Category: Labour Law I

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• The opening line of this judgment is –
• The question raised in this appeal is drawing attention of this Court since very inception when Industrial Disputes Act, 1947 was enacted and even after the passage of more than 50 years, issue remains in the fertile field of it yielding fresh crops time and again because of wide vaporous definition of the word “industry” under the said Act.
• This wide definition has given an opportunity to both employer and employee for raising issues, one trying to pull out of this definition, to be out of the clutches of the said Act, other bringing within it, to receive benefit under it. Because of width of the periphery of the word “industry” there is tug of war repeatedly between the two, in spite of various decisions of this Court.
• The Bangalore Water Supply case also notes as follows –
• In view of the difficulty experienced by all of us in defining the true denotation of the term “industry” and divergence of opinion in regard thereto-as has been the case with this bench also- we think, it is high time that the Legislature steps in with a comprehensive bill to clear up the fog and remove the doubts and set at rest once for all the controversy which crops up from time to time in relation to the meaning of the aforesaid term rendering it necessary for larger benches of this Court to be constituted which are driven to the necessity of evolving a working formula to cover particular cases.

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• The question which arose here for consideration is whether the All India Radio and Doordarshan, are `Industries’ within the meaning of the IDA.
• The respondent-employees were clerks or linemen/watchmen and other casual workers working as employees of either All India Radio or Doordarshan kendras. They challenged their orders of termination or non-regularisation. The termination orders were set aside and regularization was granted by the First Court, and the appeal against that order was dismissed by the High Court.
• The contention made by AIR / DD was that they discharge sovereign functions of the State and therefore are not industries.
• 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 or broadcast through their various kendras and stations by charging fees.
• Day in and out advertisements are being telecast and even serials are being telecast on payment of appropriate charges and on which there cannot be any dispute. Same is the position with All India Radio.
• Is it weird that the BWS case specifically said that absence of a profit motive does not make a difference, and here we are with the SC referring to the commercial nature of the function?

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• 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, it is necessary that the decision in Bangalore Water Supply 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 organizations but also to employees by the curtailment of employment opportunities.
• Undoubtedly, it is of paramount importance that a proper law is framed to promote the welfare of labour employed in industries. It is equally important that the welfare of labour employed in other kinds of organizations is also promoted and protected. But the kind of measures which may be required for the latter may be different and may have to be tailored to suit the mature of such organizations, their infrastructure and their financial capacity as also the needs of their employees.

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Section 2(j) of the Industrial Disputes Act, 1947 defines industry as “any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft or industrial occupation or avocation of workmen.”[1]

 

The conflict with respect to the definition of the term ‘industry’ has been of its application and determine as to what all enterprises, activities and establishments qualify as industries within its meaning and purpose. It was in the case of Bangalore Water Supply[2] that the Supreme Court determined the dimensions and the limitations of the concept of ‘industry’ owing to the diverse opinions and the confusions. Justice Krishna Iyer formulated the triple test in the Bangalore Water case and it states where:

(a) There is a systematic activity,

(b) Organized by co-operation between employers and employees,

(c) For the production/distribution of goods and services for satisfying the demands of humans, there will be a prima facie case of an ‘industry’.

 

The ultimate conclusion of this test was if any:

• Club
• Profession
• Co-operatives
• Educational institutions[3]
• Charitable Institutions
• Research Institutions[4] or any other venture

satisfies the triple test then it will be held as an industry for the purpose of the Industrial Disputes Act, 1947.

 

Applying this test came the following decisions:

In the case of Management of FICCI v Workmen[5] the SC held that FICCI was an industry as it satisfied the triple test. Similarly in the case of Workmen, Indian Standards Institution Case [6] ISI was considered to be an industry as it also satisfied the triple test. Further a society formed for the protection of cows, which indulged in the task of milk selling was also considered to be an industry due to the triple test.[7] Surprisingly a mandir i.e. a place of worshipping was also held to be an industry.[8] However in the case of Manager, Shri Panchsara Jain Derasar v Mahamandkha Gajikha Baloch it was laid down that a temple, which is a spiritual institution cannot be construed as an industry. [9]

 

In another series of cases came the following decisions:

A Legal Aid Board was held to be an industry in the case of Mahesh Bhargav v State of MP[10] whereas in the case of Hussen Mithu v Bombay I&S Labor Board Bombay Steel and Iron Labor Board was considered to not be an industry.[11]Further in the case of Gopal Pranjape v Rashtriya Mill Majdoor Sangh a trade union was considered to be an industry.[12]

 

Reading the above cases one can easily gauge the confusion and the diversion in opinions of the courts across the country. It was at this juncture that there was a need to reconsider the test laid down in the Bangalore Water case owing to the diverse opinions and further globalization and expansion of the Indian society. The definition was given a liberal interpretation in that case so as to meet the goals of industrial harmony and peace. However it was not successful. Hence arose a need to reconsider it.

