Coir Board, Ernakulam, Cochin & Anr. Vs. Indira Devi & Anr.

(1998) 3 SCC 259

-by Bhavya Pathania (21012622) & Aditya Shenoy (21012441)
Bench: Mrs. Sujata V. Manohar & D. P. Wadhwa
Introduction
The enaction of The Industrial Disputes Act, 1947 was to prevent industrial
unrest, guarantee the peaceful resolution of industrial disputes, and
safeguard employees from employer exploitation and persecution. The Act
provides for practical and successful negotiations with the aid of the
conciliation equipment it offers. The labour courts and industrial tribunals
established under the Act for adjudication of industrial disputes are
expected to quickly handle any referrals made to them to do justice to both
the employer and the worker in line with the larger concept of social justice
if the conciliation mechanism is unable to bring about an amicable
settlement of the dispute between the parties.

Facts
The Coir Board, Ernakulam, Cochin, has been set up under the Coir
Industry Act, 1953, to promote and develop the Coir trade. The Act
recognises the importance of the coir industry in the national economy for
the exports of goods and services. Due to the depression of the industry in
1952, it was considered necessary to establish a statutory board to control
production, improve quality and develop the internal market to reduce
dependence on exports, which was the main primary market of coir.
Showrooms and sales depots were maintained to improve the market, which
led to the employment of marketing personnel. Some consignors were part of
such co-operatives of coir manufacturers.
The cause of action occurred when the Coir Board discharged certain
temporary clerks and typists were discharged. The employees claim that
their services can be terminated only by the provisions of The Industrial
Disputes Act 1947.

Procedural History
The decision by the lower court: the lower court, while delivering its
decision, considered whether municipal corporations like Coir Board come
under the ambit of section 2 (j) of the Industrial Dispute Act, 1947, and the
disputes between its employers and employees amount to industrial dispute.
The Coir board performed functions in accordance with rules made by the
central government. Therefore, it contended that it is not an industry. The
court ruled in favour of the employees and granted relief in accordance with
the termination of workmen under Chapter V- A of the Industrial Dispute
Act, 1947.
The question of whether the Coir Board can be an industry was considered
by the High Court of Kerala, along with other governmental departments,
companies, statutory corporations, and local bodies. The court further
investigated and concluded that the employees discharged could be
considered ‘workmen’ under the Industrial Disputes Act, 1947. Finally, the
Coir Board was also determined to be an industry; thus, the said Act would
apply to the cause of action. The issue faced by the court was the wide
ambit and interpretation of the definition of ‘industry’, which meant any
business, trade, undertaking, manufacture or calling, and the contention of
employees employed by the employers are merely employees or workmen. An
undertaking by a central government such as the Coir Board leads to a
judicial interpretation of whether or not a particular organisation is an
industry.

Issue
1. Substantive issue: Whether government companies, corporations,
statutory corporations, and municipalities can be considered an
industry under Section 2 (j) of the Industrial Dispute Act, 1947?
2. Procedural issue: Coir Board performing sovereign function in
accordance with central government rules and the state's welfare, an
activity undertaken by the government, the administrative decision of
laying off its temporary employees shall not be challenged in
industrial labour court.
Judgement
The Coir Board's role was to promote the coir sector, expand its markets,
and set up infrastructure to increase its products' marketability. It was not
created to manage an industry on its own. By relying on the reason it was
established, it failed the 'Pre-Dominant Test’ and proved to be doing
commercial activity for the choir community. Whether or not there is a profit
motivation or whether there is capital is deemed to be irrelevant in the
judgment. Therefore, organizations that support philanthropic or benevolent
causes must pass the triple test, which includes:
a) The formation of a systematic activity.
b) In the workplace, the systematic action should take place between the
employer and the employee.
c) The activity must fall under the concept of industry if it results in
manufacturing, distributing, or catering goods or services (except for
prasad-making establishments that are not religious or spiritual).
The two-judge panel followed the Bangalore Water Supply and Sewage Board
v. Rajappa precedent because it met the triple test and issued a directive to
send the matter to the Chief Justice of India due to the dissenting opinions
of two judges. By merely fulfilling a test, an organization cannot be
ascertained as an industry which does useful service to the welfare of
society and employees’ people for the same. Therefore, requested a larger
and appropriate bench.

