MEANING OF "INDUSTRY": THE BANGALORE WATER SUPPLY AND SEWERAGE BOARD

v. A. RAJAPPA
Author(s): P. Kalpakam
Source: Journal of the Indian Law Institute , July-September 1978, Vol. 20, No. 3 (July-
September 1978), pp. 471-481
Published by: Indian Law Institute
Stable URL: https://www.jstor.org/stable/43950612

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MEANING OF 4 INDUSTRY" : THE BANGALORE WATER SUPPLY
AND SEWERAGE BOARD v. A. RAJAPPA

THE DECISION of the Supreme Court in The Bangalore Water Supply and
Sewerage Board v. A Rajappa and others 1 is of far-reaching importance in
the area of labour law. It removes the existing strands of confusion in the
complicated concept of 'industry'. This is achieved by abolishing blurred
edges, illumining penumbral areas and overruling what is to be regarded
as wrong and by formulating principles which are decisive, positively and
negatively.2

The term 'industry' is defined in section 2(j) of the Industrial Disputes

Act, 1947 as follows :

"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.

The term "workman" is defined in section 2 (s) of the same Act as

under :

"workman" means any person (including an apprentice) employed

in any industry to do any skilled or unskilled, manual, supervisory,
technical or clerical work for hire or reward, whether the terms of
employment be express or implied, and for the purposes of any
proceeding under this Act, in relation to an industrial dispute,
includes any such person who has been dismissed, discharged or
retrenched in connection with, or as a consequence of, that dispute,
or whose dismissal, discharge or retrenchment has led to that
dispute....

It is only when a dispute between employers and employees arises in

an 'industry' as defined above that the procedure of the Industrial Disputes
Act becomes applicable for its settlement. In other cases there is no scope
for governmental interference and the dispute will have to drag on in its
own weary course. The Act is intended to prevent industrial strife. The
control mechanisms visualised by the Act have relevance only when a
dispute arises in an 'industry'. Since the definition of 'industry' is too
wide and disjointed and various conflicting tests were propounded in
diverse situations to ascertain whether or not a particular establishment

1. A.I.R. 1978 S.C. 548.

2. Id. at 595, per Krishna Iyer, J.

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472 JOURNAL OF THE INDIAN LAW INSTITUTE [Vol. 20 : 3

falls within the scope of 'industry' "the law is in trauma" ne

fresh look at the problem.
The traumatic situation has been set right by the inst
overruling the Safdarjung ,3 Solicitors ,4 Gymkhana ,5 Delhi
Dhanrajgirji Hospital 7 cases and rehabilitating the Hosp
Sabha 8 case. To appreciate the thrust of the present ruling it
therefore, first to recount the principles laid down in the o
and see how they run counter to the ratio of the present case.
It is the Safdarjung Hospital case which, according to Krish
gave a sharp bend to the course of the law necessitating the r
ratio and in fact the seven member Bench had to be constit
specific purpose of reconsidering that landmark case. Three
Safdarjung Hospital, Tuberculosis Hospital and the Kurji
Hospital - were involved in the bunch of appeals covered by t
Hospital case. They were hospitals with research and training
and the question was whether they were covered by the
'industry'. Hidayatullah, C.J., propounded the view that
'industry' two conditions should be satisfied: (/) The end-pr
be the result of cooperation between the employers and the
(//) If the end-product is a service, it should be a material se
words of Hidayatullah, C.J., material services involve an activ
"the community with the use of something such as electric p
transportation, mail delivery, telephones and the like."9 For
service, something shall be "brought into existence quite ap
benefit to particular individuals. It is the production of thi
which is described as the production of material services."10
In a hospital especially one engaged in research work the
those of professionally trained expert persons. The character
lity is stamped on these services. The end-product, nam
rendered to patient cannot be described as one brought into e
the cooperation of employers and employees . The employers
created necessary conditions for rendering the service but t
that of the doctor alone. The service is absorbed by the pati
form of benefit and is not something tangible that can be see
that benefit. An 'industry' is generally understood as on

