 Bangalore Water Supply and Sewerage Board V/s A. Rajappa and Ors.

, decided on
21.2.1978 and 7.4.1978. In this landmark judgement 7 judge bench of the Hon’ble
Supreme Court considered pros and cons of the definition of Industry, referred earlier
pronouncements and decided the scope of definition of Industry under the Industrial
Disputes Act, 1947.
 State of UP V/s Jai Bir Singh, that the cases stated in the cause title be placed before
the Hon’ble Chief Justice of India for constituting a suitable larger bench for
reconsideration of the judgement of Supreme Court in the case of Bangalore Water
Works. The latest perusal of the records of the Supreme Court of India show that, the
said matters are presently pending before a 7 Judge Bench of the Hon’ble Supreme
Court.
 The Constitution of Bench is pending since 2005. It is not certain when finally Bench
will be constituted and judgment will come. Till that time the law as set by Bangalore
Water Works will prevail. Based on the judgement of Bangalore Water Works by the
Hon’ble Supreme Court the following activities have been considered ‘Industry’ by
various Courts;
 The triple test provides that a) systematic activities b) organized by cooperation
between employer and employees c) for the production of goods and services
calculated to satisfy human wants and wishes would constitute industry. However,
this test was subjected to exceptions, namely, industry does not include spiritual or
religious services; absence of profit motive or gainful objective is irrelevant (although
an organisation will not cease to be a trade or business because of philanthropy
animating the undertaking) The main test is the nature of activity with emphasis of
employer-employee relationship.
Change is a phenomenon that twists the very fabric of the society. When the world entered
19th century, the discovery era had just passed by and the era of invention had begun, and it
was out of these inventions that companies were born. Out of a filament bulb Thomas Elva
Edison set up the

General Electric Company and from a car Henry Ford went on to set up The

Ford Motor Company. Eventually Industries became a crucial part of our

society;

the rapidness took place after the kick start of the

Industrial

Revolution in England. Applying law to the concept of Industry, when a

dispute arises in the industry there is law which is compiled with the rules

and regulations to resolve the Issues. Coming to the Indian scenario there

is Industrial Disputes Act, 1947, which controls the disputes arising in the

Industries. The question raised was what comes under the definition of

Industry.

The

literal

meaning

of

the

Industry

is

'economic

activity
concerned with the processing of raw materials and manufacture of goods

in factories.' As per Section

2(j)

of the industrial disputes Act defines

"Industry"

means

any

business,

trade,

undertaking,

or

calling

of

employers and includes any calling, service, employment, handicraft, or

Introduction

Development of the definition “Industry”

What not comes under

How is ‘Industry’ Defined Under Labour Laws in India?

The judgement of the Hon’ble Supreme Court in the matter of Bangalore Water Works
consists of 182 paragraphs and has considered all the previous cases on the subject. The
summary of the judgement is as under –

a) Where (I) Systematic activity (II) Organised by Co-operation between employer and
employee (III) For the production and/or distribution of goods and services calculated to
satisfy human wants and wishes (inclusive of material things or services geared to celestial
bliss i.e. making on large scale or Prasad or food is an industry)

b) Absence of profit motive or gainful objective is irrelevant, be the venture in the public,
joint, private or other sector.

c) If the nature of activity is with special emphasis on employer, employee relationship and
true focus is functional.

d) If the organisation is trade or business, it will be covered by the definition of Industry

though organisation is philanthropic.

With this judgement, besides manufacturing activity, professions such as Attorney, activities
like Clubs, Educational Institutions, Co-operatives, Research Institutes, and Charitable
Projects were also covered. Respective category of professions, clubs, co-operative etc may
qualify for exemption from the definition of Industry. As held by the Hon’ble Supreme Court
in this judgement, if no employees are entertained but in minimal matters, marginal
employees are hired without destroying the non employee character of the unit.

Even pious or altruistic missions have been considered to be out of the ambit of the definition
of Industry if mainly drawn, by sharing in the purpose or common cause, for E.g. – lawyers
volunteering to run a free legal services clinic or doctors serving in their spare hours in a free
medical centre or Asharm-ites working at the bidding at the Holiness, Divinity and the
services are supplied free or at nominal costs and those who serve are not engaged for
remuneration or on the basis of Master and Servant relationship.

