1

INDUSTRY: A JUDICIAL INTERPRETATION

By
Brian Noronha
20171BBL0006
BBA LLB Section 1

SUBMITTED TO
Prof. A. Aravindan

SCHOOL OF LAW, PRESIDENCY UNIVERSITY

BANGALORE
KARNATAKA, INDIA
December, 2020
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INDUSTRY: A JUDICIAL INTERPRETATION

B Y:

BRIAN NORONHA

The landmark judgement of Bangalore Water Supply v. A. Rajappa was one of the cases which has
expanded the scope of the definition of the term Industry as per the Industrial Disputes Act, 1947.
This case overruled numerous decisions of the Supreme Court but simplified the task for the
legislature by placing major issues in the right perspective. In the Bangalore Water Supply case,
a seven-judge bench was constituted especially to examine the definition of “industry” and lay
down the law on the subject. The Bench drafted a new definition of the term “industry”. Their
ruling was a result of the various disputes arising in establishments that are not manufacturing
industries but belong to categories of hospitals, educational and research institutions,
Governmental departments, public utility services, professionals and clubs. Therefore the analysis
of this very judgement is the subject of this paper with the backdrop of the Interpretation of Statutes
and principles thereof.

INDEX OF CHAPTERS
INTRODUCTION………………………………………………….………………….3

INDUSTRY UNDER THE INDUSTRIAL DISPUTES ACT, 1947……...…………………...4

INDUSTRY AND THE BANGALORE WATER SUPPLY CASE …………………………..11

CONCLUSION………………………………………………………………………14
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INTRODUCTION

Interpretation means the art of finding out the true sense of an enactment by giving the words of
the enactment their natural and ordinary meaning. It is the process of ascertaining the true meaning
of the words used in a statute. The Court is not expected to interpret arbitrarily and therefore there
have been certain principles which have evolved out of the continuous exercise by the Courts.
These principles are sometimes called ‘rules of interpretation’.

The object of interpretation of statutes is to determine the intention of the legislature conveyed
expressly or impliedly in the language used. As stated by Salmond, "by interpretation or
construction is meant, the process by which the courts seek to ascertain the meaning of the
legislature through the medium of authoritative forms in which it is expressed."

Interpretation is as old as language. Elaborate rules of interpretation were evolved even at a very
early stage of the Hindu civilization and culture. The importance of avoiding literal interpretation
was also stressed in various ancient text books – “Merely following the texts of the law, decisions
are not to be rendered, for, if such decisions are wanting in equity, a gross failure of Dharma is
caused.” Interpretation thus is a familiar process of considerable significance. In relation to statute
law, interpretation is of importance because of the inherent nature of legislation as a source of law.
The process of statute making and the process of interpretation of statutes are two distinct
activities.

In the process of interpretation, several aids are used. They may be statutory or non-statutory.
Statutory aids may be illustrated by the General Clauses Act, 1897 and by specific definitions
contained in individuals Acts whereas non-statutory aids is illustrated by common law rules of
interpretation (including certain presumptions relating to interpretation) and also by case-laws
relating to the interpretation of statutes. Hence interpretation of statutes becomes an ongoing
exercise as newer facts and conditions continue to arise.

In this context, by the means of this research paper, we shall identify how various rules of
interpretation have been used to understand and expand the scope of the term “Industry” as
mentioned in the Industrial Disputes Act, 1947.
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INDUSTRY UNDER THE INDUSTRIAL DISPUTES ACT, 1947

In the years since independence, a series of Supreme Court and High Court decisions have carried
forward the meaning of an “industry” under the Industrial Disputes Act, 1947. The meaning of
“industry” is an important question of law and fact to be decided by the industrial tribunal before
exercising jurisdiction on a reference made to it by an appropriate government. This is so because
under the Industrial Disputes Act, 1947, the Government is empowered to make a reference to the
industrial tribunal when an industrial dispute exists between an employer and the workmen
employed in any industry.1

The following is the definition of an “industry" as per the Act: "Any business, trade, undertaking,
manufacturing, or calling of employees and includes any calling, service, employment, handicraft,
or industrial occupation or avocation of workmen."2

The first clause of the section gives the meaning and the second clause mentions several other
items within the coverage of an industry and brings them into the definition in an inclusive way.
The maxim of interpretation “EJUSDEM GENERIS” comes to mind here. The meaning of this
term simply put is where a statute describes things of particular class or kind accompanied by
words of a generic character, the generic words will usually be limited to things of a kindred nature
with those particularly enumerated, unless there be something in the context of the statute to repel
such influence. “EJUSDEM GENERIS” could be expansive, however, because the list is not
exclusive; it may be expanded if a juridical tie could be found with another item.