3. Management of Safdarjung Hospital v. Kuldip Singh Sethi , (1970) II

4. The National Union of Commercial Employees v. M.R. Meher ,
3 S.C.R. 157.
5. Madras Gymkhana Club Employees ' Union v. Gymkhana Club , (1967) II
L.L.J. 720.
6. University ofDelhiv . Ram Nath . H964Ì 2 S.C.R. 703.
7. Dhanrajgiri Hospital vĚ The Workmen . A.Ï.R. 1975 S.C. 2032.
8. State of Bombay v. Hospital Mazdoor Sabha% (1960) I L.L.J. 251.
9. Supra note 3 at 274.
10. Ibid.

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1978] MEANING OF " INDUSTRY " 473

material products. By way of extension ev

service is comprised within 'industry'.
It is here that Hidayatullah, C.J., cried a h
"non-material" services within the scope of
exclusion of the learned professions from the
Saf dar jung case, Krishna Iyer, J., in the
observed : "It is transcendental to define m
professional services".11 According to Beg,
It is not the motive of an activity in mak
service, but the possibility of making the
makes the goods or renders services so desir
whether the activity lies within the domain
even this may not be always a satisfactory t

It is obvious that the point of departure f

the extension which the instant decision sanctions as to the nature of
'services' that characterise an industry. Even non-material services now
qualify for being regarded as the product of industry and those engaged
in rendering such services are also enveloped in the concept of 'industry'.
This is indubitably a radical departure from the path paved by the
Safdarjung case. Krishna Iyer, J., observed :
We have adduced enough reasons in the various portions of this
judgment to regard hospitals, research institutions and training
centres as valuable material services to the community, qualifying
for coming within s. 2(j).13

It is respectfully submitted that there is an element of confusion here.

If material service is understood in the sense given to it by Hidayatullah,
C.J., as a tangible product apart from the benefit derived from the service,
none can be discerned in the activity as mentioned above and obviously
nothing can be adduced contra for it is plain as a pikestaff. So what the
instant case has done is really to include non-material services also as
qualifying for industrial activity. This undoubtedly represents a daring
departure calculated to submerge and wipe out the various "islets" of
exemption thrown up in the wake of the Safdarjung case.
We shall now examine the Solicitors case14 which withdrew the liberal
professions from the purview of 'industry'. Gajendragadkar, J., as he
then was, observed:

The distinguishing feature of an industry is that for the production

of goods or for the rendering of service, co-operation between capital

11. Supra note 1 at 593.

12. Id. at 555.
13. Id. at 594. (emphasis added).
14. Supra note 4.

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474 JOURNAL OF THE INDIAN LAW INSTITUTE [Vol. 20 : 3

and labour or between the employer and his employees must be

direct and must be essential.1*"

Criticising this view, Krishna Iyer, J., in the Bangalore Water Suppl
case points out that the test of 'direct' and 'indirect'; 'essential and 'in
essential' snaps in view of the subtle, complex and sophisticated operati
of modern enterprises. He observes: "A battle may be lost if winter we
were shoddy. Is the army-tailor a direct contributory?"15 In the ligh
of this query it is obvious that the learned judge was not satisfied wi
the adequacy of the distinctive test propounded by Gajendragadkar, J
It is not surprising, therefore, that he rejected "the whole theory of dir
co-operation" as "an improvisation which, with great respect, hard
impresses."14 According to the new doctrine :
There is no need for insistence upon the principle of partnership, the
doctrine of direct nexus or the contribution of values by employees.
Every emyloyee in a professional office, be he a para-legal assistant
or fullfledged professional employee or, down the ladder, a mere
sweeper or janitor, every one makes for the success of the office.17

