Labour Law - Bangalore Water Supply Case

The term industry is defined in Section 2 (j) of the Industrial Dispute Act in these words,
industry means any business, trade, undertaking, manufacture or calling of employees
and includes any calling, service, employment, handicraft or industrial occupation or
avocation of workman. The definition has undergone variegated judicial interpretations.
A definition is ordinarily the crystallization of legal concepts promoting precision and
rounding off blurred edges but the definition in Section 2 (j) viewed in retrospect has
achieved the opposite.
Starting form D.N. Banerjee v. P.R. Mukherjee and passing through various cases
Supreme Court has given conflicting decision regarding definition of the term industry. In
some cases Supreme Court has, having liberal attitude, given a very wide interpretation
and in some cases a narrow interpretation has been given. A bench of seven Judges in
Bangalore Water Supply and Sewerage Board v. A. Rajappa , wherein the question was
whether the activity of the Board fell within the ambit of industry, it went haywire and far
beyond the confines of the case in the name of judicial activism to bring every
conceivable activity in the sweep of the industry. The meaning which was given to the
term industry is so wide and wild that it covers perhaps any systematic activity under
the sun leading to obscurity.
Bangalore Water Supply and Sewerage Board v. A. Rajappa, still holds the field as it
was the largest Judge Bench decision on the issue but there are cases which have,
though not permissible under the doctrine of precedent, decided in contrary to the
decision of the Bangalore Water Supply case. A five judge Bench of the Supreme Court
has decided to refer the matter of reviewing the Bangalore Water Supply case to a
larger Bench.

CHAPTER-1
BANGALORE WATER SUPPLY AND SEWERAGE BOARD
V/S
A. RAJAPPA: ISSUES AND DECISIONS
Until specific legislative mandates emerge from Parliament the court may mould the
old, but not make the new law. Interstitially, from the molar to the molecular is the limited
legislative role of the Court, as Justice Holmes said. This was observed by
Justice Krishna Iyer in Gujarat Steel Tubes Ltd. V. Mazdoor Sabha , but, only if he could
have kept his words in words in Bangalore Water Supply and Sewerage Board v. A.
Rajappa, where he actually drafted a new definition of the term industry assuming the
role of a crusader-legislator. The broad sweep of the judgment brought within the
Industrial Dispute Act several institutions like educational institutions, solicitors offices,
State departments and even charitable institutions.
Issues and Decision:
The issue in the case was that whether Bangalore Water Supply and Sewerage Board
will fall under the definition of Industry and in fact, particularly the issue was what is an
Industry under Section 2(j) of the Industrial Dispute Act? As mentioned above that

actually a new definition to the term industry was drafted, judges have gone in-depth
and tried to wipe out the confusion and wilderness of the meaning of the term Industry.
Whether Charitable Institutions are Industry?
Held: Charitable institutions fall into three categories: (a) those that yield profit, but the
profits are siphoned off for altruistic purposes; (b) those that make no profit but hire the
services of employees as in any other business, but the goods and services which are
the output, are made available at a low or no cost to the indigent poor: and (c) those
that are oriented on a humane mission fulfilled by men who work, not because they are
paid wages, but because they share the passion for he cause and derive job
satisfaction. The first two are industries but not the third, on the assumption that they all
involve co-operation between employers and employees.
(a) If a business is run, with the aim of earning profit, for the production and/or supply of
goods and services the business is an industry. Such a business is an economic activity
which involves the co-operation of employer and employee and the fact that a
substantial amount of the profit is used for charitable purposes does not affect the
nature of the economic activity. The workers are not concerned with the destination of
the profits. They work for wages and are treated like any other workman in any other
industry. all the features of an industry are fully present.
(b) If a kind-hearted businessman or industrialist hires employees and in co-operation
with them, produces and supplies goods or services to the needy without charging any
price or receiving a negligible return, he may be charitable and his enterprise a charity,
but as far as the workmen are concerned, they contribute labor in return for wages and
for them, the charitable employer is like any other commercial minded employer. The
beneficiaries of the charity are the indigent consumers and not the workmen. Even if the
employees are shown some concession and even if the motive and project may be to
encourage and help poor families and find them employment, the compassionate
industrialist is still an industrialist.
(c) If however a philanthropic devotion is the basis for the charitable foundation or
establishment and the institution is headed by one who whole heartedly dedicate
himself for the mission and pursues it with passion, then the undertaking is not industrial
if it attracts others into the institution, provided they work not for wages but for sharing in
the cause and its fulfillment. It is not the charitable impulse, in such a case that
extricates the institution from Section 2(j), but because there is no economic relation
such as is found in trade or business between the head who employs and the others
who emotively flock to render service.
Do clubs and other organizations whose general emphasis is not on profit-making but
fellowship and self-service fit into the definitional circle?
Held: The only ground to extricate clubs form the coils of industrial law is absence of
employer-employee co-operation. In our country, it is a common phenomenon that
workers and the weaker sections of the society form small clubs or groups to satisfy
their cultural thirst and mainly for recreation. They are usually self-serving and unless
and until this strict condition is fulfilled, peoples organs cannot be non-industries. These
self-service clubs do not have hired employees to cook or serve or to provide other
service for recreation. The members come and arrange things for themselves. Those
interested in particular pursuits organize those terms themselves. There are elected

