Aapka Consultant Judgment Series- In this series, we are providing case analysis of Landmark Judgments of Hon’ble Supreme Court of India.
Bangalore Water Supply and Sewerage Board Vs. A. Rajappa and Ors.
AIR 1978 SC 969, (1978) 2 SCC 213, [1978] 3 SCR 207
Hon’ble Judges/Coram : V.R. Krishna Iyer , M. Hameedullah Beg, C.J., Y.V. Chandrachud, P.N. Bhagwati, Jaswant Singh, V.D. Tulzapurkar and D.A. Desai, JJ.
Date of Decision: 07.04.1978
FACTS: –
The employees of the Appellant were fined by the Appellant Board for misconduct and various sums were recovered from them. Therefore, they filed a Claims under Section 33C (2) of the Industrial Disputes Act alleging that the said punishment was imposed in violation of the principles of natural justice. The appellant Board raised a preliminary objection before the Labour Court that the Board, a statutory body performing what is in essence a regal function by providing the basic amenities to the citizens, is not an industry within the meaning of the expression under section 2(j) of the Industrial Disputes Act, and consequently the employees were not workmen and the Labour Court had no jurisdiction to decide the claim of the workmen. This objection being over-ruled, the appellant Board filed two Writ ’Petitions before the Karnataka High Court. The Division Bench of that High Court dismissed the petitions and held that the appellant Board is “industry” within the meaning of the expression under section 2(i) of the Industrial, Disputes Act, 1947. Therefore, the present appeal to rest the controversy relating to the scope and ambit of the word “Industry”.
ISSUE: –
What is the scope of the definition of Industry as covered under the Industrial Dispute Act?
JUDGEMENT: –
- ‘Industry’, as defined in Section 2(j) has a wide import.
(a) Where (i) systematic activity, (ii) organized by co-operation between employer and employee, (the direct and substantial element is chimerical)(iii) for the production and/or distribution of goods and services calculated 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), prima facie, there is an ‘industry’ in that enterprise.
(b) Absence of profit motive or gainful objective is irrelevant, be the venture in the public, joint private or other sector.
(c) The true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer-employee relations.
(d) If the organisation is a trade or business it does not cease to be one because of philanthropy animating the undertaking.
Although Section 2(j) uses words of the widest amplitude in its two limbs; their meaning cannot be magnified to overreach itself. ‘Undertaking’ must suffer a contextual and associational shrinkage as explained in Banerji and in this judgment, so also, service, calling and the like. This yields the inference that all organized activity possessing the triple elements in I (supra), although not trade or business, may still be ‘industry’ (provided the nature of the activity, viz. the employer-employee basis, bears resemblance to what we find in trade or business. This takes into the fold of ‘industry’ undertakings, callings and services adventure ‘analogous’ to the carrying on of trade or business’. All features, other than the methodology of carrying on the activity viz. in organizing the co-operation between employer and employee may be dissimilar. It does not matter, if on the employment terms there is analogy.
Application of these guidelines should not stop short of their logical reach by invocation of creeds, cults or inner sense of incongruity or other sense of motivation for or resultant of the economic operations. The ideology of the Act being industrial peace, regulation and resolution of industrial disputes between employer and workmen, the range of this statutory ideology must inform the reach of the statutory definition. Nothing less, nothing more. The consequences are (i) professions, (ii) Clubs (iii) educational institutions (iiia) co-operatives, (iv) research institutes (v) charitable projects and (vi) other kindred adventures, if they fulfil the triple tests listed in I (supra), cannot be exempted from the scope of Section 2(j). A restricted category of professions, clubs, co-operatives and even Gurukulas and little research labs, may qualify for exemption if in simple ventures substantially and going by the dominant nature criterion substantively, in single simple ventures, no employees are entertained but in minimal matters, marginal employees are hired without destroying the non-employee character of the unit. If in a pious or altruistic mission many employ themselves, free or for small honoraria, or likely return mainly by sharing in the purpose or cause, such as lawyers volunteering to run a free legal services clinic or doctors serving in their spare hours in a free medical center or ashramites working at the bidding of the holiness, divinity or like central personality and the services are supplied free or at nominal cost and those who serve are not engaged for remuneration or on the basis of master and servant, relationship, then, the institution is not an industry even if stray servants, manual or technical, are hired.
The dominant nature test to determine Where a complex of activities, some of which qualify for exemption, others not, involves employees on the total undertaking, some of whom are not ‘workmen’ as in the University of Delhi Case or some departments are not productive of goods and services if isolated, even then, the predominant nature of the services and the integrated nature of the departments as explained in the Corporation of Nagpur, will be true test. The whole undertaking will be ‘industry’ although those who are not ‘workmen’ by definition may not benefit by the status. Notwithstanding the previous clauses, sovereign functions, strictly understood, alone qualify for exemption, 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 from the scope of the Act categories which otherwise may be covered thereby.
HELD: – Court laid down various tests and guidelines like Triple test, Dominant Nature test etc. to determine whether a particular organization falls within the ambit of Industry or not. Moreover, the true focus should be on the functional aspect and the decisive test is the nature of activity with special emphasis on the employer and employee relationship.
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