The case of the Gymkhana Club Va is found by Krishna Iyer, J., to be

mixed bag with "different strands of reasoning in the judgment which
somewhat difficult to reconcile."18 The question for consideration was
whether the Madras Gymkhana Club was an 'industry'. It was a member
club offering facilities for golf, tennis, billiards, etc., and arrangi
refreshments and entertainments for its members with the help of a lar
retinue of servants. Two reasons were given by Hidayatullah, C.J., for
withdrawing clubs from the scope of 'industry'. In the first place, thou
the activity of a club may be falling in the second part of the definition
as much as the work of the club is conducted with the aid of the employees
who follow a "calling" or "avocation", it cannot be described as a calling
of the members of the club or of the managing committee of the club
within the first part of that definition. The learned Chief Justice had
drawn a distinction between the 'denotation' and the 'connotation'
'industry'. The first part of section 2(j) contains the 'denotation' and t
second part is only an enlargement of 'connotation' of the term.19
unless the activity is within the first part of the definition it does no
qualify for the status of «industry'. No doubt the word 'undertaking'
there in the first part but the learned Chief Justice pointed out that th
"undertaking" was not one analogous to trade or business, an eleme
missing in the members' club. The club was thus excluded from the category

14a. Id. at 164. (emphasis added).

15. Supra note 1 at 577.
16. Ibid.
17. Id. at 578.
Ila. Supra note 5.
18. Supra note 1 at 594.
19. Supra note 5 at 728-29.

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 1978) MEAŅING OF "INDUSTRY" 475

of 'industry*. The second reason given by him

members' self-serving institution. He stated :

No doubt the material needs or wants of a secti

is catered for but that is not enough. This mu
a trade or business or as an undertaking an
business. This element is completely missing in

The decision in the Gymkhana was followed

India.21 Dealing with the ratio of the Gymkhan
India cases Krishna Iyer, J., remarks :

'This element'? What element makes it analog

motive? No, says the learned judge. Because
institution ? Yes ? Not at all. For, if it is self-s
extensive establishment and staff with high sa
as day-light that the club members do noth
goods or services. They are rendered by empl
wages....22
He further observes :

When all these services are rendered by hired employees, how can
the nature of the activity be described as self-service, without taking
liberty with reality ?22fl

It is respectfully submitted that here there is semantic confusion.

"Self-service" is used by Hidayatullah, C.J., in the Gymkhana case to signify
service to the club-members and not to outsiders. Krishna Iyer, J., is taking
the word to signify service by the members themselves without the assis-
tance of employees. This seed of confusion sprouted and by ramification
overshadowed the ratio of the Gymkhana . In the secondary sense given to
it by Krishna Iyer, J., it has, however, served as a limiting factor immunis-
ing certain "low-profile" clubs from the scope of 'industry'. Krishna Iyer,
J., observes :

The central thrust of our proposition is that if a club or other like

collectivity has a basic and dominant self-service mechanism, a
modicum of employees at the periphery will not metamorphose it
into a conventional club whose verve and virtue are taken care of
by paid staff....23
Only the latter are put in the category of 'industry' by the instant
decision exempting the small man's clubs from the Industrial Disputes Act.
It is noteworthy that the reasoning of Hidayatullah, C.J., based upon

20. Id. at 733.

21. Cricket Club of India v. Labour Union , A.I.R. 1969 S.C. 276.
22. Supra note 1 at 591.
22a. Ibid.
23. Id. at 590.

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476 JO U RN AL OF THE INDIAN LAW INSTITUTE [Vol. 20 : 3

the 'denotation' as distinguished from 'connotation' of the term 'industry'

