TRIPLE TEST – MODE TO DETERMINE AN INDUSTRY

INTRODUCTION

An industry pertains to any trade, business, undertaking, or the calling of employers and includes service, handicraft, employment, or avocation of the workmen. The definition is categorised into two parts for the benefit of all. The first part of the meaning denotes any trade, business, undertaking, and others. While, the second part of the definition implies service, handicraft, and the avocation of the workers. Throughout decades, the meaning of the industry has evolved while, at present, it is a joint venture undertaken by employers and workmen. Thus, the industry can only exist when there is a relationship between the employers and the workmen undertaking such trade. Now, a question may arise about the validity of an industrial establishment. The solution to this question will be the triple test method. It is a method used to test the validity of an establishment and eliminate the ambiguity arisen out of business. An establishment gets its recognition as an industry if it passes the triple test method.

TRIPLE TEST

In the case of Bangalore Water Supply v. A. Rajappa,[1] 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 and services
  4. The goods and services produced are by the satisfaction of human wants.

Here, the industry will not embody any religious services or other work undertaken out of spiritual bliss. The thing that strikes us is to find whether the profit motive is important or not. But it 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.

EXCEPTIONS

Certain establishments do not fall under the ambit of the industry. They are as listed below:

  1. Restricted category of professions, Clubs, Co-operatives and Gurukuls.
  2. Charitable services provided include free legal aids and medical aids.
  3. Sovereign functions that are undertaken by the Government

VALIDITY OF VARIOUS UNDERTAKINGS

The Courts have played a significant role in determining various undertakings as industries through the delivery of landmark judgments.

  • Municipal Corporation:

The Municipal Corporation is a body established to undertake tasks of the municipality. The case, which plays a key role is the judgement of D.N. Banerjee v. P.R. Mukherjee[2]. Here, the Budge Budge Municipality had dismissed two employees on the charges of indiscipline and negligence. Those two employees pertained to the Municipal Workers Union, through which they questioned the validity of the dismissal. Therefore, the matter got referred to the Industrial Tribunal. While considering it, the Tribunal awarded reinstatement of the dismissed employees which, was challenged later on the ground that the Municipal Authority is not an industry but is performing the duties of local self-government. Ultimately, the Supreme Court reiterated the verdict that not every business activity concerning the master-servant relationship intends to be an industry. Therefore, the horizon of industry needs to be extended due to the increasing industrial progress owing to which the ‘public utility services’ were included in it. Therefore, the local bodies like municipalities that carry out public utility services fall under the purview of industry. Thus, summarizing all these, the Municipal Corporation was held to be an industry.

  • Hospital:

Many occasions have questioned the validity of the hospital as an industry. In the case of State of Bombay v. Hospital Mazdoor Sabha [3], the uncertainty of the hospital being an industry was sorted out. Here, the Hospital Mazdoor Sabha was a registered trade union concerned with the hospital employees in the State of Bombay. The services of two of its employees were terminated by retrenchment through the Government, and the Union claimed for their reinstatement. The claim undertook through a writ petition, but the State urged that the writ petition was wrongly conceived as the hospital does not fall under the purview of industry. But the Supreme Court held the hospital as an industry by following:

  1. The State was carrying on an ‘undertaking’ by running hospitals for the purpose to render medical relief.
  2. The hospital runs an activity dealing with the habitual production and distribution of goods to provide material services to the community.
  3. The profit motive stands irrelevant for this purpose.

By applying the above requirements, the hospital is considered to be an industry under the Act. 

  • College:

In the case of Brahmo Samaj Education Society v. West Bengal College Employees’ Association[4], a dispute arose between the education society and the non-teaching staff of the colleges belonging to that society. Here, the education society owned two colleges and the staff belonged to one of them. Later, the pleading undertook where it was upheld that the education society belonged to an educational institution and not an industry. But, the Calcutta High Court mitigated the dispute and held that the definition of ‘industry’ is a dynamic concept and does not only direct towards a business entity. Colleges are not only based upon the intellect of the students but also impart education for which they charge fees against it. Thus, colleges fall under the purview of industry.

  • Clubs:

The clubs are self-service institutions that fall under the definition of an industry. The reason being that clubs do provide services but profit plays no role here. Due to this, the clubs pass the triple test and are recognised as the industry.

  • Agricultural Operation:

The company engaged in agricultural operations intending to earn profits by employing workmen is considered an industry. The reason is that the workmen are employed to produce and distribute goods related to agricultural production, and the contribution helps it to pass the triple test [4].

  • Government Department:

As the case of State of Rajasthan v. Ganeshi Lal[5], the Labour Court had held that the Law Department of Government should be considered an industry. The view was given by a Single Judge and the Division Bench of the High Court, which was later challenged by the State before the Supreme Court. Thus, the decision was changed and held that the Law Department would not be considered an industry. The Court opined, “A decision is a precedent on its facts. Each case presents its features. It is not everything said by a Judge while giving a judgment that constitutes a precedent. The only thing in a Judge’s decision binding a party is the principle upon which the case is decided and for this reason, it is important to analyse a decision and isolate from it the ratio decidendi.”[6] Thus, when the lower Court considered it as an industry, it did not investigate the work undertaken by the department. Thus, the government department will not fall under the purview of industry.

CONCLUSION

Now, we have a clear view of how different establishments can be considered an industry under the Act. Whenever any dispute arises to determine the validity of an establishment, the provisions of the triple test comes 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. Hrer, 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.

Author(s) Name: Mukulita Dutta (S.K.Acharya Institute of Law, Kalyani)

References:

[1] Bangalore Water Supply v. A. Rajappa [1978] AIR 553 (SC)

[2] D.N. Banerjee v. P.R. Mukherjee [1953] AIR 58 (SC)

[3] State of Bombay v. Hospital Mazdoor Sabha [1960] AIR 866 (SCR)

[4] Brahmo Samaj Education Society v. West Bengal College Employees’ Association [1964] AIR 48 (Cal)

[5] State of Rajasthan v. Ganeshi Lal [2008] I LLJ 670 (SC)

[6] A.Pasayat, ‘State of Rajasthan vs Ganeshi Lal on 10 December, 2007’ (Indiankanoon, 10 December 2007)https://indiankanoon.org/accessed on 14 October 2021

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