LABOUR & INDUSTRIAL LAW

HOSPITAL AS AN INDUSTRY; ANALYZING THE JUDICIAL TRENDS

CE-III SUBMISSION

SEMESTER VI

SUBMITTED TO: SUBMITTED BY:

DIYA SHEKHAWAT (19BAL073)

MS. ANUBHUTI DUNGDUNG
MR. GURURAJ DEVARHUBLI GOURAV PILLAI (19BAL075)

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TABLE OF CONTENTS

INTRODUCTION ..........................................................................................................3
AMBIGUOUS NATURE OF THE TERM “INDUSTRY” ...................................................3
BANGALORE WATER SUPPLY AND SEWERAGE BOARD V. R. RAJAPPA. ........................................ 4
HOSPITAL AS AN ‘INDUSTRY’ ....................................................................................5
STATE OF BOMBAY V. HOSPITAL MAZDOOR SABHA .................................................................... 5
MANAGEMENT OF SAFDARJUNG HOSPITAL V. KULDIP SINGH ...................................................... 6
DHANRAJGIRI HOSPITAL V. WORKMEN ........................................................................................ 6
CONCLUSION ..............................................................................................................7

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INTRODUCTION

Section 2 (j) of the Industrial Disputes Act, 1947 (herein after referred to as
“IDA”) defines ‘industry’ as “any business, trade, undertaking, manufacture, or
calling of employers and includes any calling, service, employment, handicraft or
industrial occupation or avocation of workmen.” The basic idea behind industrial
legislation is to bind together labour and capital in order to establish an atmosphere in
which they are an indivisible whole in the production. It is the branch of law that plays
such a broad and successful role in social engineering and social action. Industrial law
differs from other fields of law in that it is a set of legislative acts and judicial principles
dealing with employment and non-employment, pay, working conditions, industrial
relations, social security, and employee labour welfare. It is in the interest of the state
to impose limits on employers on the one hand and workers on the other in order to
prevent exploitation and achieve industrial peace.

AMBIGUOUS NATURE OF THE TERM “INDUSTRY”

The IDA was enacted by our legislators to ensure industrial peace and harmony by establishing a
systematic mechanism and machinery for the investigation and resolution of industrial disputes
through discussions. The major goal of the IDA is to provide equal treatment between employers
and employees, as well as between workers and employers. It aids not only in preventing problems
between employers and employees, but also in determining how to resolve such issues so that the
organization's productivity is not affected.

The word “Industry” in IDA is too generic and does not provide a clear definition of what will
come under the ambit of the term “Industry”. A rough interpretation establishes that an industry
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exists only when there is a relationship between employers and employees, with the former
engaged in business, trade, undertaking, manufacture, or calling of employers, and the latter
engaged in calling, service, employment, handicraft, or industrial occupation and avocation. This
definition is exhaustive as well as inclusive. However, because of the various types of industry,
particularly after fast industrial advancement and the broadest language utilized in the definition,
the concept of industry extended in all directions. The current meaning is the same as it was
originally enacted in the IDA of 1947. Despite the fact that this definition has not been amended,
it has been subjected to numerous court interpretations.

BANGALORE WATER SUPPLY AND SEWERAGE BOARD V. R. RAJAPPA.1

Therefore, the term industry has been given a wider scope in the judgement of the case Bangalore
Water Supply and Sewerage Board v. R. Rajappa.2 The court established that:-
(i) Any activity will be industry if it satisfies the ‘triple test’, as under:
• If that activity is systematic and organized;
• If it is with the cooperation between employers and employees; and
• If it is for the production and distribution of good and services whether or not capital
has been invested for this activity.
(ii) It is irrelevant whether or not there is a profit motive, which is why professional clubs
or educational institutions will not cease to be an industry
(iii) It is immaterial whether or not there is capital.
(iv) If the organization is a trade or business it does not cease to be one because of
philanthropy animating the triple test, cannot be exempted from scope of definition of
industry.
(v) Dominant nature test – whether there is complex of activities or the industry deals with
more than one activity, the test would be predominant nature of services and integrated
nature of departments. All departments integrated with industry will also be industry.
(vi) The exceptions to industry are;

1
Bangalore Water Supply and Sewerage Board v. R. Rajappa, AIR 1978 SC 548.
2
Bangalore Water Supply and Sewerage Board v. R. Rajappa, AIR 1978 SC 548.