is not confuted by Krishna Iyer, J. Indeed no attempt has been made to
come to grips with it. But in view of the categorical statement in the
instant case that "The Gymkhana case. ..we respectfully hold, is wrongly
decided",24 we have to conclude that the distinctive test has been jettisoned
in the latest ruling. It is no longer necessary to bring an activity squarely
within the first part of the definition of 'industry' referring to employers.
Even otherwise an activity may well qualify for being treated as 'industry'.
This is by virtue of certain other tests which the instant case propounds
or confirms to which reference will be made later.
Before dealing with the positive tests of 'industry' accepted in the instant
case it is necessary to refer to the two other overruled cases - the Delhi
University case24" and the Dhanrajgirji Hospital case246.
In the Delhi University case, universities were excluded from 'industry'
on the ground that the predominant activity of the university is teaching
but teachers are not 'workers' as defined in the Act. The incidental activity
of the subordinate staff may be 'industrial' activity but that by itself does
not alter the predominant character of the institution. According to
Krishna Iyer, J., in the Banglore Water Supply case :
In the Case of the University or an educational institution, the
nature of the activity is ex hypothesi, education which is a service to
the community. Ergo, the university is an industry. The error has
crept in, if we may say so with great respect, in mixing up the
numerical strength of the personnel with the nature of the activity.25
These observations reveal the clear-cut cleavage between the instant
case and the earlier ruling. Education is, no doubt service but it is not a
'material' service in the sense explained earlier while discussing the
Gymkhana case. That is why teaching was kept outside 'industry'. Unless
non-material services are also visualised as part of industry, the reasoning
of Delhi University case cannot be overthrown. In view of the emphatic
statement of Krishna Iyer, J. : "Our conclusion is that the University of
Delhi. ..case was wrongly decided",26 it must be assumed that he seems to be
prepared to embrace the view that even non-material services are sufficient
to qualify as an activity for being characterised as 'industry'. Then we are
squarely presented with the anomaly of a university being an industry but
its teachers are not "workmen".47 Theoretically, it is possible to conceive
of a university with teachers alone and without any other staff. Even

24. Id. at 591.

24a. Supra note o.
2Ab. Supra note 7.
25. Supra note 1 at 583.
26. Id. at 584.
27. This is clear from the definition ot 'workman7 in the Industrial Disputes Act and
is the basis of the decision in the Delhi University case.

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1978] MEANING OF "INDUSTRY" 477

Krishna Tyer, J., does not seem to be prepar

brought within the definition of 'workmen
decision to a "battle to be waged on a later
do not propose to pronounce on it at presen
of Gajendragadkar, J., the instant case proc
the non-teaching staff would be workers. W
or small, and so long as they can take benef
be no anomaly in holding the university to
fully submitted that the confutation is no
theoretical possibility of an educational institut
non-teaching staff. Further, what happens t
if the presence of some non-teaching staff c
stamp the activity as 'industry'. This will be
discussing the positive tests propounded in
article.

The case of the Dhanrajgirji Hospital focus

of a charitable trust running a hospital and
training of nurses. In this case the Safdarju
activity was treated as outside the ambit
object reinforced the same conclusion. It is o
motivation that philanthropic activity wou
within the scope of 'industry'. Thus, in t
Milter, J., concluded that if the income
derived from donations and animals are trea
'industry'. Since this was not so and income
for producing milk and by selling the milk p
considered an 'industry'. Krishna Iyer, J., w
the conclusion in the Bombay Pinjrapole case
him the philanthropic purpose is an extran
should be concentrated on the nature of th
in one case can charity be a 'non-industry'. T
there is no economic relationship such
business between the head who employ
emotively flock to render service. In on
employers and employees but crusaders all
is no wage basis for the employment but v
the production, inspired by lofty ideals and u
tion, service conditions and the like.. ..Such
and such institutions are not industries d
some professionals in a vast complex being
the predominant character of the institut
relations resulting in the production of g
28. Supra note 1 at 581.
29. Bombay Pinjrapole v. The Workmen, A.I.R.
Employed in Madras Pinjrapole v. Madras Pinjrapole

