9
that apart from the aforesaid three functions, there may be some other functions also regarding
which a view could be taken that the same too is a sovereign function.

As to which function could be, and should be, taken as regal or sovereign function was again
examined in N. Nagendra Rao v. State of AP15 , in which case Sahai J. speaking for the Bench
examined this question in detail and observed that it would all depend on the nature of the
power and manner of its exercise. As per the decision in this case, one of the tests to determine
whether the executive function is sovereign in nature is to find out whether the State is
answerable for such action in Courts of Law. It was stated by Sahai J. that acts like defense of
the country, raising armed forces and maintaining it, making peace or war, foreign affairs,
power to acquire and retain territory, are functions which are indicative of external sovereignty
and are political in nature. They are, therefore, not amenable to the jurisdiction of ordinary a
civil court in as much as the State is immune from being sued in such matters. But, then
according to this decision the immunity ends there. It was then observed that in a welfare State,
functions of the State are not only the defense of the country or administration of justice or
maintaining law and order but extends to regulating and controlling the activities of people in
almost every sphere, educational, commercial, social, economic, political and even marital.
Because of this the demarcating line between sovereign and non-sovereign powers has largely
disappeared.

The aforesaid shows that if we were to extend the concept of sovereign functions to include all
welfare activities, the ratio in Bangalore Water Supply case would get eroded and substantially.
And in fact there are sets of cases who have actually dissented from Bangalore Water Supply
v. A. Rajappa on the concept of sovereign functions or regal functions, though they have not
challenged it. Because of the sets of dissenting cases the confusion that, are governmental
functions, stricto sensu, industrial and if not, what is the extent of the immunity of
instrumentalities of government, still persists. In Des Raj v. State16 of Punjab it was held that
having regard to the activities of irrigation department of State of Punjab and applying the tests
laid down in various decisions of Supreme Court and particularly applying the dominant nature
test enunciated in Bangalore Water Supply case it must be held that the irrigation department
of State of Punjab is an industry.

Now it was the turn of telecommunication and postal department to be scrutinized. Regarding
telecommunication and postal department also there were conflicting decisions wherein in
some cases the department was held to be an industry and is some cases the conclusion was
opposite. In Sub Divisional Inspector of Post v. Theyyam Joseph17 , wherein respondent was
appointed as a substitute to the regularly appointed ED Packer, who had not joined duty after
training. The appointment so made dehors the rule. About two years later his services were
terminated. It was held that India as a sovereign, socialist, secular, democratic, republic has to
establish an egalitarian social order under the rule of law. The welfare measures partake the
character of sovereign function and the traditional duty to maintain law and order is no longer
the concept of the sovereign function. The Directive Principle of State Policy under Part IV of

15
N. Nagendra Rao v. State of AP, A.I.R. 1994 S.C. 1994.
16
Des Raj v. State of Punjab, A.I.R. 1988 S.C. 1182.
17
Sub Divisional Inspector of Post v. Theyyam Joseph, A.I.R. 1996 S.C. 1271.

10
the Constitution of India and the performance of duties, provided therein, are constitutional
functions. One of the functions of the State is to provide telecommunication facilities to general
public and an amenity, and so is an essential part of the sovereign functions of the State as a
welfare state. It is, therefore, not an industry.

Incidentally this decision was rendered without any reference to the seven-judge Bench
decision in Bangalore Water Supply case. In a latter two judge Bench decision in Bombay
Telephone Canteen Employees’ Association case this decision was followed for taking the
view that the Telephone Nigam is not an ‘industry’. Then came General Manager, Telecom.
V. A. Sriniwas Rao18 , which overruled the Theyyam Joseph case and it was held that Theyyam
Joseph is in direct conflict with the seven-Judge Bench decision in Bangalore Water Supply
case and it is not permissible to take a contrary view or to bypass that decision so long as it
holds the field.

Such conflict again arose in Chief Conservator of Forest v. Jagannath Maruti Kondare19 and
State of Gujarat v. Pratamsingh Narsinh Parmar 20, where in the former case forest department
of State of Maharashtra was held to be an industry and in the latter case it was held that forest
department of State of Gujarat is not an industry. In the case of Chief Conservator of Forest v.
Jagannath Maruti Kondare , scheme named Panchgaon Parwati Sheme was framed as per the
government resolution based on the policy decision taken in April 1976. The scheme was to be
initially for a period of five years and an area of about 245 hectares situated in a hill platue on
the southern outskirts and within easy access of Pune city was selected for creation of a park
under bioaesthetic development for the benefit of the urban population. The appellant
conservator of forests contended that the scheme as well as the social forestry work undertaken
had to be regarded as part of inalienable or sovereign functions of the State and therefore not
an industry within the meaning of the Industrial Dispute Act, 1947.