 

This need for re-consideration was first deliberated upon in the case of Coir Board Ernakulam, Cochin v Indira Devai [13]. In this case the question to determine before the Court was whether a Coir board can be considered an industry or not as per the ID Act, 1947. The Supreme Court observed, “there is a lot of uncertainty prevailing with respect to this aspect and owing to the experience of the courts in the last two decades there is a sincere need to re-consider the test laid down in the case of Bangalore Water Supply.”[14] The Court further added that the aim was to achieve industrial peace and harmony. However this definition might have done more harm than good to the industrial establishments by including within its ambit the establishments which were never intended to be a part of the Act.

 

While concluding the Supreme Court said, the Industrial Disputes Act never contemplated such a test and that there is no such need to label every organization, which engages in useful service as an industry. However Bangalore Water supply was a 7-judge bench decision and since the Coir board case a 2-judge bench therefore it could not over rule the Bangalore Water case and was bound by it.[15]

 

Similarly in the case of Physical Research Laboratory v K G Sharma[16] the Supreme Court said that the test laid down by the case of Bangalore Water Supply was not exhaustive and needed re-consideration. Ultimately it was the case of State of UP v Jai Bir Singh[17], which observed that the definition laid down by the judges in the BW case, was broad and was extremely favorable for the employees. There was a sincere need to refer this case to a larger bench to put an end to all the confusion and consider its dimensions and limitations again.

 

The Supreme Court highlighted various reasons, which compel the matter to be referred to a larger bench of the Supreme Court so as to re-consider its interpretation of the term ‘industry’.[18]

• The decision of the Apex Court was not a unanimous one.
• Five Judges formed the majority opinion.3 had a common opinion whereas the other 2 had different and separate opinions.
• The majority opinion observed that their interpretation of the term was temporary. It was only operational till the time legislature intervened and formulated a new definition or amended the existing one. This creates a doubt over the authoritative value of the precedent.
• The interpretation given was biased and worker oriented. However the aim was to harmonize relations between the employers and the employees.
• A broad interpretation of the term acts a deterrent to private sector industries in India.
• The current interpretation covered within its ambit such streams and professions which were never intended to be covered and hence they had to face the rigors of the ID Act.
• Thought the Act underwent an amendment in 1982 still uncertainty and confusion prevailed. It was a result of the judicial interpretations given to the term that inhibited the operation of the amended definition.

The definition of the term ‘industry’ got amended in 1982 but this definition has not yet been enforced. This will invalidate the decisions and interpretations given by the Supreme Court in various cases. This definition includes the observations of the Bangalore Water Case. It includes the triple test from the Bangalore Water Case and excludes from its ambit establishments like educational institutions, hospitals etc.

[1] Section 2(j) Industrial Disputes Act, 1947

[2] Supply, B. W. (1978). Sewerage Board v. A. Rajappa, 2.

[3] AIR 1963 SC 1873

[4] Ahmedabad Textiles Industry’s Research Association v State of Bombay, AIR 1961 SC 484

[5] AIR 1972 SC 763

[6] AIR 1976 SC 145

[7] The Bombay Panjrapole v the Workmen AIR 1971 SC 2422

[8] Workmen of M/s Baikunthnath Debasthan Trust v State of W.B [(1991) 1 Lab LJ 145 (Cal)]

[9] 1993 1 LLJ 523

[10] 1994 1 LLJ 1113 MP

[11] 1991 LIC 1385(BOM)

[12] 1995 2 Lab LJ 913 (BOM)

