PRAGYA’S & KARTIKEYA’S CASE ANALYSIS

State of Bombay V. The Hospital Mazdoor

Sabha
Citation:- 1960 AIR 610, 1960 SCR (2) 866

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 PRAGYA’S & KARTIKEYA’S CASE ANALYSIS

Factual Matrix of the case

1. The defendants; Ms. Vatsala Narayan and Mrs. Ruth Isaac were employed in the services of JJ. Hospitals as ward servants,
one of the five hospitals owned and looked after by the Appellant; State of Bombay.

2. Their services were terminated in 1954. A notice was served to both the petitioners regarding their termination. The reason
for the termination, as stated, was the fact that several employees were being retrenched from the Civil Supplies Department,
and in order to accommodate them, the defendants had to be let go.

3. The positions of the defendants were replaced by the two employees retrenched from the Department of Civil Supplies.
Therefore, in the year 1956, the defendants filed a writ of mandamus before the Bombay High Court contending that the
termination notice was improper, and therefore their termination would stand invalid.

4. After examination and interpretation of all the terms, the High Court of Bombay presided by Tendolkar J., held that the
administration of a hospital didn’t fall under the meaning of ‘Industry’ as provided under the Act, and therefore the notice
would be held valid. Hence, this case was appealed to the Supreme Court of India.

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 PRAGYA’S & KARTIKEYA’S CASE ANALYSIS

Section Interpreted & Examined

Industrial Disputes Act, 1947
1. Section 2(g): “employer” means-
i. In relation to an industry carried on by or under the authority of any department of the Central Government Government or a
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State Government the authority prescribed in this behalf, or where no authority is prescribed, the head of the department;
ii. In relation to an industry carried on by or on behalf of a local authority, the chief executive officer of that authority;

2. Section 2(j): "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;

3. Section 25F (b): Conditions precedent to retrenchment of workmen.--No workman employed in any industry who has been in
continuous service for not less than one year under an employer shall be retrenched by that employer until the workman has been
paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days' average pay for every completed year of
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continuous service or any part thereof in excess of six months.

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 PRAGYA’S & KARTIKEYA’S CASE ANALYSIS

Issues

1. Whether the provisions of the Industrial Disputes Act are applicable to Hospitals? Does this
mean that Hospitals come within the ambit of definition of an ‘Industry’?

2. Whether the retrenchment orders concerning the two employees is invalid due to non-
compliance of Section 25F of the Act?

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 PRAGYA’S & KARTIKEYA’S CASE ANALYSIS

Contentions of the Appellant

1. That the Appellants contended that since they are not within the ambit of definition of Section 2(j)
therefore the provisions of the Act will not apply to them. Their contention rests upon the argument
that there are certain essential features which are associated with terms ‘business and trade’, and
therefore must be understood in the light of popular and conventional sense even though they may
be denoting use of wide import.

2. That the Appellate court passed an impugned judgment holding the appellants liable for non-
compliance of Section 25F of the Act.

3. That the appellant further contended that since there is not ‘quid pro quo’ in the business of
hospitals, the principle of ‘noscitur a sociis’ will not be applicable in the present case.

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 PRAGYA’S & KARTIKEYA’S CASE ANALYSIS

Contentions of the Defendants

1. That the contentions furthered by the Defendants were that there was no payment at the time
of retrenchment compensation thereby a complete violation of Section 25F (b).

2. That the non-compliance of the conditions laid down under Section 25F makes the
retrenchment order of their termination invalid and improper.

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 Interpretational Principles
Section 25(j):Industry 2)It includes any
1) Industry means any i) Calling
i) Business ii) Service
ii) Trade iii) Employment
iii) Undertaking iv) Handicraft
iv) manufacture v) Industrial occupation
v) calling of employers vi) Avocation of workmen.

EXTERNAL AID: DICTIONARY

WORD MEANING
UNDERTAKING Any business or any enterprise in which one
engages or works in.
TRADE primary meaning : exchange of goods for
money or goods for goods
secondary meaning: any business carried on
with the purpose to profit from the money.

BUSSINESS wider import, and an activity which is an

occupation and not a pleasure.
CALLING One’s usual occupation, vocation, business or
trade
SERVICE Action of helping or doing work for
someone
 PRAGYA’S & KARTIKEYA’S CASE ANALYSIS

Interpretational Principles
The Court further used the principle of ‘noscitur a sociis’ to determine whether Hospitals would form part of Industry or not.