Rejecting the contention the Supreme Court held that the dichotomy of sovereign and non-
sovereign functions of the State does not really exist. Whether a particular function of the State
is or is not a sovereign function, depends on the nature of the power and manner of its exercise.
The Scheme in question cannot be regarded as a part of inalienable or inescapable function of
State for the reason that the scheme was intended even to fulfill the recreational and educational
aspiration of the people. There can be no doubt that such a work could well be undertaken by
an agency which is not required to be even an instrumentality of the State. Therefore the forest
department of the State is an industry.

But then in State of Gujarat v. Pratamsingh Narsinh Parmar 21, wherein the question for
consideration was whether the forest department in the State of Gujarat where the respondent
was appointed as a clerk can be held to be an industry within the meaning of the said expression
under the Industrial Dispute Act, so that an order of termination, without complying with the
provisions of Section 25-F of the Act would get vitiated. It was held that if a dispute arises as

18
General Manager, Telecom v. A. Sriniwas Rao, A.I.R. 1997 S.C. 11.
19
Chief Conservator of Forest v. Jagannath Maruti Kondare, A.I.R. 1996 S.C. 2898.
20
State of Gujarat v. Pratamsingh Narsinh Parmar (2001) I.L.L.J. 1118 S.C.
21
(2001) I.L.L.J. 1118 S.C.

11
to whether a particular establishment or part of it where an appointment has been made is an
industry or not, it would be for the person concerned who claims the same to be an industry, to
give positive facts for coming to the conclusion that it constitute an industry. Ordinarily a
department of government cannot be held to be an industry and rather it is a part of the
sovereign functions. The respondent in the writ petition had made no assertion with regard to
the duty which was discharging and with regard to the activity of the organization where he
had been recruited, though no doubt he had been contended that the order of dismissal was
vitiated for non-compliance of Section 25-F. In the absence of assertion by the petitioner as
well as the job of the establishment where he had been recruited, the High Court wholly erred
in law in applying the principles enunciated in Jagannath Maruti Kondhare to hold that the
forest department could be held to be an industry.

Due to the apparent conflict between these two cases, again a matter was referred to the
constitutional Bench of five judges in State of UP v. Jai Bir Singh22 . 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’,
‘defense’, ‘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.

Hence the question whether a department of government is an industry or not within the
meaning of Section 2(j) of the Act is a mixed question of law and fact and therefore, it cannot
be allowed to be raised for the first time before the High Court if it has not been raised before
the industrial forum from which the proceedings before the High Court have arisen.23

22
State of UP v. Jai Bir Singh, (2005) 5 S.C.C. 169.
23
Gujarat Forest Producers v. State Of Gujarat (2004) 1 G.L.R. 752.

12
 CHAPTER 4: CASE LAW AND ITS ANALYSIS

In Bangalore Water Supply case the term ‘industry’ was given a very wide expansion and it
included educational institution, charitable institutions and liberal profession into its wide
sweep. The reasoning given as regards the educational institutions was that they satisfy the
triple test and based on its predominant nature it is an industry though teachers are not
workmen. As regards charitable institutions the first two categories- (i) where the enterprise
like any other, yields profits, but they are siphoned off for altruistic objects; (ii) where the
enterprise makes no profit, but hires the services of employees for producing goods and
services- will be industry and the reasoning given was there is employer-employee relation. In
relation to liberal and learned professions, the majority opinion in Rajappa’s case was that they
will constitute industry and the reasoning given was that the contribution to the good will and
reputation of an organization comes not only from the professionals but from all others
employed under him as well.

The elimination of profit motive or a desire to generate income as the purpose of industrial
activity has led to a large number of philanthropic and charitable activities being affected by
the Industrial Disputes Act. In a number of cases where the organisation is run by voluntary
social workers, they are unable to cope with the requirements of Industrial Disputes Act. This
has led to a cessation of many welfare activities previously undertaken by such organisations
which has deprived the general community of considerable benefit and the employees of their
livelihood. There are many activities which are undertaken not with a view to secure any
monetary return-whether one labels it as livelihood, income or profit, but for other more
generous or different motives. Such activities would not normally be labeled as industrial
activities, but for the wide interpretation given judicially to the term ‘industry’ in the Industrial
Disputes Act. For example, a number of voluntary organizations used to run workshops in
order that the poor and more particularly poor or destitute woman may earn some income.
Voluntary welfare organizations organized activities like preparation of spices, pickles or they
would secure small orders from industries for poor woman.

