Hospital- Whether an Industry?

Table of Contents
 Introduction
 Factors that Influenced the Enactment of Labour Law in India
o Development of International Labour Organization
o Colonisation by British
 “Industry” under Industrial Disputes Act, 1947
 Attributes of “Industry” Through Judicial Interpretation
o STATE OF BOMBAY v. HOSPITAL MAZDOOR SABHA
o D. N. BANERJEE v. P.R.MUKHERJEE
o CORPORATION OF CITY OF NAGPUR v. EMPLOYEES 
o NATIONAL UNION OF COMMERCIAL EMPLOYEE v. M.R. MEHER
 Scope of Term “Hospital as Industry”
o STATE OF BOMBAY v. HOSPITAL MAZDOOR SABHA
o UNIVERSITY OF DELHI v. RAM NATH- SELECTIVE EXCEPTION CASE 
o MANAGEMENT OF  SAFDARJANG HOSPITAL v. KULDIP SINGH
o DHANRAJGIRI HOSPITAL v. WORKMEN
 Landmark Case for Determining Scope of Industry
o BANGALORE WATER SUPPLY AND SEWERAGE BOARD v. RAJAPPA 
 Aftermath of Watershed Judgment
 Conclusion

Introduction
‘Industry’ means, “any business, trade, undertaking, manufacture, or calling
of employers and includes any calling, service, employment, handicraft or
industrial occupation of workmen”. Security of the individual is a basic
human right and the protection of individuals is, accordingly, a fundamental
obligation of Government. The main concept of industrial legislation is to
fasten together both labor and capital in order to create an atmosphere that
they are indivisible whole in the production. It is the branch of law which
embraces such a wide and effective role in social engineering and social
action. Industrial law distinguishes itself from other branches of law as it is
the body of legal enactment and judicial principles which deals with
employment and non-employment, wages, working conditions, industrial
relations, social security’s and labor welfare of employees. It is in a state
intervention to put restrictions on employer on one hand and workman, on
the other hand, to prevent exploitation to attain industrial peace. Industrial
legislation aims at protecting the workers from exploitation and strengthens
the values of industrial relations. The legislation provides effective tool to
settle industrial disputes and tries to provide safe and healthy industrial
atmosphere.

Factors that Influenced the Enactment of

Labour Law in India
There are many factors which have influenced the emergence of labor
legislation in India and around the world, but the two main reasons which led
to the emergences of Labor Law in India are as following:  

Development of International Labour

Organization
The ILO standards have influenced Indian Labor Legislations to a great
extent. ILO standards have been one of the major factor which led to the
formation of Indian Labor Legislations, especially after 1946 when Indian
National Government assured office. After independence the lawyer makers
also never forget to give representatition to the working class of the country
hence, we see that the Directive Principles of State Policy in Articles 39, 41,
42„43 and 43A of the constitution, lay down policy objectives in the field of
labor which is a having close resemblance and influence to the ILO’s
Constitution and the Philadelphia Charter of 1944. Thus, the ILO both directly
and indirectly has had a great influence on the Indian Labor Scene and Labor
Legislation.

Colonisation by British
Most of the early labor legislation came into being because of the pressure
from the manufacturers of Lancashire and Birmingham; because labor
employed in factories and mills in India were proving very cheap in
comparison to their British counterpart. The British Civil Servants carried
with them the British tradition of democracy and pragmatism. The Workman
Compensation Act, 1923, the Indian Trade Unions Act, 1926, the Payment of
Wages Act, 1936 etc, followed British pattern. The Industrial Workers got
support from the freedom struggle and nationalist leaders who made tireless
efforts to get protective labor legislations enacted. The Indian Trade Unions
Act, the appointment of Royal Commission on Labor etc, was because of
pressure from freedom struggle. 

“Industry” under Industrial Disputes Act,

1947
Industrial Disputes Act is an act is formulated by our law makers to secure
industrial peace and harmony by providing a systematic procedure and
machinery for the investigation and settlement of industrial disputes by
negotiations. The main purpose of the Industrial Disputes Act, 1947 is to
ensure fair terms between employers and employees as well as workmen and
employers. It helps not only in preventing disputes between employers and
employees but also help in finding the measures to settle such disputes so
that the production of the organization is not hampered.

