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EVOLUTION OF DEFINITION OF INDUSTRY FROM JUDICIAL PERSPECTIVE

INTRODUCTION

Over time, the idea of the industry has undergone tremendous modification and expansion as a result of legislative initiatives and legal precedents. The main causes of this change have been a lack of explicit legislative intent reflected in the statute and divergent judicial viewpoints concerning the extent of the definition.

The industry is defined 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 evolution of the industry’s definition can be understood in three phases. The first phase is between 1950-1962; the second phase is between 1963-1978, and the last phase is post-1978.

FIRST PHASE (1950-1962)

In D.N. Banerjee’s Case,[2] the definition of the industry was interpreted for the first time. Due to the suspension of the Head Clerk and Sanitary Inspector at the municipality and the disagreement of the workers’ union, reinstatement was demanded. The municipality argued that because it is carrying out sovereign duties in accordance with the Bengal Municipality Act, it is not an industry and there is no industrial dispute. The Court ruled that even those operations that cannot be classified as trade or business are included in the definition of industry. Because sanitation and conservation are tasks that are equivalent to trade, the municipality is an industry. Thus, the Municipality of West Bengal was said to be an industry. Furthermore, the Court observed that “undertaking” and “industrial occupation or avocation” mean considerably more than what commerce or business often understands. In this case, the Court rejected the profit motive and focused on the character of the activity. In such services, a dispute between employers and workmen is an industrial dispute.

In the Corporation of the City of Nagpur Case,[3] the definition of the industry was interpreted in two parts; one part was defined from the employer’s perspective, and the other from the employee’s perspective. The main issue here was whether the activities of the Corporation come within the definition of the term industry and to what extent. The Court observed that the sovereign functions were excluded from the definition of industry. The decision talks about the primary and predominant activity test and the integrated activity test for the determination of industry. Let’s say there’s a municipal department that handles a lot of different responsibilities. If this is the case, then the primary responsibility of the department should serve as a criterion for determining whether or not the entity in question is considered an industry.

In Hospital Mazdoor Sabha Case,[4] this case was about the payment of retrenchment compensation to workmen. The administration of the hospital argued that because they did not engage in any kind of commercial activity, they did not qualify as an industry. According to a principle that was developed by the Court, every systematic activity that is undertaken for the purpose of the manufacture or distribution of products or services in an industry is carried out with the assistance of employees in the manner of a trade or business in that industry. A hospital, nursing home, or dispensary can be considered part of an industry if they are operated in a businesslike manner. Because of this, a hospital transforms into a business the moment it serves a purpose other than only providing medical care for patients. Government hospitals are excluded from this, thus limiting the scope of an industry. It will be regarded as an industry only if a commercial component is present. Thus, hospitals were brought under the ambit of industry.

SECOND PHASE (1963-1978)

In Ram Nath’s Case,[5] the question was does an educational institute comes under the purview of industry. The predominant activity test was applied, and it was held that the educational institutes mainly involved in teaching could not be considered industries. Therefore, a driver employed couldn’t be considered a workman in an industry. Hence, educational institutes do not come under the purview of an “industry” as defined u/s 2(j) of the Act.

In Gymkhana Club Case,[6] the workmen of the Gymkhana Club were not paid bonuses. The main issue was whether Gymkhana Club would be considered an industry or not. The club’s purpose was to offer a location for sporting events and gaming activities for amusement. As a result, the Court determined that the administration of the Gymkhana Club in Madras was not required to pay bonuses to its employees for the year 1962 since the club did not qualify as an “industry.”

The Safdarjung Hospital Case[7] overruled the Hospital Mazdoor Sabha case. The Court held that the view taken in the Hospital Mazdoor Sabha Case was extreme and unjustified. The Court observed that Safdarjung Hospital has not begun an economic endeavour that can be compared to trade or business.” There is no proof that it is anything other than a facility where people can receive medical care. 

A hospital could be operated as a for-profit corporation; thus, it was decided that a government-run facility must have the same characteristics. Hospitals and educational institutions do not come under the purview of industry. The Court also interpreted the terms ‘manufacture’ and ‘calling’ used in the definition of industry.

FINAL PHASE (POST-1978)

In Bangalore Water Supply Case,[8] the Supreme Court gave a broader & more comprehensive interpretation of the word “industry.” The Supreme Court laid out some principles regarding the determination of an industry:

  1. The triple test, which includes cooperation between employer & employee, either directly or indirectly, is a systematic activity and the production or distribution of goods or rendering of services that satisfy human needs and desires (material or services not religious or spiritual). Whether one is motivated by profit or charity is irrelevant in this test.
  2. Dominant Nature Test- Applying the dominant nature criterion if the non-employee character of the unit is maintained, such professions, clubs, cooperatives, gurukuls, and little research labs may be exempted from the definition of industry. Where a complex of activities are involved, some qualifying for exemptions, not others, predominant activity test and integrated activity test would apply here. The entire project would be an industry, and individuals who are not “workmen” would not be eligible for benefits. Only sovereign functions, not the economic or social endeavours undertaken by governmental or statutory bodies, are excluded from this rule. There are certain exceptions to the term “industry,” such as-
  • Single doctor, lawyer (because of the absence of unorganised labour)
  • Casual activities (because they are not systematic)
  • Free legal and medical services (because of the lack of profit-making)
  • Sovereign functions such as maintenance of law & order, legislative and judicial functions.

Based on the interpretations mentioned above, the Supreme Court refused to accept the narrow meaning of the definition of industry & has recognised the broader definition of industry. Hence, the appeal was dismissed. 

The rulings of cases such as Safdarjung Hospital v. K.S. Sethi, the University of Delhi v. Ram Nath, Madras Gymkhana club Employees v. Management of Gymkhana club, etc., were overruled by the judgment of Bangalore Water Supply Case. Later in 1982, the Parliament changed the Industrial Dispute Act of 1947 under  the section 2 definition of “industry.”

In Coir Board Ernakulam Kerala State V. Indira Devai P.S.,[9] the Supreme Court supported the decision made in the Bangalore Water Supply Case. 

In State of U.P. v. Jai Bir Singh,[10] the Supreme Court’s majority ruling stated that before the intervention of the legislature, interpretation was only provisional and transitory; after the legislature’s action, ambiguity and confusion were resolved.

CONCLUSION

There has been substantial debate because the definition’s scope and ambit will have a significant impact on labour regulations in many different ways. This explains why the industry’s definition has evolved over time. However, the present definition of “industry”[11] has been well-written by the legislature to appeal to present-day needs through its comprehensive and understandable nature of legislature.

Author(s) Name: Pragati Rastogi (University of Petroleum and Energy Studies)

References:

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

[2] D.N. Banerjee V. P.R. Mukherjee & Ors. [1953] SC 58

[3] Corporation of the City of Nagpur V. Its Employees [1960] SC 675

[4] State of Bombay V. Hospital Mazdoor Sabha [1960] SC 610

[5] University of Delhi V. Ram Nath [1963] SC 1873

[6] Secretary Madras Gymkhana Club Employees Union V. Management of the Gymkhana Club [1968] SC 554

[7] Management of Safdarjung Hospital V. Kuldip Singh Sethi [1970] SC 1407

[8] Bangalore Water Supply and Sewerage Board V. A. Rajappa [1978] SC 548

[9] [2000] 1 SCC 224

[10] [2005] 5 SCC 1

[11] The Industrial Relations Code 2020, s 2(p)