A small number of persons were employed to assist in the activities. The income earned by
these activities was distributed to the women who were given such work. Other voluntary
organizations organized tailoring or embroidery classes or similar activities for poor woman
and provided an outlet for the sale of the work produced by them. These persons would
otherwise have found it impossible to secure a market for their products. Such organizations
are not organized like industries and they do not have the means or manpower to run them as
industries. A large number of such voluntary welfare schemes have had to be abandoned
because of the wide interpretation given to the term industry.

Apart from such activities, there may be other activities also which are undertaken in the spirit
of community service, such as charitable hospitals where free medical services and free
medicines may be provided. Such activities may be sustained by free services, given by
professional men and women and by donations. Sometimes such activities may be sustained
by using the profits in the paid section of that activity for providing free services in the free

13
section. Doctors who work in these hospitals may work for no returns or sometimes for very
nominal fees. Fortunately, philanthropic instinct is far from extinct. Can such philanthropic
organisations be called industries? The definition needs re-examination so that, while the
workers in an industry have the benefit of industrial legislation, the community as such is not
deprived of philanthropic and other vital services which contribute so much to its well-being.
Educational services and the work done by teachers in educational institutions, research
organisations, professional activities, or recreational activities amateur sports, promotion of
arts, fine arts and performing arts, promoting crafts and special skills, all these and many other
similar activities also require to be considered in this context.

In Bangalore Water Supply and Sewerage Board v. A. Rajappa , Krishna Iyer, J., speaking for
himself and on behalf of the other two Hon’ble Judges agreeing with him, proceeded to deal
with the interpretation of the definition of ‘industry’ on a legal premise that the Industrial
Dispute Act is a worker oriented Statute and so must be construed accordingly. There are sets
of cases, though they do challenge the decision in Bangalore Water Supply case, but actually
dissented from it. But for the first time, in year 1998, a two Judge Bench decision, in Coir
Board v. Indira Devi P.S. called for a reconsideration of the law as laid down by Bangalore
Water Supply and Sewerage Board . In this case there was a coir board situated in Ernakulam
performed the following functions:- (i) promotion of coir industry; (ii) opening of markets for
achieving the object in (i); and (iii) providing facilities to make coir industry’s products more
marketable. The court came to a prima facie conclusion that the coir board is not set up to run
any industry.

Further it was held that looking to the uncertainty prevailing in this area and in the light of the
experience of the last two decades in applying the test laid down in the case of Bangalore Water
Supply and Sewerage Board , it is necessary that the decision in Bangalore Water Supply and
Sewerage Boards case is re-examined. The experience of the last two decades does not appear
to be entirely happy. Instead of leading to industrial peace and welfare of the community (which
was the avowed purpose of artificially extending the definition of industry), the application of
the Industrial Disputes Act to organizations which were, quite possibly not intended to be so
covered by the machinery set up under the Industrial Disputes Act, might have done more
damage than good, not merely to the organisations but also to employees by the curtailment of
employment opportunities.

Hence an order of reference to Chief Justice for constituting a larger Bench of more than seven
Judges, if necessary was passed. However when the matter was listed before a three-Judge
Bench, the request for constituting a larger Bench was refused both on the ground that the
Industrial Dispute Act had undergone an amendment and that the matter did not deserve to be
referred to a larger Bench as the decision of seven Judges in Bangalore Water Supply case was
binding on the Benches of lesser strength. But such inhibitions did not limit the power of a five
Judge Bench which was constituted on a reference made due to apparent conflict between the
judgments of two different Benchs of the Supreme Court. The experience of judges in Coir
Board case was not derived from the case in which the observations were made.

14
The experience was from the cases regularly coming to this Court through the labour courts. It
is experienced by all dealing in industrial law that over-emphasis on the rights of the workers
and undue curtailment of the rights of the employers to organize their business, through
employment and non-employment, have given rise to large number of industrial and labour
claims resulting in awards granting huge amounts of back wages for past years, allegedly as
legitimate dues of the workers, who are found to have been illegally terminated or retrenched.
Industrial awards granting heavy packages of back wages sometimes result in taking away the
very substratum of the industry. Such burdensome awards in many cases compel the employer
having moderate assets to close down industries causing harm to interests of not only the
employer and the workers but also the general public who is the ultimate beneficiary of material
goods and services from the industry. The awards of reinstatement and arrears of wages for
past years by labour courts by treating even small undertakings of employers and entrepreneurs
as industries is experienced as a serious industrial hazard particularly by those engaged in
private enterprises. The experience is that many times idle wages are required to be paid to the
worker because the employer has no means to find out whether and where the workman was
gainfully employed pending adjudication of industrial dispute raised by him.

