Indian Legal System > Civil Laws > Labour Laws > Industrial Disputes Act, 1947 > Bangalore Water Supply Case
In this article, we shall study the Landmark case Bangalore Water Supply and Sewerage Board v. A Rajappa.
Bangalore Water Supply and Sewerage Board v. A Rajappa :
In Bangalore Water Supply and Sewerage Board v. A Rajappa, AIR 1978 SC 548 case, a seven Judges Bench of the Supreme Court carried out an in-depth study of the definition of the term industry in a comprehensive manner, and after considering various previous judicial decisions on the subject and in the process, it rejected some of them, while evolving a new concept of the term “industry”. Thus the decision of this case overruled several earlier decisions and widened the ambit of the term “Industry”. After discussing the definition from various angles, in the above case, the Supreme Court laid down the following tests to determine whether an activity is covered by the definition of “industry” or not. It is also referred as the triple test.
- Systematic and organized activity
- Organized with the cooperation between employers and employees
- For the production and distribution of good and services 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) whether or not capital has been invested for this activity prima facie, there is an “industry”
i. The absence of profit motive or gainful objective is irrelevant, be the venture in public, joint, private or other sectors.
ii. The true focus is functional and the decision test is the nature of the activity with special emphasis on the employer and employee relations.
If the organization is a trade or business, it does not cease to be one because of philanthropy animating the undertaking
In view of the above points and the consequences of the decision given in the Bangalore Water Supply case activities that such as professions, clubs, educational institutions, cooperatives, research institutes, charitable projects, and other kindred adventures if they fulfill the above Triple test, cannot be exempted from the scope of section 2(j) of the Industrial Disputes Act, 1947. The decisions of Management of Sufdarjang Hospitals, Delhi v. Kuldip Singh, N. N. U. C. Employees Vs Industrial Tribunal AIR, 1962 SC 1080, the University of Delhi v. Ramnath AIR, 1963 SC 1873, Dhanrajgiri Hospital v. Workmen AIR, 1975 SC 2032, and such other rulings have been overruled.
Criteria for Determining Dominant Nature of the Undertaking
The Supreme Court, in Bangalore Water Supply case laid down the following guidelines for deciding the dominant nature of an undertaking:
(a) Where a complex of activities, some of which qualify for the exemption, others not, involves the employees on the total undertaking. Some of whom are not “workmen” or some departments are not productive of goods and services if isolated, nature of the department will be the true test. The whole undertaking will be “industry” although those who are not “workmen” definition may not be benefited by the status.
(b) Notwithstanding the previous clause, sovereign functions strictly understood alone qualify for the exemption and not the welfare activities or economic adventures undertaken by Government or statutory bodies.
(c) Even in departments discharging sovereign functions, if there are units which are industries and they are substantially severable, then they can be considered to come within Section 2(j).
(d) Constitutional and competently enacted legislative provisions may well remove an undertaking from the scope of the Act.
The Bangalore Water Supply case’s interpretation of the “industry” and the consequent amendment of the definition do not appear to have eliminated the confusion and the controversy surrounding the definition. Because, in Coir Board, Ernakulam, Cochin v. Indira Devi P.S., AIR 1998 S.C. 2801 case, a Two Judge Bench of the Supreme Court, by pointing out the “uncertainty” surrounding the definition of “industry”, suggested that Bangalore Water Supply case’s decision be reconsidered by a larger Bench. While not entertaining the suggestion or the plea, the Supreme Court has ruled: “The judgment delivered by seven learned judges of this Court in Bangalore Water Supply case does not, in our opinion, require any reconsideration on a reference made by a two-Judge Bench of this Court, which is bound by the Judgement of the larger Bench”. (1999) 1 LLJ 1109 (SC).
In the judgment, it is said that it is immaterial whether or not there is a profit motive or whether or not there is capital. Hence the businesses having philanthropic or charitable cause if satisfy the triple test shall come under the scope of the definition of industry.
The Exceptions to Above Definition:
- Casual activities (because they are not systematic).
- Small clubs, cooperatives, research labs, gurukuls which have an essential nonemployee character.
- Single door lawyer taking help from a clerk (because there is no organized labour).
- Selfless charitable activities carried on through volunteers e.g. free legal or medical service.
- Sovereign functions – strictly understood, i.e., maintenance of law and order, legislative functions and judicial function.
All organized activity possessing the triple elements as prescribe in the judgment although not trade or business, may still be “industry”, provided the nature of the activity is systematic and on the employer-employee basis similar to in any trade or business. This takes into the fold of “industry”, undertaking, callings and services, adventures similar to the carrying on of trade or business.
Hence, the Supreme Court observed that professions, clubs, educational institutions. co-operatives, research institutes, charitable projects, and other kindred adventures, if they fulfill the triple tests listed in (1), cannot be exempted from the scope of Section 2(j) i.e. they should be considered an “industry”. In the next article, we shall apply the triple test to various activities.
Amendment to Industrial Disputes Act, 1947 in the Definition of Industry in 1982:
for clause (j) the following clause shall be substituted, namely:-
“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 5 A of the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948); or
b) any activity relating to the promotion of sales or business or both carried on by an establishment. but does not include 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. Explanation.- For the purposes of this sub-clause, “agricultural operation” does not include any activity carried on in a plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951); or hospitals or dispensaries; or educational, scientific, research or training institutions; or Institutions owned or managed by organizations wholly or substantially engaged in any charitable, social or philanthropic service; or Khadi or village industries; or 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 any domestic service; or any activity being a profession practiced 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 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 cooperative society, club or other like body of individuals in relation to such activity is less than ten;
c) granting a wage increase to workmen at crucial periods of trade union organization, with a view to undermining the efforts of the trade union at the organization.
This amendment is still not enforced.