In the Supreme Court of India 1978 AIR 548, 1978 SCR (3) 207 Petitioner Bangalore Water Supply & Sewerage Board, etc. Respondent R. Rajappa & ors. Date of Judgement 21 February 1978 Bench Chief Justice M. Hameed Ullah Beg; Justice Y.V. Chandrachud; Justice P.N. Bhagwati; Justice V.R. Krishna Iyer; Justice Jaswant Singh; Justice V.D. Tulzapurkar,; Justice D.A. Desai
The unprecedented momentous judgment in this case which was pronounced by the Supreme Court of India scrutinized the definition of “industry” as per section 2(j) of the Industrial Dispute Act, 1947. The Supreme court of India carried out in-depth the study of the definition in a comprehensive manner. The axiom laid down by the Apex Court eradicated the consensus influx of presumption made in regard to the definition “industry”. It becomes unpredictable in terming the definition that speculates great importance as the mechanism for settlement and compensation in relation to the Industrial disputes can only be resolved in a proposition when variances related to the industry arises. With the stated principles in the judgment, it annulled numerous past judgments of the Supreme Court but reduced the burden for the legislature by fixing up the issues in the right perspective. The two functional bodies i.e., “employer” and “employee” are the nucleus in every setup industry where any minute conflicts between them can rupture the foundation of an industry. The Supreme Court conducted tests through various aphorisms that what shall be included and to be excluded in the sphere of the definition.
Background of the study:
While observing closely the Supreme Court raised questions about the construction of legislation where the drafter failed to produce the reliable meaning and definition of the word “industry” in the purview of Industrial Dispute Act, 1947. To remove such austerity from the legislative framework the Court must use their interpretation skills more vigilantly to repair such loopholes. In the case of Seaford Court Estates Ltd. v. Asher,1 Lord Denning, L.J., said “When a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament and then he must supplement the written words to give ‘force and life’ to the intention of the legislature. A judge should ask himself the question of how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out? He must then do as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases”.
The Apex Court cited the reference mentioned in Maxwell, Interpretation of Statutes,2which interprets that “It is necessary, therefore, to take the Act as a whole and examine its salient provisions. The long title shows that the object of the Act is “to make provision for the investigation and settlement of industrial disputes, and certain other purposes.”
In reference to the case Budge Municipality case, 3 the Apex Court dealt with the objects of the Act to define the term “industry” the Court said “When our Act came to be passed, labor disputes had already assumed big proportions and there were clashes between workmen and employers in several instances. We can assume that it was to meet such a situation that the Act was enacted, and it is consequently necessary to give the terms employed in the Act referring to such disputes as wide an import as reasonably possible.”
Constitution and Statutory Provisions:
- Section 2(j) of the Industrial Dispute Act 1947
Facts and Procedural History:
- The respondents in this leave application were employees in Bangalore Water-Works and Sewerage Board.
- For some misconduct, the Appellant Board imposed fines on the employees and recovered a sum from them.
- Looking at this the respondent employees filed claim application No.5/72 under Section 33C (2) of the Industrial Dispute Act,1947, before the Labour Court alleging that such imposition of fines is against the Natural Justice.
- The Appellant board objected before the labor court on grounds that the board is a statutory body and its main function is to render service to the citizens and not carrying business with a profit motive and hence bars them from the definition of “industry”.
- The Labour Court overruled the objections and considered that the board comes under the ambit of section 2 (j) i.e., “industry”.
- The Appellant Board filled two Writ application/s No.868 and 2439 of 1973 before the Karnataka High Court where again the division bench of Karnataka High Court held that the Appellant board comes under the sphere of “industry”.
- Lastly, the aggrieved Appellant Board knocked on the doors of the Supreme Court through a Special Leave Application.
- Whether Bangalore Water-Works and Sewerage Board comes in the parameter of section 2(j) of the Industrial Dispute Act, 1947
- Whether the following activities/services are Industry?
- Sovereign functions
- Charitable institutions
- Universities and research Institutions
- Professional Firms
- Voluntary services
The definition which depicts the meaning under 2 (j) “industry” means any business, trade, undertaking, manufacturer or calling of employer’s and includes any calling service, employment, handicraft, or industrial occupation or avocation of workmen.
To make it relevant and to prove the definition, the Apex court conducted a test to determine whether an activity is consumed by the definition of “industry” or not, and can also be referred to as the Triple Test Method. The Apex segregated in three parts:
Part 1 “industry”:
- includes systematic activity, organized cooperation between employer and employee, production, procurement and distribution of goods and services for fulfilling human wants and needs,
- Where the activity is para-trade or Quasi-business undertaken by the public, joint, private, philanthropic or labor sector which may include profit and gainful objective
- It is in the human sector, the way the relations between an employee-employer is set up which initiates to give rise to claims, demands, settlements and peace in industry. That is the Raison d’etre of industrial law itself.
- Provided some non-trade or business may still be “industry” depends upon the nature of the activity,
- The definition of industry is quite comprehensive, two standpoints are from the view of employers and the view of employees, any trade or activity falls in either of the two standpoints will construe Industry.
These guiding principles shall also be applied in examining the economic operations as well as the statutory ideology shall be merged with the statutory definition even though the comfy connotes with Industrial disputes between an employee and employer.