Analysis
The two-judge bench of the Supreme Court questioned the uncertainty of
the term ‘industry’. Still, it relied upon the judgment delivered by a seven-
judge bench in Bangalore Water Supply and Sewage Board v. Rajappa
(BWSS). The triple test was developed to distinguish between sovereign and
industrial activities provided in section 2(j). After the amendment of 1982,
the legislative itself narrowed down the scope of interpretation of the
definition of industry. From the judicial interpretation in the case of Hospital
Mazdoor Sabha, activities of the government which perform ‘sovereign’
functions cannot be confused with the welfare function of the state, but the
activities performed by the Coir Board were undertaken by private
individuals for private benefit as well, therefore, the court stipulated it as an
industry. It also opined that the Bangalore Water Supply and Sewage Board
v. Rajappa test opened the door to include various organisations not
intended by the machinery set up under the Act. A larger bench was
required to re-examine the BWSS decision since it added several
organizations to the definition of "industry" that, in their opinion, may not
have been meant to be covered by the Act's machinery. The division bench
believed that by limiting job prospects, BWSS may have caused more harm
than good to organizations and employees.
In D.N. Banerji v. P.R. Mukherjee (AIR 1953 SC 58), a panel of five judges
discussed Whether a municipal corporation should be regarded as an
industry. The Court responded by observing that the term "industrial
dispute" implies a dispute that would significantly impact vast groups of
employees and employers. Hence, a conflict in the workplace. The
Corporation of the City of Nagpur v. Its Employees (1960 (2) SCR 942)
involved a similar ruling.
In the case of The State of Bombay & Ors. v. The Hospital Mazdoor Sabha &
Ors. (AIR 1960 SC 610), the Court further broadened the definition of an
industry by adding activities like charities, public hospitals providing free
medications and medical services, or other philanthropic activities. Even
activities that benefit the community, like research, education, and
recreation, were classified as "industry."
Due to the ambiguity that the word industry connotates and provides
harmony amongst employers and employees, the court ruled in The
Workmen on Indian Standards Institution v. The Management of Indian
Standards Institution (AIR 1976 SC 145) that since the Industrial Disputes
Act was a welfare law for the welfare of workers, Indian Standards
Institution was also held to be an industry.
Given the conflicting rulings regarding the definition of industry, the court
had previously ruled in the cases of the University of Delhi and Anr. v. Ram
Nath and Ors. that an educational institution was not an industry and
Secretary, Madras Gymkhana Club Employees' Union v. The Management of
the Gymkhana Club (AIR 1968 SC 554) that not all activities involving the
relationship between an employer and employee are necessarily industries
while it was a separate legal proceeding. Additionally, it was determined that
the Cricket Club of India was not an industry in the Cricket Club of India v.
Bombay Labour Union and Anr. (AIR 1969 SC 276). Kuldip Singh Sethi v.
The Management of Safdar Jung Hospital, New Delhi (AIR 1940 SC 1407)
The Safdar Jung Hospital was ruled by a court panel of six judges not to be
an industry.

Thus, the definition of an industry is a very controversial topic. Applying the

BWSS test widens the interpretation of the ‘industry’, which can lead to the
inclusion of organisations that were not intended to be included in the ambit
of the Industrial Disputes Act, of 1947. The test, however, seems logical as
the Act was designed for the protection and welfare of the labour market in
India. Due to a large population, India is a very labour-intensive market
with a very high labour supply, which increases the chances of organisation
exploitation. The widened test laid down in the BWSS case protects
employees in the departments which also do sovereign functions, without
which there would be no redressal mechanism for such employees.

Conclusion
The industry's definition was judicially interpreted to promote workplace
harmony and collaboration between employers and employees for the benefit
of society. The court dismissed erratic excursion, not every previous ruling
or newly created tests. The legislative must rationalise the definition of
industry rather than a judicial reconsideration of the Bangalore case.