The Concept of Industry

Indian Legal System > Civil Laws > Labour Laws > Industrial Disputes Act, 1947 > The Concept of Industry

Let us discuss the concept of the industry in light of the Industrial Disputes Act, 1947.

Section 2(J) Definition of Industry:

“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: 

The statutory definition defies some of the ordinary notions associated with “industry” or industrial activity. When it is said that a person or a group of persons has/have established an industry, one would assume, probably, rightly, that there has been capital investment and that the industrial activity has been undertaken to produce goods on a large scale for selling the same to the public or for rendering material services to the community for a price with a view to make profits. But, the Courts have ruled that neither capital investment nor profit motive is a sine qua non while determining whether an activity is an industry or not.

The Scope of the Term “Industry”:

In Budge Municipality v. P.R. Mukerjee, 1953, I. LLJ 195 case, two employees of the Municipality who were the members of Municipality Workers Union were suspended by the Chairman on the charges of the negligence, insubordination, and indiscipline. The workers were dismissed from the service saying that their explanations were unsatisfactory. The union questioned the dismissal and the matter was referred by the Government of West Bengal to the Industrial Tribunal for adjudication. The Tribunal directed the worker’s reinstatement in their respective offices by making an award saying that the suspension of two employees was of victimization. The Municipality under Article 226 of the Indian Constitution took the matter to the High Court. The petition was dismissed and leave was granted under Article 132(1) of the Indian Constitution to make an appeal to the Supreme Court.

The Supreme Court analyzed this situation in the light of the Australian Judgment given in Federated Municipal and Shire Council Employees Union of Australia Vs Melbourne Corporation, 23. CLR 508 and observed that through every activity in which the relationship of employer and employee existed commonly understood at the industry, but still a wider and more comprehensive interpretation has to be given to such words to meet the rapid industrial progress and to bring about industrial peace, and economy and a fair.

In Madras Gymkhana Club, Employees Union v. Management of Madras Gymkhana Club, AIR, 1968 SC 554 case, it was observed that “if the activity can be described as an industry with reference to the occupation of the employers, the ambit of the industry, under the force of the second part takes in the different kinds of activity of employees mentioned in the second part. But the second standing alone cannot define the industry. By the inclusive part of the definition, the labour force employed in any industry is made an integral part of the industry for the purpose of industrial disputes although the industry is ordinarily something which employers create or undertake”. The Court held that if employer’s work cannot be regarded as an industry, the persons he employs cannot be industrial workmen, and nor can a dispute between him and employees be treated as an industrial dispute.

In Management of Sufdarjang Hospital, Delhi Vs Kuldip Singh, AIR 1970 SC 1407 case, the Supreme Court observed that “an industry exists only when there is relationship between employers and employees, the former engage in business, trade, undertaking, manufacture or calling of employers and latter engaged in any calling, service employment, handicraft or industrial occupation or avocation. There must be an enterprise in which the employers will follow their avocations as detailed in the definition and employ workmen. Therefore the basic requirement of ‘industry’ is that the “employers must be carrying on any business, trade, undertaking, manufacture or calling of employers”. The Court observed that a place of the treatment of patients run as a department of the government was not an industry because it was a part of the functions of the government. Charitable hospitals run by Government or even private associations cannot be included in the definition of the industry because they have not embarked upon economic activities analogous to trade or business. If hospitals, nursing home or a dispensary is run as a business in a commercial way, there may be elements of the industry.

In Bombay Panjarapole Bhuleshwar v. Its Workmen, AIR 1971 SC 2422 case, the object of the institution was to look after the cattle, the sale of milk was a regular activity which brought in profits, and therefore, the undertaking was treated as an industry. The Court pointed out that the activity of the institution is a compassionate activity but it shares a business-like orientation and operation. The Court observed that where an establishment carries activities of different types, it is the dominant purpose that will determine where it is an “industry”.

In the Workmen of I. S. Institution v. I. S. Institution, AIR, 1976 SC 145 case, the Court held that the “industry is ordinarily something which employers create or undertake”. which is gradually yielding place to the modern concept which regards the industry as a joint venture undertaken by employers, and workmen, an enterprise which equally belongs to both. Here it is not necessary to view the definition of the industry under section 2(j) of the Industrial Dispute Act in two parts.