However we cannot hasten to include several things of a like nature into the definition of
“industry”. Establishments such as Educational Institutions, Municipality Organisations, Co-
operative Societies, and other organizations may be on first glance included as per this maxim.
Thus, we need to continue the exercise of Interpretation of Statutes in the context of this definition.

1
S. 10 of the Industrial Disputes Act, 1947 provides: “Where the appropriate Government is of opinion that any
industrial dispute exists or is apprehended it may at any time, by order in writing, refer the dispute to an industrial
Tribunal". "An industrial dispute" means any dispute or difference between employers and workmen . . . and
workman means any person employed in any industry. Thus a dispute which the Government may refer to the
Tribunal shall be an ' industrial dispute ' between the employer and workmen; and workmen shall be employed in an
industry.
2
S. 2(j) of the Industrial Disputes Act, 1947
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Even though the term “industry” has been given an exhaustive definition in the Act there is still
ambiguity regarding its scope and coverage. Ambiguity does not lie in the expressions’ “trade,
business or manufacturing", but it lies with regard to the scope of “undertaking and calling” as
used in section 2(j) of the Act.

It is true that under the capitalist form the term “industry” generally means an economic activity
involving for profit for the production or sale of goods labour.3 Perhaps the layman even to this
day understands it in this sense. The Indian courts, however, seem to have rejected the traditional
meaning of the term “industry”. In giving the new meaning courts have brought to light the
essential characteristics of “industry”. In deciding whether a particular establishment is an industry
or not, the courts have normally to decide:

i. The extent to which profit motive is essential; and

ii. The meaning of the terms “undertaking” and “calling”.

Let us now look at the judiciary’s interpretation of Industry in the context of the aforementioned
two conditions.

Profit Motive

The first case which required the interpretation of the term “industry” as used in the Industrial
Disputes Act, 1947 was Bombay Province v. W. I. Automobile Association,4 in which the Bombay
High Court was faced with a problem to decide whether an association of automobile owners
which simply rendered services to its members and had no motive to make profit could be held as
an industry for the purposes the Industrial Disputes Act, 1947.

The court held that the association was an industry though it had no motive to make any profit.
Interpreting the statutory language section 2 (j) of the Act, the court pointed out that profit motive
may be essential for a business, trade or manufacture but, it was observed by Chagla, J:

“There is no indication in the section itself that the Under-taking referred to in this definition
clause must be undertaking carried on for the purpose of making profit . . . the expression

3
The International Webster Dictionary defines "industry" as follows: "Any department or branch of art, occupation
or business, especially one which employs much labour and capital and is distinct branch of trade - as sugar
industry."
4
A.I.R. 1949 Bom. 141
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“calling” is also sufficiently wide to include in its activities not necessarily concerned with profit
motive.”

In V. S. Marwari Hospital v. Its Workmen,5 interpreting section 2(j) of the Industrial Disputes Act,
the Labour Appellate Tribunal held that section 2(j) of the Industrial Disputes Act, 1947, is of wide
amplitude and is not EJUSDEM GENERIS with the words “business or trade” used in the section.
It was held that if judged by the object and scope of the Act and the other provisions of the Act,
the plain meaning of the word could not be cut down to limit it to profit making enterprises only.
Hence charitable institutions like hospitals, universities, free schools or colleges or public bodies
like municipalities would come within the concept of "undertaking" as used in section 2(j) of the
Act

In State of Bombay v. Hospital Mazdoor Sabha,6 the Supreme Court of India has approved the
decision of the Labour Appellate Tribunal in V.S. Marwari. The Supreme Court held:

“It is the character of the activity which decides the question as to whether the activity in
question attracts the provision of section 2(j); who conducts the activity and whether it is
conducted for profit or not do not make any material difference.”

Whether the Indian legislature intended to include non-profit organization in the term “industry”
and to make the Industrial Disputes Act applicable to them can be examined by reading the various
provisions of the Act together.

