Definition of Industry and its Evolution

 

Relevant Provision:

• Section 2(j) of the Industrial Disputes Act, 1947

Statutory Definition:

According to Section 2(j) of the Industrial Disputes Act, 1947:

“Industry” means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen.

 Key Elements:

The definition includes:

• Activities of the employer (business, trade, manufacture)
• Activities of the employees (service, employment, handicraft, etc.)

2. Three Phases of the Meaning of Industry

The interpretation of the term "industry" has undergone three phases:

 Phase 1: Pre-Bangalore Case (Restrictive Interpretation)

In the early years, courts interpreted "industry" narrowly, focusing on profit-oriented, commercial activities. Institutions like hospitals, clubs, and educational institutions were excluded.

 Phase 2: Bangalore Water Supply Case (Widened Interpretation)

Landmark Case:

Bangalore Water Supply and Sewerage Board v. A. Rajappa, (1978) 2 SCC 213

Facts:
Employees of the Bangalore Water Supply Board raised an industrial dispute. The employer challenged that the Board was not an "industry" under the Act.

Issue:
Whether a government utility body like Bangalore Water Supply and Sewerage Board qualifies as an "industry."

Judgment:
A 7-judge bench of the Supreme Court, led by Justice Krishna Iyer, gave an expansive interpretation of "industry" and held that even non-profit, public utility, educational and charitable institutions could fall under the term “industry” if they fulfill the “triple test”.

Triple Test laid down by the Court:

1. Systematic activity
2. Cooperation between employer and employee
3. Production and distribution of goods/services to satisfy human wants

Exclusion only if: The activity is spiritual/religious, or involves personal services (like domestic servants), or purely sovereign functions (legislation, judiciary, etc.).

Held:

• Clubs, hospitals, educational institutions, even municipalities, may come under the term industry if the above tests are satisfied.
• A broad and inclusive approach was adopted.

 Phase 3: Post-Bangalore Criticism and Legislative Reaction

After the Bangalore case, there was widespread criticism due to the over-inclusive nature of the definition, bringing even charitable institutions and non-profits under industrial law obligations.

To address this:

 Proposed Amendment:

• In 1982, Parliament passed the Industrial Disputes (Amendment) Act, 1982 (but not notified) which sought to redefine “industry” and exclude:
• Charitable institutions
• Hospitals
• Educational institutions
• Professions
• Clubs and cooperatives

However, since the amendment was never brought into force, the Bangalore Water Supply decision remains good law.

3. Institutions Included or Excluded as Industry

 Included as "Industry":

1.     Hospitals

• Bangalore Water Supply Case – Held: Hospitals with systematic employment and services fall under "industry".

2.     Clubs

• If run in a business-like manner with employees, fall under "industry".

3.     Educational Institutions

• University of Delhi v. Ram Nath, AIR 1963 SC 1873 – Initially excluded.
• But post-Bangalore case, even private educational institutions are included if they satisfy the triple test.

4.     Municipalities and Local Authorities

• If providing water, sanitation, and other services, are industries.
• Bangalore Water Supply – Municipality included.

 Excluded from "Industry":

1.     Purely Sovereign Functions:

• Activities like policing, defence, judiciary not considered industry.

2.     Domestic Services:

• Employers of domestic servants not considered industry.

3.     Religious Institutions:

• Institutions engaged in spiritual or religious functions are excluded.

 

4. Summary of Important Case Law

 (i) Bangalore Water Supply and Sewerage Board v. A. Rajappa, (1978) 2 SCC 213

In this seminal case, the Supreme Court dealt with the definition of "industry" under Section 2(j) of the Industrial Disputes Act, 1947. The Court adopted a wide interpretation and introduced the “triple test” to determine what constitutes an industry. Justice Krishna Iyer held that systematic activity, organised cooperation between employer and employee, and the production/distribution of goods/services aimed at satisfying human wants, collectively define an “industry”. The judgment brought in even non-profit and charitable institutions such as hospitals, educational institutions, and clubs within its ambit, as long as they satisfied this test.

 (ii) State of Bombay v. Hospital Mazdoor Sabha, AIR 1960 SC 610

In this case, the Supreme Court held that a hospital run by the State for providing medical services to the public was an “industry” under the Act. The decision emphasized that the motive (profit or no-profit) is not decisive. The focus should be on the nature of the activity and whether there exists employer-employee cooperation to deliver services.

 (iii) Management of Safdarjung Hospital v. Kuldip Singh Sethi, AIR 1970 SC 1407

The Court ruled that a government-run hospital is not an “industry” due to its welfare orientation and lack of profit motive. However, this view was overruled in the Bangalore Water Supply case, which included even government-run hospitals under "industry".

 Conclusion:

The term “industry” under the Industrial Disputes Act has evolved from a narrow, profit-based definition to a broad, inclusive one, largely due to judicial activism. Despite criticism and attempted statutory amendments, the Bangalore Water Supply judgment still stands as the authoritative precedent, making it a cornerstone for interpreting labour disputes and employee rights in diverse sectors.