Sec.2 (j) of the Industrial Disputes Act, 1947 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”. This definition is too generic and has led to
numerous contradicting interpretations. An industry exists only when there is
relationship between employers and employees, the former is engaged in
business, trade, undertaking, manufacture or calling of employers and the
latter is engaged in the calling, service, employment, handicraft or industrial
occupation and avocation. This definition is both exhaustive and inclusive.
The words used are of widest amplitude. A considerable amount of difficultly
was faced while interpreting these different words. No doubt, the task of
interpretation is straightforward. But because of varied forms of industry,
especially after rapid industrial progress and widest language used in the
definition, the concept of industry expanded in all directions. The present
definition continues to be as originally enacted in the Industrial disputes Act
1947. Though this definition has not undergone any amendment, it has
undergone variegated judicial interpretations.

The definition of “industry” has evolved and expanded significantly over a

period of time by the legislative acts and judicial decisions. The journey of
such evolution has been symbolic primarily because of lack clarity in the
legislative intent as embodied in the law and conflicting judicial approaches
regarding the ambit of such definition.

Attributes of “Industry” Through Judicial

Interpretation

STATE OF BOMBAY v. HOSPITAL MAZDOOR

SABHA
In this case the Supreme Court held that the activity held by the institutions
involves the habitual production and distribution of goods or rendering of
materials services to the community at large. Similarly the activity should
neither be only for pleasure nor be of a casual nature.

D. N. BANERJEE v. P.R.MUKHERJEE
In this case the court observes that the activity by the institution must be
similar in the nature to the organization of business. The court also held that
the activity must fall within the ambit of first part of the definition of
industry, and the second part will indicate what is included for the workmen
from the perspective of second part of the definition. 

CORPORATION OF CITY OF NAGPUR v.

EMPLOYEES 
In his case the court held that the activity by the institutions must involve
the satisfaction of the material needs, and not spiritual needs. The court also
held that the activity should not be done merely for the government
purposes.

NATIONAL UNION OF COMMERCIAL EMPLOYEE

v. M.R. MEHER
In this case the court held that the activity held by the institution must
involve the employee and the workmen’s effort. However the mere the
employer-employee relationship does not result into an industry.

Scope of Term “Hospital as Industry”

STATE OF BOMBAY v. HOSPITAL MAZDOOR

SABHA
In 1960, Hospital Mazdoor Sabha Case brought hospitals within ambit of
industry. This case involved payment of retrenchment compensation to
workmen in JJ Hospitals, Mumbai. The Management pleaded that the Hospital
was not involved in any trade or business and hence they are not industry.
Court framed a working principle that any systematic activity for production
or distribution of goods or services done with help of employees in the
manner of a trade or business is an industry. The services in the hospital
were held to be material service and hence Hospitals are industry under the
Industrial Disputes Act.

The reason for giving a wide interpretation to the word Industry was that the
Court wanted to bring organizations within fold of ID Act so that a large
number of agitations and strikes could be curtailed and industrial peace could
prevail.

UNIVERSITY OF DELHI v. RAM NATH- SELECTIVE

EXCEPTION CASE 
In 1961, University of Delhi Case arose where a driver of Miranda House was
discharged from service which led to dispute. University claimed that it is not
industry and the Court agreed. The Court held that education is imparted by
teachers who are not workmen. The intention of legislature was not be
include educational institutions within industry to extend benefits to the
drivers and others who are not core service providers.

MANAGEMENT OF  SAFDARJANG HOSPITAL v.

KULDIP SINGH
In 1967, Safdarjung Hospital Case This Case dealt with same issue again: Is
Hospital an industry? This case reversed the judgment of Hospital Mazdoor
Sabha Case as it provided clarity on how to determine whether an activity is
industry or not.  

