The Concept of Industry

  • Section 2(J) of the act defines industry as follows: “industry” means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft or industrial occupation or vocation of workmen.
  • An industry exists only when there is a relationship between employers and employees, the former is engaged in business, trade, undertaking, manufacture or calling of employers and the latter is engaged in the calling, service, employment, handicraft or industrial occupation and avocation.
  • Thus the definition can be considered to have two parts. The first part “any business, trade, undertaking, manufacture or calling of employers” is w.r.t. employer and the second part “any calling, service, employment, handicraft or industrial occupation or vocation of workmen” is w.r.t. employee.
  • From the above definition, the industry appears to mean: 
Sr. Activity Example
1 A business merchandising
2 A trade Cutlery shop
3 A manufacturer Manufacturing bicycle
4 An undertaking Electric supply company
5 A calling architecture, plumber
6 Services Transport company
7 An employment the rest of vocations

Case Law: Bangalore Water Supply and Sewerage Board v. R. Rajappa, (AIR 1978 SC 548)

  • This case is very important because the decision of this case overruled several earlier decisions and widened the ambit of the term “Industry”.
  • According to this judgment, any activity will be an industry if it fulfills the ‘triple test’, as under:
  1. Systematic and organized activity
  2. With the cooperation between Employers and employees
  3. For the production and distribution of good and services whether or not capital has been invested for this activity.
  • It is immaterial whether or not there is a profit motive or whether or not there is capital.

Businesses Having Philanthropic Nature:

  • 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.

Dominant Nature State:

  • The Supreme Court, in the Bangalore Water Supply case laid down the following guidelines for deciding the dominant nature of an undertaking:
  • 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.
  • Notwithstanding with 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. 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). Constitutional and competently enacted legislative provisions may well remove an undertaking from the scope of the Act.

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.

Conclusion:

  • 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”.

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 work-men 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-

  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. 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
  2. hospitals or dispensaries; or
  3. educational, scientific, research or 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 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
  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 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.

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