In Bowra Colliery v. its Workmen, 1962 I LLJ 378 SC case, the Court held that though a domestic servant has a calling or occupation, he is not employed in the industry, as personal employment is counterposed to the concept of industrial vocation.

All decisions of the Supreme Court agreed that an undertaking to be within the definition in section 2(j) must be read subject to a limitation, namely, that it must be analogous to trade or business. The Supreme Court in many cases evolved certain working principles to provide guidance in determining attributes and characteristics which would specify that an undertaking is analogous to trade or business.

In State of Bombay v. Hospital Mazdoor Sabha, AIR 1960 SC 610 case, the Supreme Court held that “hospital” to be industry within the scope of Section 2 (j) and relied upon the “inclusive part” of the definition and also the definition of employer under Sec. 2 (g) which includes an industry carried on by or under the authority of any department of the Central Government or a State Government. he Court observed that activities having no commercial implications, such as hospitals carried on with philanthropic motives would be covered by the expression ‘undertaking’. The mere fact that the Government runs such activity is immaterial. In case an activity is industry if carried on by a private person, it would be so, even if carried on by the Government. This view was approved by the Supreme Court in Banglore Water Works case.

Attributes of an Industry:

• In State of Bombay v. Hospital Mazdoor Sabha, AIR 1960 SC 610 case, the Supreme Court held that the activity by the institution must involve the habitual or systematic production or distribution of goods or the rendering of material services to the community at large or a part thereof. Similarly, the activity should neither be only for pleasure or for oneself alone nor be of casual nature.
• In D. N. Banerjee v. P. R. Mukherjee, (1953) I LLJ 195 SC case, the Court observed that the Supreme Court held that the activity by the institution must be similar in nature to the organization of business or trade. The Court also held that the activity must, in the first instance, fall within the first part of the definition of the industry, and the second part will indicate what is included from the workmen’s angle.
• In the National Union of Commercial Employee v. M.R. Meher, (1962) I LLJ 720 SC case, the Court held that the activity by the institution must involve employee-workmen co-operation effort. However, a mere employer-employee relationship by itself does not result in an industry.
• In the Corporation of City of Nagpur v. Its Employees, AIR 1960 SC 675 case, the Court held that the activity by the institution must involve the satisfaction of material needs, and not of spiritual needs. The court also held that the activity should not be in exercise merely of government functions.
• The employment must not be personal, such as in the case of domestic servants.
• In Palace Administrative Board v. State of Kerala, AIR 1960 Ker 151 case, the Court observed that once the above attributes are found, it is immaterial whether the activity is carried out by an individual, corporation, local body, or State.

From the above case laws, we can see, that there was no clear test to decide, whether a given activity is “industry” or not.

Triple Test Proposed in Bangalore Water Works Case:

In Bangalore Water Supply v. A. Rajappa, AIR 1978 SC 548 case, a seven-member Judges’ Bench was constituted to determine the scope of the industry. The triple test working principle was born in the case that is used to check the validity of different establishments. The Triple Test has requisites that are as follows:

1. Systematic Activity
2. Co-operation between the employer and employee
3. Activity concerned with the production of goods and services for the satisfaction of human wants.

Here, the industry will not embody any religious services or other work undertaken out of spiritual bliss. The profit motive stands irrelevant when it comes to any venture. Through the triple test, the focus is concentrated on the functional part emphasizing the employer-employee relations. An establishment that is engaged in philanthropic activities does not cease to become an industry because of it. Thus, if all the above-stated provisions are complied with, then the undertaking can be termed as an ‘industry’ under section 2(j) of the Industrial Disputes Act, 1947.

Conclusion:

The law in force presently is the interpretation of the original Section 2(j) as was laid down by Bangalore Water supply Case. The triple test formula is surely pro-labour as it seeks to bring more activities within the ambit of the Industrial Dispute Act 1947. Whenever any dispute arises to determine the validity of an establishment, the provisions of the triple test come into force. If the provisions comply with the work undertaken by the establishment, then it will be an industry under section 2(j) of the Act or else not. There might be times where the establishment is running on profit motive through the rendering of services. Here, the establishment imitates an industry but is not an industry in real. The triple test plays a significant role in the judgements passed by the Court while dealing with uncertain validities of business entities. Whenever any dispute arises, one should consider what type of work the establishment is engage in so that it helps to provide clarity in future.

Indian Legal System > Civil Laws > Labour Laws > Industrial Disputes Act, 1947 > The Concept of Industry