Now the supreme court, based on these mentioned Triple Test theory they summarised whether the following activities would fall under industry or not:
- Sovereign functions: The Supreme Court held that sovereign functions strictly understood, alone qualify for the exemption, not the welfare activities or economic adventures undertaken by the government or statutory bodies. Even in departments discharging sovereign functions, if there are units that are industries and they are substantially severable, then they can be considered to come within Section 2(j).
- Municipalities: Departments of the municipality which were held to be industry
- Public conveyance
- Fire brigade
- City engineers
- Public gardens
- Printing press
- General administration
Department of municipal discharges many functions some may include in the definition of industry or some non-industrial, particularly subdominant function shall prevail in the criterion for the Act 4(Corpn.of city of Nagpur v. Employees, AIR 1960 SC 675)
- Hospitals: Hospitals come under the ambit of industry whether it is State or Private, absence of profit or gains from the business activity doesn’t term down to be an exclusion in the context of this section. The true focus is glancing at the nature of the activity and relations between an employee and employer. For this, the Court concluded that “If that be so, if a private citizen runs a hospital without charging any fees from the patients treated in it, it would nevertheless be an undertaking under Section 2(j) Thus the character of the activity involved in running a hospital brings the institution of the hospital within Section 2(j) further the institutions held to be industry are State Hospital i.e., Ayurvedic Pharmacy and Hospital (State of Bombay v. Hospital Mazdoor Sabha),5Activities of Panjrapole (Lalit Hari Ayurvedic College Pharmacy v. Workers Union),6 ( Bombay Panjrapole v. Workmen).7
- Charitable Institutions: There are three categories to define charitable Institutions firstly the establishments meant for yielding profit but profits are extracted for humanitarian purpose secondly those who don’t yield profits but who recruit employees for the purpose of business where goods are procured and made available to the indigent people and lastly the persons in the charitable institution work for the humane purpose fulfilled by men who work not for wages or paying but to fulfill the passion The first two criteria fall under industry but the last criteria only there some intersection relation of cooperation of employers and employees.
- Clubs: The clubs which are established as a social institution where the relationship between an employee and employer seen for the serving of the community is an Industry. Certain gurukuls, cooperative, clubs may be excluded from the definition where minimal or marginal employees are hired.
- Universities/Research Institutions: The Court observed that If the triple tests of ‘systematic activity, co-operation between employer and employee and production of goods and services were alone to be applied, a University, a college, a research institute or teaching institution will be an industry. The following institutions were held “industry”: Ahmedabad Textile Industries Research Association, Tocklai Experimental Station, Indian Standard Institute and universities.
- Professional Firms: For professional firms, in the words of the Apex Court held that a lawyer or a solicitor could not raise a dispute with his litigants in general on the footing that they were his employers. Nor could doctors raise disputes with their patients on such a footing. Again, the personal character of the relationship between a doctor and his assistant and a lawyer and his clerk may be of such a kind that it requires complete confidence and harmony in the productive activity in which they may be cooperating so that, unless the operations of the solicitor or the lawyer or the doctor take an organized and systematized form of a business or trade, employing a number of persons, in which disputes could arise between employers and their employees, they would not enter the field of industry.
- Voluntary services: Establishments or institution engaged in altruistic mission or for any free services who employee themselves for such activities like a lawyer volunteering to run free legal service or a doctor serving in their spare hours in a free medical center or any such establishments are exempted from the definition of “industry”.
With this Triple Test Method, the apex court critically examined and advanced the meaning of “industry” where it was held that Banglore Water Works shall be included in the purview of definition and Act.
The Apex Court even cited certain establishments that are not in the sphere of the industry are Posts and Telegraphs Department ( Union of India v. Labour Court),8 Central Institute of Fisheries, Construction, And Maintenance of National and State Highways (State of Punjab v. Kuldip Singh and another). 9
The Court in this above Banglore Water Supply Case dismissed the appeal of the Appellant Board and rightly restored judicial discipline and eradicated the unnecessary turmoil caused chaos with the interpretation of the statue. Seven apex Judges briefly explained and interpreted the statute provisions and even opined on the part of the legislature to removes the fog in the drafting perspective so that it won’t tarnish the basic interpretation of Act. With the enforcement of a newly advanced definition, the sectors and establishment/s which were on the darker side of the statute were brought in to the limelight so that the contingent issues may be resolved by these laid down principles.
“The views of the authors are personal“
1 Seaford Court Estates Ltd. v. Asher  2 All. E. R. 15 5 at 164.
2 Maxwell, Interpretation of Statutes, 9th Edition, p. 55.
3 Budge Municipality case  S.C.R. 302 at 310.
4 Corpn.of city of Nagpur v. Employees, AIR 1960 SC 675.
5 State of Bombay v. Hospital Mazdoor Sabha AIR 1960 SC 610.
6 Lalit Hari Ayurvedic College Pharmacy v. Workers Union AIR 1960 SC 1261.
7 Bombay Panjrapole v. Workmen (1971) 3 SCC 349.
8 Union of India v. Labour Court,(1984) 2 LLN 577 ).
9 State of Punjab v. Kuldip Singh and another, 1983 Lab IC 83).