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• Casual Activities, such as small clubs or volunteer work, as they are not systematic
• Sovereign functions
• Charitable Institutions which are oriented on a humane mission fulfilled by men
who work, not because they are paid wages, but because they share the passion for
the cause and derive job satisfaction.

HOSPITAL AS AN ‘INDUSTRY’

There are plenty of judgements that have dealt with the debate regarding whether Hospital can be
termed as an ‘Industry’ or not. We shall discuss the interpretation while analyzing the judicial
pronouncements through years, which are:-

STATE OF BOMBAY V. HOSPITAL MAZDOOR SABHA3

The Hon’ble Supreme Court of India held that when the state manages a network of hospitals for
the purpose of providing medical treatment to citizens and assisting in the transmission of medical
education, it is engaging in a 'undertaking' within the meaning of Section 2(j). The court made the
following observations:

a. An 'undertaking' is an activity that is routinely or habitually conducted for the production

or distribution of goods or the delivery of material services to the community at large or a
subset of such community with the assistance of personnel.
b. It is the nature of the activity in question that draws the provisions of Sec. 2 (j), not who
conducts the activity or whether it is performed for profit or not.

Therefore, activities with no commercial implications, such as hospitals run for altruistic reasons,
would be covered by the term 'undertaking.' The fact that the government is in charge of such an

3
State of Bombay v. Hospital Mazdoor Sabha, AIR 1960 SC 610.
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activity is irrelevant. If an activity is considered industry if carried out by a private individual, it is

also considered industry if carried out by the government.

MANAGEMENT OF SAFDARJUNG HOSPITAL V. KULDIP SINGH4

The Hon’ble Court held that a patient care facility administered as a government agency was not
an industry because it was part of the government's activities. Charitable hospitals run by the
government or even private organisations are not considered industry because they have not
engaged in economic activities comparable to trade or business. If a hospital, nursing home, or
dispensary is administered as a commercial enterprise, there may be elements of industry.

Safdarjung Case established a solid reasoning for determining what constituted service. "Material
services involve an activity carried out by cooperation between employers and employees to offer
the community with anything like electric power, water, transportation, mail delivery, telephones,
and the like." Such material services are eligible to be classified as Industry. Material service, on
the other hand, does not arise for professionals such as doctors, lawyers, and teachers because they
do not work in occupations where employers and employees collaborate. As a result, organisations
such as hospitals and educational institutions are not classified as industries.

DHANRAJGIRI HOSPITAL V. WORKMEN5

In the above mentioned case, the main activity of the hospital was imparting of training in nursing
and the beds in the hospital were meant for their only practical training. The Hon’ble Court held
that such a activity is not an industry, as it was not carrying on any economic activity in the nature
of trade or business.

4
Management of Safdarjung Hospital v. Kuldip Singh, AIR 1970 SC 1406.
5
Dhanrajgiri Hospital v. Workmen, AIR 1975 SC 2032.
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CONCLUSION

The Hon’ble Supreme Court in the case of Bangalore Water Supply v A. Rajappa6 overruled the
cases of Safdarjung Hospital and Dhanrajgiri Hospital, and upheld the law established in the
Hospital Mazdoor Sabha case. It was decided that hospital facilities are unquestionably services
and thus industries. While carrying out welfare operations, government departments cannot be
regarded to be carrying out sovereign tasks and hence fall outside the purview of Section 2(j) of
the Act. As a result, a charitable hospital administered by a private trust, giving free services and
employing a permanent staff, is an industry since there is systematic activity, collaboration
between employer and employees, and the provision of services that satisfy human needs and
desires. Furthermore, employees are hired in the same manner as in any other organization.

However, although the judgement of Bangalore Water Supply and Sewerage Board v A. Rajappa
has been regarded as a watershed moment in defining the scope of industry, we have concluded
from many other judicial interpretations that the Triple Test given in the ratio of the Judgment has
many loopholes that must be filled. No doubt, Judges sought to revisit the verdict for better
interpretation on numerous occasions, but the ruling was never reversed due to the Ratio of Judges
in a Bench Criteria.

Hence, we can conclude by saying that there is still a lot of scope in the interpretation of the
definition, but it could only be possible when a higher bench with more number of judges get any
case regarding the interpretation of the definition of Industry. Until then, due to the width of the
interpretation of word, a tug-of-war will pertain between the two parties, in spite of various
decisions.

6
Bangalore Water Supply and Sewerage Board v. R. Rajappa, AIR 1978 SC 548.

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