[13] AIR 1998 SC 2801

[14] Supra Note 18

[15] Supra Note 18

[16] AIR 1997 SC 1855

[17] (2005) 5 SCC 1

[18] Jai Bir Singh, Para 6

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• Involves a Research Laboratory which employed a glass blower who was made to retire at 58, instead of 60.
• He filed a complaint before the Labour court that rejected the contention of the appellant that it was not an ‘industry’ within the meaning of Section 2(j) of the I.D. Act.
• It recorded a finding that though PRL is purely a research institute and the research work carried on by it is not connected with production supply or distribution of goods or services, YET it took the view that it is an industry, following the Bangalore Water Supply decision. It found that PRL is carrying on, in an organized and systematic manner, the activity of research in its laboratory by active co-operation between itself and its employees and the discoveries and invention made would be eligible for sale.
• The Supreme Court stated –
  • PRL is engaged in pure research work. The purpose of the research is to acquire knowledge about the formation and evolution of the universe but the knowledge thus acquired is not intended for sale.
  • The material on record discloses that PRL is conducting research not for the benefit or use of others. Though the results of the research work done by it are occasionally published they have never been sold. There is no material to show that the knowledge acquired by PRL is marketable or has any commercial value. The work is for the benefit of the Department of Space and its object is not to render services to others.
  • PRL cannot be said to be engaged in an activity which can be called business trade or manufacture, or an `undertaking’ analogous to business or trade. It is not its object to produce and distribute services which would satisfy wants and needs of the consumer community.
  • NOTE that this is an aspect that the BWS case did not refer to at all.
• SC was of the opinion that PRL is not an industry even though it is carrying on the activity of research in a systematic manner with the help of its employees as it lacks that element which would make it an organization carrying on an activity which can be said to be analogous to the carrying on of a trade or business because it is not producing and distributing services which are intended or meant for satisfying human wants and needs, as ordinarily understood.
• In the case of Sub-Divisional Inspector of Post, Vaikam Theyyam Joseph (Supreme Court, 1996), the establishment of the Sub-Divisional Inspector of Post was held not to be an industry but an exercise of a sovereign function.
• In the case of Bombay Telephone Canteen Employees’ Association, Prabhadevi Telephone Exchange Union of India (Supreme Court, 1997) the SC, after examining the case law, held, among other things, that if the finding is that there exist no statutory rules or no certified standing orders exist or they are inapplicable, the remedy under IDA would always be available as an ‘industry’ and indicia laid in Bangalore Water Supply Board case gets attracted.
• However, a Bench of three judges of the SC in General Manager, Telecom S. Srinivasa Rao in 1997 held that the cases of Sub-Divisional Inspector of Post and Bombay Telephone Canteen Employees’ Association, Prabhadevi Telephone Exchange were not correctly decided in view of the ratio laid down by a Bench of seven judges of this Court in the case of Bangalore Water Supply and Sewerage Board.
• The court held that according to the Triple Test the Telecommunication Department of the Union of India is an ‘industry’ within that definition because it is engaged in a commercial activity and the Department is not engaged in discharging any of the sovereign functions of the State.
• It said that the two-Judge bench in Theyyam Joseph’s case which held that the functions of the Postal Department are part of the sovereign functions of the state and it is, therefore, not an ‘industry‘, was rendered without any reference to the seven-judge Bench decision in Bangalore Water Supply.
• In the two-judge Bench decision in Bombay Telephone Canteen Employees’ Association, the Theyyam joseph case was followed for taking the view that the Telephone Nigam is not an ‘industry’. However, in Bombay Telephone Canteen Employees’ Association case, reference was also made to the Bangalore Water supply case. After referring to the decision in Bangalore Water Supply, it was observed that if the doctrine enunciated in Bangalore Water Supply is strictly applied, the consequence is ‘catastrophic’.
• The SC said that it is unable to subscribe to this view for the obvious reason that it is in direct conflict with the seven judge Bench decision in Bangalore Water Supply case by which we are bound. It is needless to add that it is not permissible for us, or for that matter any Bench of lesser strength, to take a view contrary to that in Bangalore Water Supply or to by pass that decision so long as it holds the field. Moreover, that decision was rendered long back – nearly two decades earlier and we find no reason to think otherwise. Judicial discipline requires us to follow the decision in Bangalore Water Supply case. We must therefore, add that the decisions in Theyyam Joseph and Bombay Telephone Canteen Employees’ Association cannot be treated as laying down the correct law.