"Public utility services" as defined in section 2 (n) of the Act includes railways, post-telegraph and
telephone services, light system, public sanitation and any industry which supplied power, light or
water to the public. 7 Normally these functions are performed by the state or public bodies without
any motive of profit. There is no doubt that “public utility services” are included in the definition
of industry as given in section 2(j) of the Act. This is because a dispute in these services between
employers and workmen is an industrial dispute, and section 10 lays down that where such dispute
arises and a notice under section 22 has been given, the appropriate government shall make a

5
4 F.J.R. 295 (L.A.T. Calcutta) (1952)
6
I L.L.T. 251 (S.C.) 1960
7
S. 2(n) of the Industrial Disputes Act, 1947
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reference under the sub-section. Hence profit motive is not the central idea running in these various
items which are mentioned in the definition of industry contained in section 2(j) of the Act.

We can observe that the maxim EJUSDEM GENERIS cannot be applied exclusively to this
definition. We also see that whether an establishment was began with the purpose of making profit
by sale or production of goods, or provision of services, is immaterial. Let us now look at the other
condition.

Meaning of the terms “Undertaking” and “Calling”

Though the word "undertaking" in the definition of "industry" is wedged between business and
trade on the one hand and manufacture on the other, and though therefore it might mean only a
business or trade undertaking, still it must be remembered that if that were so, there was no need
to use the word separately from business or trade. The wider import is attracted even more clearly
by the latter part of the definition which refer to “calling, service, employment or industrial
occupation or avocation of workmen”. It therefore follows that the word "undertaking," covers
much more than trade or business.

Considering the attributes, the presence of which would make an activity an undertaking within
the meaning of section 2(j) the Supreme Court in State of Bombay v. Hospital Mazdoor Sabha,8
stated:

“It is difficult to state these possible attributes definitely or exhaustively; as a working principle
it may be stated that an activity systematically or habitually undertaken for the production or
distribution of goods or for rendering of material services to the community at large or a part of
such community with the help of employees is an undertaking”

The court laid down the following as the essential characteristics of an industry:

1. There must be co-operation of the employer and the employees.

2. The object of the activity should be the satisfaction of material human needs.
3. The activity must be organised or arranged in a manner in which trade or business is
generally organised or arranged.

8
Supra note 6
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4. The activity must not be casual nor must it be for oneself nor for pleasure.

Thus, the manner in which the activity in question is organized or arranged, the condition of the
co-operation between employer and employees necessary for its success and its object to render
material service to the community can be considered as some of the features which are distinctive
of activities to which section 2 (j).

This follows the Golden Rule of Interpretation. The Golden rule, or British rule, is a form of
statutory interpretation that allows a judge to depart from a word's normal meaning in order to
avoid an absurd result. It also follows the rule of Reasonable Construction. This states if the literal
meaning collides with the reason of enactment of the statute then the intention of the law should
be taken up so that the actual meaning of the statute can be properly understood.

The reason I am including the abovementioned two rules of interpretation is because there is clear
ambiguity in the case of the term undertaking. However as observed by the Court, they have tried
to solve this ambiguity by looking at what is the intention the law was enacted, which was to
regulate the law for disputes in an industry, and to remove absurdities, such as excluding the
establishments not mentioned explicitly in the definition.

In Madras Pinjarapole v. Labour Court,9 the High Court of Madras applied the test laid down by
the Supreme Court in State of Bombay v. Hospital Mazdoor Sabha to consider how far the activities
of Madras Pinjarapole fulfilled the two essential requirements to constitute an industry, namely:
(1) The co-operation of the employer and the employees; and (2) The satisfaction of human wants
and desires.

On the first question, the court came to the conclusion that there was co-operation between the
employer and employees in the functioning of the Pinjarapole. On the second question, the court
looked into the object of Pinjarapole society and held that the object with which the Pinjarapole
received the animals was not for doing service to the owner, but to the animal by affording it
protection till death. Essentially, therefore, the services rendered was not for human wants and
desires but for the sake of the voiceless animals themselves. The activities of the Pinjarapole had
nothing to do with human needs. Though, incidentally such activities might have a business link
about them, it could not be said that they had for their object, any human need or material welfare,

9
19 F.J.R. 186 (H.G. Madras) (1960)
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the objects being mainly religious and humanitarian. The court concluded that as the tests laid
down by the Supreme Court in the Hospital case could not be satisfied, the Madras Pinjarapole
was not an "industry" within the meaning of section 2 (j) of the Act

In D.N. Banerjee v. P.R. Mukherjee,10 a bench of five judges was to determine whether a municipal
corporation could be considered as an industry. Invoking the rule of “NOSCITER A SOCIIS” (a
general word is known by the company it keeps) the court pronounced that the words “any
undertaking or calling” used in section 2(j) of the Act must be understood to mean such
undertakings or calling which are “analogous to the carrying on of a trade, business or
manufacture”.