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478 JOURNAL OF THE INDIAN LAW INSTITUTE [Vol. 20 : 3

wage-earning employees do not shape the soul of the institution

an industry.30
Is not the latter part of this extract precisely what Gajendragadkar, J.,
had said in the Delhi University case? The predominant character of the
institution is teaching. Teachers are not workers. So the university
is not an 'industry'. That was the argument of Gajendragadkar, J. Now
what does it matter whether the 'non-worker' stamp is derived from the
statutory definition (as in the Delhi University case) or from the non-
acceptance of wages (as in the hypothetical case put by Krishna Iyer, J.)?
The legal result cannot be any different in either case. Having demolished
this particular ratio of the Delhi University case there is no point in harking
back to it again. The further point that there are no employers and
employees is only a variant of the point as to absence of 'workmen'
answering the statutory definition. The conclusion of Krishna Iyer, J., that
if the workers are all volunteers, there is no element of 'industry' is
undoubtedly sound. It is respectfully submitted that there may be other
circumstances also such as those envisaged by Mitter, J., in the Bombay
Pinjrapole case where paid employees and 'non-industry' may 'co-exisť.
Having considered the various positive and negative aspects demarcating
'industry' from 'non-industry' which had commended themselves to the ,
Supreme Court in the catena of cases now overruled, we shall now turn
our attention to the positive criteria which have been finally adopted in the
instant case. Even at the outset Krishna Iyer, J., premised that "it is not
wise, in our view, to reject everything ruled till date and fabricate new
tests armed with lexical wisdom or reinforced by vintage judicial thought
from Australia."31 Thus, the positive criteria have been fashioned from
the earlier precedents.
The seminal ideas, which have fertilised this branch of law are discernible
according to Krishna Iyer, J., in Banerjťs case,32 the earliest ruling on the
subject described by Krishna Iyer, J., as the "mariner's compass" for the
voyage of discovery in the instant case. The question there raised was
whether a municipality can be said to be engaged in industrial activity
while discharging its normal municipal functions and was posed by
Chandrasekhara Iyer, J., as follows: "If a public utility service is carried on
by a Corporation like a Municipality . .does it cease to be an industry?''33
His coaclusion was that what would amount to an industry if carried on
by a private person does not cease to be an industry, when it is carried on
by a local body although in the latter case "there is nothing like investment
of any capital or the existence of a profit earning motive as there generally

30. Supra note 1 at 586-87.

31. Id. at 562-63.
32. B.N. Banerji v. P.R. Mukherjee , (1953) I.L.L.J. 195; followed in Baroda Borough
Municipality v. Its Workmen , (1957) I L.L.J. 8.
33. Quoted in Banerji case, supra note 32 at 200.

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1978] MEANING OF "INDUSTRY" 479

is in a business."34 Thus, absence of capital

are irrelevant in considering whether an under
of 'industry* or not. 'Industry' will cover, a
"all branches of work that can be said to be
of a trade or business".34 Krishna Iyer, J.,
deduces from this ruling that "spiritual unde
domestic undertakings, war-waging, policin
collecting, and the like are prima facie push
'industry'. The exclusion of sovereign functio
the scope of 'industry' the vast sector of em
servjce. Such employees enjoy statutory or
so may well be excluded from the scope of t
activity involved in spiritual and domestic
excluded and allowed to be taken care of
residuum is the forum for industrial acti
into this residue and was included within the am
BanerjVs case was elaborated in the Corp
Subba Rao, J., as he then was, explained the
activity being "analogous to trade or busine
of the similarity lies in the "structural, orga
The analogy with trade is in the carrying ou
operandi and not in the purpose of the proje
Here Subba Rao, J., applied the predomin
possible that an activity has many aspect
predominant activity that imparts its compl
test is supplemented by the severability tes
integrated with the predominant activity, it
severable, it can be considered in isolation.
these principles, held that health, education
municipality fell within the ambit of 'indu
discharge of these functions the municipality w
power was regarded as "irrelevant". In the n
Sabha the same judge has restricted sove
governmental functions and as the activity
government was held outside the scope of s
assimilated to 'industry'. No doubt, the le
widest meaning is given to the word 'industry',

even service rendered by a servant me

domestic matter or even in a casual wa
definition. It is not and cannot be sug
sweep the word "service" is intended to
34. Ibid.
35. Supra note 1 at 566.
36. Corporation of City of Nagpur v. Its Employees , (I960) I L.L.J. 523, (S.C.).