In State of UP v. Jai Bir Singh , it was held that “with utmost respect, the statute under
consideration cannot be looked at only as a worker-oriented statute. The main aim of the statute
as is evident form its preamble and various provisions contained therein, is to regulate and
harmonise relationships between employers and employees for maintaining industrial peace
and social harmony. The definition clause read with other provisions of the Act under
consideration deserves interpretation keeping in view interests of the employer, 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. It is a peace of social legislation. In interpreting,
therefore, the industrial law, which aims at the promotion of social justice, interests both of
employers, employees and in a democratic society, people, who are the ultimate beneficiaries
of the industrial activities, have to be kept in view. A worker oriented approach in construing
the definition of industry, unmindful of interest of the employer or the owner of the industry
and the public, would be a one sided approach and not in accordance with the provisions of the
Act.

15
 CHAPTER 5: CONCLUSION

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 latter 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 Singh24, 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 non­democratic
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.

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

24
(2005) 5 S.C.C. 1.

16
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 lacuna.

17
 BIBILIOGRAPHY
Articles

1. V. Chandra Sekhar, What does not come under the definition of industry? Vol II Lex-
Warrier Onl. 2014 available at: http://lex-warrier.in/2014/06/come-definition-industry/
2. Sneha Bhawani, What Constitutes An “Industry”? – An Analysis In Context Of Labour
Laws Of India available at: https://blog.ipleaders.in/constitues-industry-analysis-
context-labour-laws-india/
3. Kudrat Agarwal, How has industry been defined under the labour laws of India,
available at: http://asklabourproblem.info/how-is-industry-defined-under-labour-laws-
in-india/
4. http://www.prsindia.org/uploads/media/Acts/The%20Industrial%20Disputes.pdf
5. Palak Verma and Aditya Tomar, Industry Under Industrial Disputes Act, 1947,
available at: https://www.lawctopus.com/academike/industry-under-industrial-
disputes-act-1947/

Cases

1. Banaras Ice Factory Ltd. v. Its Workmen, A.I.R. 1957 S.C. 168. ................................. 4
2. Bangalore Water Supply and Sewerage Board v. A. Rajappa, A.I.R. 1978 S.C. 610 ... 3
3. Chief Conservator of Forest v. Jagannath Maruti Kondare, A.I.R. 1996 S.C. 2898. . 11
4. Corporation of the city of Nagpur v. Its employee,s A.I.R. 1960 S.C. 675. .................. 5
5. D.N. Banerjee v. P.R. Mukherjee, A.I.R. 1953 S.C. 58. ................................................ 4
6. D.N.Banerji v. P.R. Mukherjee, A.I.R. 1953 S.C. 582. ................................................. 6
7. Des Raj v. State of Punjab, A.I.R. 1988 S.C. 1182...................................................... 10
8. General Manager, Telecom v. A. Sriniwas Rao, A.I.R. 1997 S.C. 11 ......................... 11
9. Gujarat Forest Producers v. State Of Gujarat (2004) 1 G.L.R. 752. .......................... 13
10. Gujarat Steel Tubes Ltd. v. Mazdoor Sabha, 1980 S.C.R. (2) 146 ................................ 3
11. Madras Gymkhana club Employees’ Union v. Gymkhana club, A.I.R 1967 S.C. 720,
729.................................................................................................................................. 6
12. N. Nagendra Rao v. State of AP, A.I.R. 1994 S.C. 1994. ............................................ 10
13. N.N.U.C. Employees v. I.T., A.I.R. 1962 S.C. 1080. ..................................................... 6
14. Osmania University v. Industrial Tribunal Hyderabad, [1960] I L.L.J. 593 [AP]. ....... 6
15. Shrimali v. District Development Office, (1989) 1 G.L.R. 396. .................................. 10
16. State of Gujarat v. Pratamsingh Narsinh Parmar (2001) I.L.L.J. 1118 S.C............... 11

18
17. State of UP v. Jai Bir Singh, (2005) 5 S.C.C. 169. ...................................................... 12
18. Sub Divisional Inspector of Post v. Theyyam Joseph, A.I.R. 1996 S.C. 1271. ........... 10
19. Workmen of Dimakuchi Tea Estate v. Management of Dimakuchi Tea Estate, A.I.R.
1958 S.C. 353................................................................................................................. 4

19