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:
- Systematic activity
- Cooperation between employer and employee
- 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.