members and secretary and one of them maintains small accounts or clerical items. On
special evenings all contribute efforts to make a good show, excursion, joy, picnic or
anniversary celebration. The dynamic aspect is self-service. The central thrust is that if
a club or other like collectivity has a basic and dominant self-service mechanism, a
marginal element of employer-employee relation will not make such self-serving club a
conventional club whose verve and virtue are taken care of by paid staff, and the
members role is to enjoy.
Such big clubs are industries. These clubs are not limited partnership but formed from
the community. They are open to the public for membership subject to their own byelaws and rules. Moreover, these clubs of rich peoples admit members guests who are
not specific souls but come from community or part of a community. They serve a
section and answer the doubtful test of serving the community. They are industry.
Would a university or college or school or research institute be called an industry?
Held: The bulk of the employees in the university is the teaching community. Teachers
are not workmen and cannot raise disputes under the Act. The subordinate staff being
only a minor category of insignificant numbers, the institution must be excluded, going
by the predominant character test. It is one thing to say that an institution is not an
industry. It is altogether another thinking to say that a large number of its employees are
not 'workmen' and cannot therefore avail of the benefits of the Act so the institution
ceases to be an industry. The test is not the predominant number of employees entitled
to enjoy the benefits of the Act. The true test is the predominant nature of the activity. 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. So long services are part of
the wealth of nation, education being a service it is industrial.
Could a lawyers chamber or chartered accountants office, a doctors clinic or other
liberal professions occupation or calling be designated an industry?
Held: Regarding liberal professions like lawyers, doctors etc., the test of direct cooperation between capital and labour in the production of goods or in the rendering of
service, or that co-operation between employer and employee is essential for carrying
out the enterprise and the service rendered is unworkable. Every employee in a
professional office, be he a para-legal assistant or full-fledged professional employee or,
down the ladder, a mere sweeper or janitor, every one makes for the success of the
office, even the mali who collects the flowers. In the sophisticated organization of expert
services, all occupations have central skills, an occupational code of ethics, a group
culture, some occupational authority and some permission to monopoly practice from
the community. But a professional in our egalitarian ethos is like any other man of
common clay plying a trade or business and assent cannot be given to the cult of the
elite in carrying out islands of exception to industry. The contribution to the success of
the institution cones not merely from the professional or specialist but from all those,
whose excellence in their respective parts makes for the total proficiency. Therefore, the
claim for exclusion on the score of liberal professions is unwarranted. Even so, a single
lawyer a rural medical practitioner or urban doctor with a little assistant and menial
servant may ply a profession but may not be said to run an industry. That is, not
because the employee does not make a contribution nor because the profession is too

high to be classified as a trade or industry with its commercial connotations, but