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• Section 2(j) shall stand amended by Amendment Act of 1982, date of effect is yet to be notified. The amended definition provides –
• “Industry” means any systematic activity carried on by co-operation between an employer and his workmen (whether such workmen are employed by such employer directly or by or through any agency, including a contractor) for the production, supply or distribution of goods or services with a view to satisfy human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature), whether or not:

(i) any capital has been invested for the purpose of carrying on such activity; or

(ii) such activity is carried on with a motive to make any gain or profit, and includes:

(a) any activity of the Dock Labour Board established under Section 5A of the Dock Workers (Regulations of Employment) Act, 1948

(b) any activity relating to the promotion of sales or business or both carried on by an establishment, but does not include:

(1) any agricultural operation except where such agricultural operation is              carried on in an integrated manner with any other activity (being any such     activity as is referred to in the foregoing provisions of this clause) and such          other activity is the predominant one.

(2) hospitals or dispensaries; or

(3) educational, scientific, research to training institutions; or

(4) institutions owned or managed by organizations wholly or substantially          engaged in any charitable, social or philanthropic service; or

(5) khadi or village industries; or

(6) 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; or

(7) any domestic service; or

(8) any activity, being a profession practised by an individual or body of      individuals, if the number of persons employed by the individuals or body of individuals in relation to such profession is less than ten; or

(9) any activity, being an activity carried on by a co-operative society or a club or any other like body of individuals, if the number of persons employed by the co-operative society, club or other like body of individuals in relation to such activity is less than ten.

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• If in a pious or altruistic mission, many employ themselves free or for small honoraria or like return, mainly drawn by sharing in the purpose or cause such as lawyers volunteering to run a free legal services clinic or doctors serving in their spare hours in a free medical center or ashramites working at the bidding of the Holiness, divinity or Central personality and the services are supplied free or at a nominal cost and those who serve are not engaged for remuneration or on the basis of master and servant relationship, then the institution is not an industry even if stray servants manual or technical are hired. Such eleemosynary or like undertakings alone are exempted.
• The BWS case has among others, considered the following and held them to be not be “Industry”
  • Posts and Telegraphs Department
  • Telecom Deptt.
  • Construction and maintenance of National and State Highways
  • Trade Unions

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• A solicitors establishment can be an “industry” as per Bangalore Water Supply case). Regarding liberal professions like lawyers, doctors, etc., the test of direct cooperation between capital and labour in the production of goods or in the rendering of service or that cooperation between employer and employee is essential for carrying out the work of the enterprise. The personal character of the relationship between a doctor or a lawyer with his professional assistant may be of such a kind that requires complete confidence and harmony in the productive activity in which they may be cooperating.

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• Clubs: A restricted category of professions, clubs, co-operatives and even Gurukuls may qualify for exemption if, in simple ventures, substantially and going by the dominant nature criterion substantively, no employees are entertained, but in minimal matters marginal employees are hired without destroying the non-employee character of the unit. But larger clubs are “industry” as per Bangalore Water Supply case.
• Universities, Research Institutions: As regards institutions, if the triple tests of systematic activity, cooperation between employer and employee and production of goods and services were to be applied, a university, a college, a research institute or teaching institution will be “industry”.

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• No exemptions to charitable institutions are available if there is an industry in the enterprise considering the nature of the activity, and the employer-employee basis bears resemblance to what is found in trade or business.
• This takes into the fold of industry, undertakings, callings, services and adventures analogous to the carrying on of trade or business. Absence of profit motive or gainful objective is irrelevant for “industry”, be the venture in the public, joint, private or other sector. The true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer-employee relations.
• If the organization is a trade or business it does not cease to be one because of philanthropy animating the undertaking e.g. NGOs
• Charitable institutions fall into three categories: (a) those that yield profit but the profits are siphoned off for altruistic purposes; (b) those that make no profit but hire the services of employees as in any other business, but the goods and services which are the output, are made available at a low or at no cost to the indigent poor; and (c) those that are oriented on a humane mission fulfilled by men who work, not because they are paid wages, but because they share the passion for the cause and derive job satisfaction from their contribution.
• Which of these three do you think are industries, and why?
• The first two are industries but not the third, on the assumption that they all involve co-operation between employers and employees.

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