Even in case of sovereign functions if there are units which are Industries and which are
substantially severable then they were considered to be falling within the ambit of definition
of Industry. Constitutional and competitively enacted legislative provisions removing certain
activities from the scope of the Act, which otherwise are likely to be covered by the
interpretation of Industry, were held to be out of ambit of the definition of Industry.

The Hon’ble Supreme Court held that in deciding whether an enterprise is an industry, the
absence of profit motive or gainful objective is irrelevant. The Hon’ble Supreme Court also
held that whether the venture is public/joint or private or other sector is also irrelevant. The
Hon’ble Apex Court also observed that absence of capital does not qualify an enterprise for
exemption from the scope of Section 2(j) of the Act.

The Hon’ble Supreme Court also observed that welfare economic activities undertaken by the
Government or statutory bodies not being sovereign functions are covered by the definition
of Industries. The judgement also brought research institutes, educational institutions,
hospitals, professions like attorney, co-operative societies, clubs, philanthropic enterprises,
performing business functions within the definition of Industry. Charitable Institutions make
no profits but hire the services of employees as in other like businesses.

The Hon’ble Supreme Court held that from the point of view of workers there is no charity,
they are concerned about the disposal of end products. The Hon’ble Supreme Court felt that
noble objectives, pious purposes are no reasons to bring charitable institutions out of the
definition of Industry. The Hon’ble Supreme Court also felt that if kind hearted businessmen
or high minded industrialist or service minded operated, hire employees and provide services
to the lowly and the lost, the needy and ailing, without charging them any price or receiving a
negligible return is a charity but as far as workmen are concerned, they contribute their labour
in return for wages and conditions of service and therefore such an activity is covered by the
definition of Industry. While holding that Attorney’s office is an industry, the Hon’ble
Supreme Court in the same judgement excluded single lawyer, rural medical practitioner or
urban doctor with little assistant and/or menial servant. The Hon’ble Supreme Court also held
that if Club or other like collective has basic and dominant self service mechanism, presence
of stray employees will not bring such a club within the definition of Industry, however the
Hon’ble Court also observed that there should be absence of employer-employee co-
operation. The Club should be self serving and should not hire employees to manage their
activities except part time sweeper etc.
The interpretation of the definition of Industry by the Hon’ble Supreme Court brought a large
ambit of activities under the definition of Industry. A large number of institutes, particularly,
charitable institutes, universities approached the Union of India for an amendment in the
definition of Industry and accordingly Industrial Disputes Act, was amended in the year
1982. Sub section 2 of Section 1 of the Amendment Act states that the Act shall come into
force on such a date as the Central Government may, by notification in the Gazette, appoint.
However, although the Act has amended the definition of Industry in 1982, the amended
provision is not brought into force.

On this background, in the year 2005, the Hon’ble Supreme Court, 5 Judge Bench, decided
on 5.5.2005, in the matter of State of UP V/s Jai Bir Singh, that the cases stated in the cause
title be placed before the Hon’ble Chief Justice of India for constituting a suitable larger
bench for reconsideration of the judgement of Supreme Court in the case of Bangalore Water
Works. The latest perusal of the records of the Supreme Court of India show that, the said
matters are presently pending before a 7 Judge Bench of the Hon’ble Supreme Court.

On this background, in today’s business world the definition of Industry as held by the
Hon’ble Supreme Court, in the year 1978, certainly requires reconsideration not only from
the point of view of amendment of 1982 but also from the point of view of present
industrial/business scenario. Today with liberalization, a manufacturer in India may have to
compete with manufacturer from all over the world. In the business world, what matters most
is competitiveness and pricing with quality. Therefore if Indian business houses have to
compete with manufacturers in China where restrictions are not as severe as in India, the
manufacturers in India will not be able to compete with their Chinese counterparts. While
doing so, however, welfare of the workforce and compliance with Indian employment laws
shall also have to be kept in mind.

The Constitution of Bench is pending since 2005. It is not certain when finally Bench will be
constituted and judgment will come. Till that time the law as set by Bangalore Water Works
will prevail. Based on the judgement of Bangalore Water Works by the Hon’ble Supreme
Court the following activities have been considered ‘Industry’ by various Courts;

Public Works Department of Government (State of Punjab V/s Hari Dass & Anr, 1999)

Doordarshan (All India Radio V/s Santosh Kumar, 1998)

Tata Sports Club (Ratilal B Ravji V/s Tata Sports Club & Anr., 1997)
Research Institute (Central Council for Research in Ayurveda and Siddha V/s Central
Government Industrial Tribunal & Anr, 2010