Similarly 'any calling, or service' corresponds to those involved in business, trade, or any
analogous undertaking or calling. Thus, a municipal was held to be an 'industry' even though it
was engaged in conservancy (a 'public utility service' under the Act) without motive or investment
of any capital, which were held considerations for an industry. This analogy cuts down the
boundless sweep of the term 'undertaking', and therefore of 'industry', excluding spiritual, domestic
or casual undertakings, waging of war, policing, providing justice, legislating, tax-collecting and
the like, for “wars are not merchantable, nor justice saleable nor divine grace marketable.”

Similarly, educational institutions are not industries, was held by the court in University of Delhi
v. Ram Nath,11 because imparting of education is “more a mission than a profession” and thus not
“analogous to the carrying on of business.”

In the case of Osmania University v. Industrial Tribunal,12 the High Court of Andhra Pradesh held
that Osmania University was not an "industry" within the meaning of section 2(j) . The court
insisted on the co-operation of capital and labour (rather than employer and employees) and the
activities connected directly with or attendant upon, the production or distribution of wealth, as
the essential requisites for the test of an industry.

The aforesaid 'analogous activity test' was liberally modified by the apex court in its decision in
The Corporation of the City of Nagpur v. Its Employees 13 wherein the department of health,

10
AIR 1953 SC 58
11
AIR 1963 SC 1873
12
18 F.J.R. 440 (H.C. Andhra) (1960)
13
AIR 1960 SC 675
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education, tax and even the general administration department of a municipality were held to be
an 'industry'. The court elaborated that

“The emphasis is more on activities implicit in trade or business than to equate the other with
trade or business.”

Excluding “regal functions of the state” from the ambit of industry, the court declared that in any
department, industrial and non-industrial activities are carried on, it's “predominant functions”
shall be the criteria for ascertaining its true nature.

These were some of the examples of how the term “industry” had been interpreted by our judiciary.
The author would like to now analyse the interpretation as observed in the landmark judgement of
Bangalore Water Supply.
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INDUSTRY AND THE BANGALORE WATER SUPPLY CASE

The liberal approach in defining “industry” reached its zenith with the landmark case of Bangalore
Water Supply and Sewerage Board v. A. Rajappa14 wherein a seven-judge bench of the Supreme
Court overruled its earlier judgement given in court in The Management of Safdarjung Hospital
New Delhi v. Kuldip Singh Sethi,15 Secretary, Madras Gymkhana Club Employees' Union v. The
Management of Madras Gymkhana,16 University of Delhi17 etc. by a majority of five with two
dissenting, and extended its scope to new dimensions. This heralded a new era in the field of
industrial law in favour of common workmen.

Carefully considering the various expressions used in the of “industry”, the objects of the Act, the
Directive Principles of State Policy given under part IV of the Constitution of India, relevant
resolutions of the International Labour Organisation to which India is a signatory and Indian and
foreign rulings, the Supreme Court in this judgement laid down the following triple test for
identifying an industry under section 2(j) of the Act. As per the court an enterprise is prima facie
an industry where there is18:

1. A systematic activity,
2. Organised by co-operation between employer and employees,
3. For the production and/or distribution of goods and 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 large-scale prasad or food).

Further, absence of profit motive or presence of charitable or philanthropic objectives was held to
be irrelevant. True focus was declared as “functional” with the “nature of activity” being the
decisive test.

14
AIR 1978 SC 548.
15
AIR 1960 SC 1460.
16
AIR 1968 SC 554.
17
Supra note 11
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This seems to be an application of the Reasonable Construction rule as noted before. The Court
has not limited the scope of Industry to those which would have been included in a business, or
trade or the like. It has expanded to include those satisfying the triple test.

The court agreed that the word 'undertaking' must suffer a contextual and associational shrinkage
as explained in D.N. Banerjee18 so also service, calling or the like. Shattering the cloak of every
club being a mere self-serving organisation, the court said that if the club employs workmen, with
whose co-operation goods and services are made available to a section of the community and such
operations are organised in a systematic manner, it is no doubt an industry. From this case only
domestic, spiritual and religious services excluded on the beneficiary basis.

Parliament’s Explicit Definition

The Parliament, up till then remiss by not having amended the tenuous definition suo motu now
appreciably responded to the judicial call by enacting an explicit definition of industry, which
corresponded to the tests evolved in Bangalore Water Supply19 through the Industrial Disputes
(Amendment) Act, 1982.