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480 JOURNAL OF THE INDIAN LAW INSTITUTE [Vol. 20 : 3

ever rendered in whatsoever capacity and for whatsoever re

We must, therefore, consider where the line should be drawn
what limitations can and should be reasonably implied in int
preting the wide words used in S. 2( j), and that no doub
somewhat difficult problem to decided
It is in tackling this difficult problem that in the Safdarjung
the cases following upon it that a sharp bend was taken altering
of the three landmark cases discussed above. It is this deviation
course that has been corrected now by the decision in the instant
To sum up, Prima facie, all organised activity is 'industry' w
possesses the triple elements of :
(a) Systematic activity; ( b ) organised cooperation between e
and employees; and (c) production and/or distribution of
and/or services to satisfy human wants.
While dealing with a complex of activities the dominant natur
to be applied. It is possible that some employees are outside the
of 'workman' but this will not derogate from the activity
'industry'. Sovereign functions are no doubt excluded38 but th
ability test is applicable and there may be units which qualify for 'in
even within the 'sovereign' sphere.
Negatively, profit motive, performance of statutory function
anthropic character are all irrelevant. To qualify for exemption
should be simple, possessing a non-employee character, i.e., self-
in its essential features "though stray servants, manual or techni
hired".
It is clear that the decision in the instant case is guided by th
consideration that :

The ideology of the Act being industrial peace, regulation and

lution of industrial disputes between employers and workmen
range of this statutory ideology must inform the reach of the sta
tory definition. Nothing less, nothing more.39
We may observe that the word industry has to be interpreted in t
text of entry 22 of List III: Industrial and Labour disputes. It is a
ledged rule of constitutional construction40 that a legislative ent

37 Supra note 8 at 257 (emphasis added).

- . ...

38. Doubt is cast on mis proposition vy mc uwcivanu« vi v

he stated : . , , . „
[lit seems to me beside the po
taken by the State, and fur
of the State's constitution
functions. ( supra note 1 a
39. Id. at 596.

40. Raja Jagannath v. State of U.F. A.i.k. . -,

S.C. 1375.

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 1978) MEANING OF " INDUSTRY " 481

be given meaning of the largest amplitude

reference to the aforesaid entry that the leg
trial Disputes Act has been passed. So the
tioned above should have full play.41 Thus vi
ted that the functional test evolved by Kri
has followed the right canons of statutor
arrived at are theoretically sound and pr
judges have appealed to the legislature to inte
tion.42 Indeed the National Commission on
fully prodded the government to legislat
deepening the scope of 'industry'. In view
instant ruling any legislative tinkering w
may appear to be superfluous.

P. Kalpakam*

41. Chandrachud, J., has arrived at the same conclusion by rejecting the test of
unoscitur a sociis " by which is meant that associated words take their meaning
from one another. By this test the width of the more general words in the definition of
'industry* may be made to square with that of words of lesser generality. Chandrachud,
JM asks rightly The question then is : If there is no doubt either as to the meaning of the
words used by the legislature in S. 2 (/) or on the question that these are words of
amplitude, what justification can one seek for diluting the concept of industry as
envisaged by the legislature"? (Supra note 1 at 972).
42. Thus, Jaswant Singh on behalf of Tulzapurkar, J., and himself has observed:
In view of the difficulty experienced by all of us in defining the true
denotation of the term "industry" and divergence of opinion in regard
thereto- as has been the case with this bench also- we think, it is high
time that the Legislature steps in with a comprehensive bill to clear up the
fog and remove the doubts and set at rest once for all the controversy
which crops up from time to time in relation to the meaning of the
aforesaid term rendering it necessary for larger benches of this Court to be
constituted which are driven to the necessity of evolving a working
formula to cover particular cases (Id. at 975-76).
* LL.M., Research Associate, Indian Law Institute.

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