Safdarjung Case developed a strong logic for deciding what constitutes

service. “Material services involve an activity carried on through co-operation
between employers and employees to provide the community with the use of
something such as electric power, water, transportation, mail delivery,
telephones and the like.”Such material services qualify to be included as
Industry. But for professionals like Doctors, Lawyers, Teachers, material
service do not arise as they are not engaged in occupation in which
employers and employees co-operate. Hence, organizations like Hospitals
and Educational institutions do not fall within industry. 

DHANRAJGIRI HOSPITAL v. WORKMEN

In Dhanrajgiri Hospital v. Workmen, the main activity of the hospital was
imparting of training in nursing and the beds in the hospital were meant for
their practical training. It was held not to be an industry, as it was not
carrying on any economic activity in the nature of trade or business.
Landmark Case for Determining Scope of
Industry

BANGALORE WATER SUPPLY AND SEWERAGE

BOARD v. RAJAPPA 
In Bangalore Water Supply and Sewerage Board v A. Rajappa, the court
constituted a seven-judge bench to enter into a detailed examination of
earlier decisions with a view to finding out a rational basis for determining
whether activities like professions, club, educational institutions, research
institutes, cooperatives, charitable projects, domestic servants,
governmental functions, and so on, fall within or outside the scope of the
statutory expression ‘industry”.

The majority opinion not only answered it in the affirmative, but exploded
the judicial myth. The court overruled its earlier decision in Management of
Safdarjung Hospital, National and Dhanrajagirji Hospital v The Workmen.
After reviewing earlier decisions of the court this case devised a triple test to
determine whether an activity can be called industry or not. These tests
were:

Any industry where:

(a) (i) A Systematic activity, (ii) Organized by cooperation between employer

and employee (the direct and substantial element is commercial), (iii) For the
production and distribution of goods and services calculated to satisfy human
wants and wishes (not spiritual or religious but inclusive of material things)
or services geared to celestial bliss, i.e. making, of a large scale prasad or
(food), prima facie enterprise.

(b) Absence of profit motive of gainful objective is irrelevant be the venture

in the public, joint, private or other sector.

(c) The true focus is functional and the decisive test is the nature of the
activity with special emphasis on the employer-employee relations.

(d) If the organization is a trade or business it does not cease to be one

because of philanthropy animating the undertaking.

Hence, these four measures which were laid down by the judges were
followed until new dispute arose in the court regarding the validity of
judgment.
Aftermath of Watershed Judgment
 After about two decades, when the law was settled, a departure was made
by a two-judge bench in Sub-Divisional Inspector of Post Vaikam and Others
v Theyyam Joseph and Others without any reference to the seven-judge
bench decision in Bangalore Water Supply overrule the judgment, similarly in
the case of Coir Board Ernakulam v Indira Devi a two-judge bench held that
since the difficulty had arisen because of the judicial interpretation given to
the definition of ‘industry in the Industrial Disputes Act, 1947, there was no
reason why the matter should not be judicially re-examined. But in Coir
Board Ernakulam, Kerala State v Indira Devi a three-judge bench, presided
over by the Chief Justice, ruled that the judgment delivered by seven-judge
bench of the court in Bangalore Water Supply did not require reconsideration
on a reference being made by a two-judge bench of this court, which is
bound by the judgment of the larger bench.

Conclusion
The trail of various judicial interpretation about what all is to be included in
the definition of Industry under Industrial Dispute Act, 1947 had a narrow
scope of the industry initially from various decisions, however by the
emergence of Triple Test from the Landmark Judgment of Watershed case
has widen the scope interpretation of the definition of Industry under section
2(j) of IDA, 1947. Not only this the water shed judgment has also given
opportunity to both the employer and employee to raise issue, which means
that one of the aggrieved party always want to bring the definition within the
clutches of their industry. 

Although, the judgment of Bangalore Water Supply and Sewerage Board v A.

Rajappa has been considered as a landmark for defining the Scope of
industry still from many other judicial interpretation we have concluded that
the Triple Test given in the ratio of the Judgment has many loop holes which
needed to be fulfilled. No doubt many times Judges wanted to review the
judgment for better interpretation but due to the Ratio of Judges in a Bench
Criteria, the judgment was never reversed. 

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.