The application of the rule had been rejected in the case by the SC, the scope of the rule had been analysed. The judgement stated that the
rule of noscitur a socii is a mere rule of construction. It cannot be used where the legislative intent is clear, that is, the legislature has
deliberately used words of an open nature and where this usage does not cause any ambiguity.

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 PRAGYA’S & KARTIKEYA’S CASE ANALYSIS

JUDGEMENT
The Supreme Court held the group of hospitals to be industry and observed as follows :

1. Giving Medical Relief: The State is said to be carrying an ‘undertaking’ within the scope of Section 2(j) in cases where it runs a
group of hospitals for the purpose of giving medical relief to the citizens and for helping impart medical education.

2. Systematic activity for production or distribution of goods: The Court further held that wherein an activity systematically or
habitually is undertaken with the help of employees for the purpose of production or distribution of goods for the entire public at large,
then such an activity will be considered an ‘undertaking’.

3.Character & Nature is important: It is in fact, the character and the nature of the concerned activity which ascertains its character
as an industry.

4. Profit Immaterial: The presence of profit motive isn’t a material factor for bringing an activity/undertaking within the ambit of
Section 2(j). It is in fact, the character and the nature of the concerned activity which ascertains its character as an industry.

5. Activity with Charitable motive also undertaking: The mere fact that the activity in question is administered by the government is
immaterial. Certain activities which are undertaken for charitable motives will be considered as ‘undertaking’.

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 PRAGYA’S & KARTIKEYA’S CASE ANALYSIS

JUDGEMENT
The Court further went on to interpret whether or not ‘Governmental Activity’ be within the ambit of ‘undertaking’.

1. To ascertain the above doubt, the Court went on to examine the definition of ‘employer’ under Section 2(g) that is
The person authorized to do the work in the capacity as an employer under the leadership of either the Central Government or the state government or
the local authority.

After careful examination, the Court was of the opinion that the wordings of the Section indicate that there was clear intention of
the Legislature to make the provisions of the Act applicable to activities of the Government which fall within the ambit of Section
2(j).

3. The Court referred to the precedent set by the Supreme Court in D.N. Banerjee v. P.R. Mukherjee and Ors, in which the
learned bench was of the opinion that while determining the meaning of word ‘industry’, absence of profit motive doesn’t make
any difference in determining the character of the activity. The real test lies in the determination of other relevant factors such as
the real nature of the Activity.

TRIPLE TEST:
Systematic Activity + co-operation of the employer and the employees; + production or distribution of goods or for
the rendering of material services 

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 FINAL JUDGEMENT
1. Whether the provisions of the Industrial Disputes Act are applicable to Hospitals? Does this mean that Hospitals
come within the ambit of definition of an ‘Industry’?
The services in the hospital were held to be material service and hence Hospitals are industry under the Industrial Disputes
Act.

2. Whether the retrenchment orders concerning the two employees is invalid due to non-compliance of Section 25F(b)
of the Act?
Condition precedent for the retrenchment: In compliance with sec Section 25F (b)
.Section 25F (b): The workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen
days' average pay  for every completed year of continuous service] or any part thereof in excess of six months;

Thus, retrenchment order of workmen was invalid and inoperative as it did not comply with Section 25F(b) of Act.

COURT ORDER:
The order was passed to reinstate them in their post and the appeal was dismissed with costs.
Hospital was asked to pay to the Mazdoor Sabha costs of the petition and costs of the appeal. Costs of the petition was
quantified at Rs. 250. Costs of the appeal to be taxed.
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Analysis of the Case & Conclusion

1. That the Court in the above case had made a lot of significant changes in the interpretation of the term ‘industry’. Moreover, it has
also established that the mere presence of profit motive will not be a material factor to widen the scope of the term ‘industry’.

2. Furthermore to ascertain such a wide scope which was established, in Bangalore Water Supply v. A. Rajappa, the Court held
that any government department undertaking the welfare activities cannot be termed as part of sovereign functions. Therefore, any
hospital is surely a service and hence, within the ambit of Section 2(j) of the Act.

3. Justice Gajendragadhkar may have established a groundbreaking interpretation of the term ‘industry’, but he was also careful
while doing so. The judge stated that while the words used in Section 2(j) were of very wide denotion, a line will have to be drawn
in a fair manner to exclude some services and undertakings.

4. In more recent developments after the precedent set by the judgment, the Court has clarified that the duties and function falling in
Part IV of Indian constitution such as ‘law and order’, ‘defense’ and so on; such functions of the government are sovereign and will
not fall within the ambit of Section 2(j). This would make undue expansion of the definition of the term ‘industry’

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PRAGYA’S & KARTIKEYA’S CASE ANALYSIS

Thank You

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