This new definition20 recognised as many as nine exclusions in order to restrict the purview of
industry to a reasonable extent. It expressly excluded any agricultural operation; hospitals and
dispensaries; educational and scientific, research and training institutions; institutions engaged in
charitable, social and philanthropic services; khadi and village industries, sovereign-functions of
the government including activities dealing with defence research, atomic energy and space.
Besides the above, domestic services, any professional activity or a club or co-operative society
employing less than ten persons was also excluded from the ambit of industry.

Whereas many other amendments introduced by Industrial (Amendment) Act of 1982 were
enforced from 1984, the Central Government has failed, for reasons best known to it, to notify
enforcement of this restructured definition of industry till date. Consequently, the legal principles
laid down in the Bangalore Water Supply21 case continue to be the binding.

18
Supra note 10
19
Supra note 14
20
S. 2(c) of the Industrial Disputes (Amendment) Act, 1982
21
Supra note 14
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Therefore, the rules of interpretation used by the Supreme Court while deciding on the triple test
were, in my opinion, as follows.

The Golden Rule of Interpretation was applied in this expanded definition.in order to expand its
scope. Before this definition, through the various judgements observed above, we can see that the
courts used to remove establishments from the definition of industry for simple reasons. Through
this definition, the courts now received a set test on which they were supposed to adjudicate
whether an establishment it as an industry if it satisfied the conditions. Therefore absurd results
started being avoided.

The Reasonable Construction Rule was also followed, wherein the apex court realised that the
Industrial Disputes Act, 1947 was enacted in order to create certain safeguards for the workers of
various establishments of our nation. The exclusion of an establishment from the definition of
industry would restrict these workers from availing of these benefits which people in similar
conditions would be receiving. Hence, they aimed to expand the definition of Industry to include
such workers who were hitherto being left out.

Other than the above two, I feel that there are fragments of the rule of Beneficial Construction
visible as well. This rule is similar to the Golden Rule in that it says that when the literal meaning
of the statute defeats the objective of the legislature, the court may depart from the dictionary and
instead give it a meaning which will advance the remedy and suppress the mischief. Therefore, in
our present definition, the court deviated from just those words as used in the legislation, to
suppress the establishments which tried to find a loophole and thereby escape their liabilities to
their employees.

On the whole, I feel that this was an apt way to decide on the definition of Industry. The Triple
Test rule for Industries were used by the Parliament as observed previously, which shows that the
rules of Interpretation applied were effective in ensuring that an accurate meaning was followed
rather than one that was which was just a literal one. It is encouraging to see that our legislature
can enact amendments to definitions on the basis of the interpretation of courts.
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CONCLUSION

As has been seen, an imprecise definition of the pivotal term “Industry” under the Industrial
Disputes Act of 1947 has resulted in much ambiguity, uncertainty and confusion as to its
application to different activities and organisations. The legislation, being a beneficial legislation,
imposes several liabilities on the employer/management in order to safeguard the interests of their
workers, which has given rise to differences of opinions as to the extent and limits of its ambit.

The great mass of contradictory judgements has also not helped in clarifying the mist surrounding
the inexplicably vague wordings of the statutory definition. Such judicial indecision and legislative
indifference does not augur well for the certainty and clarity in industrial law. In fact, the landmark
decision of the Supreme Court in 1978 sincerely endeavoured to channelize the law, as did ensuing
amendment to the Act in 1982; but whereas the amendment was never brought into force, there
has been increasing demands to re-examine the liberal judgement of 1978. This confusion will
further subsist unless concrete and all-out efforts are not made ardently. There exists therefore,
urgent need for law-reform on this foundational aspect of industrial law.

The Indian Parliament, which has a 'commitment to legislate promptly in vital areas like industry,
has brought out a recent code on Industrial Relations which holds an explicit definition to the term.
Though there is reason for optimism in this concern, at the same time, we should be cautious to
see how the code is actually implemented, with no date for execution in sight. The new law,
legislative or judicial, should candidly elucidate the extent of application of the law both in public
and private sector industries, keeping in view the righteous demands of social justice. Last but not
the least, such law should aim at clarity, and certainty.

It will be some time before this new code is implemented in full force. Therefore, it is my
enthusiastic hope that our new code, along with the other three recent codes, shall help streamline
the interpretation of industrial law to include maximum benefits to the workers of India. The future
alone shall answer questions related to the sincerity of the Central Government.