because there is nothing like organized labour in such employment. The image of
industry or even quasi-industry is one of plausibility of workmen, not an isolated or
single little assistant or attendant.
Are governmental functions, stricto sensu, industrial and if not, what is the extent of the
immunity of instrumentalities of government?
Held: Sovereign functions be kept out of the scope of industry. Sovereign functions of
the State cannot be included under the definition of the term industry. Although what
such functions are has been aptly termed the primary and inalienable functions of a
constitutional government. The primary and inalienable functions are law making,
maintenance of law and order, defense and dispensation of justice. In any case, it is
open to Parliament to make law which governs the State's relations with its employees.
Articles 309 to 311 of the Constitution of India, the enactments dealing with the Defence
Forces and other legislation dealing with employment under statutory bodies may,
expressly or by necessary implication, exclude the operation of the Industrial Disputes
Act, 1947.
Sovereign functions, strictly understood, alone qualify for exemption, not the welfare
activities or economic adventures undertaken by government or statutory bodies. Even
in departments discharging sovereign functions, if there are units which are industries
and they are substantially severable, then they can be considered to come within
Section 2(j).
Whether Sovereign or Regal functions will be industry?
Held: Only sovereign and regal functions of State are out side the purview of the coil of
industrial law. The question arises that what is sovereign or regal function. They are the
States very primary and inalienable functions. State has three wings viz. Legislature,
Executive and Judiciary and hence there primary and inalienable function that is law
making, maintenance of law and order, defense and justice dispensation are only
sovereign and regal functions of State.
Whether Municipal Corporations Industry?
Held: All the undertakings that are analogous to trade or business are industries. The
analogy with trade or business is in the carrying out of the economic adventure. So the
parity is in the mode of operation, in the working--not in the purpose of the project or in
the disposal of the proceeds but in the organization of the venture, including the
relations between labour and management. If the mutual relations, the method of
employment and the process of co-operation in the carrying out of the work bears close
resemblance to the organization, method, remuneration, relationship of employer and
employee and the like then it is industry. If the nature of the activity is para-trade or
quasi business, it is no moment that it is undertaken in the private sector, philanthropic
sector or labour sector; it is industry.
Whether Hospital is Industry?
Held: Hospitals run by the government as part of its sovereign functions with the sole
object of rendering free service to the patience are not industry. But all other hospitals,
both public and private; whether charitable or commercial would be industry if they fulfill

the triple test.

What is the meaning of the term industry?
Held: 'Industry', as defined in Section 2(j) and explained in Bauerji, has a wide import.
(a) Where (i) systematic activity, (ii) organized by co-operation between employer and
employee, (the direct and substantial element is chimerical)(iii) for the production and/or
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
e.g. making, on a large scale, prasad or food), prima facie, there is an 'industry' in that
enterprise.
(b) Absence of profit motive or 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 organisation is a trade or business it does not cease to be one because of
philanthropy animating the undertaking.
II. Although Section 2(j) uses words of the widest amplitude in its two limbs, their
meaning cannot be magnified to overreach itself.
(a) 'Undertaking' must suffer a contextual and associational shrinkage as explained in
Banerji and in this judgment, so also, service, calling and the like. This yields the
inference that all organized activity possessing the triple elements in I (supra), although
not trade or business, may still be 'industry' (provided the nature of the activity, viz. the
employeremployee basis, bears resemblance to what we find in trade or business.
This takes into the fold of 'industry' undertakings, callings and services adventure
'analogous' to the carrying on of trade or business'. All features, other than the
methodology of carrying on the activity viz. in organizing the co-operation between
employer and employee may be dissimilar. It does not matter, if on the employment
terms there is analogy.
III. Application of these guidelines should not stop short of their logical reach by
invocation of creeds, cults or inner sense of incongruity or other sense of motivation for
or resultant of the economic operations. The ideology of the Act being industrial peace,
regulation and resolution of industrial disputes between employer and workmen, the
range of this statutory ideology must inform the reach of the statutory definition. Nothing
less, nothing more.
(a) The consequences are (i) professions, (ii) Clubs (iii) educational institutions (iii) cooperatives, (iv) research institutes (v) charitable projects and (vi) other kindred
adventures, if they fulfil the triple tests listed in I (supra), cannot be exempted from the
scope of Section 2(j).
(b) A restricted category of professions, clubs, co-operatives and even Gurukulas and
little research labs, may qualify for exemption if in simple ventures substantially and
going by the dominant nature criterion substantatively, in single simple ventures, no
employees are entertained but in minimal matters, marginal employees are hired
without destroying the non-employee character of the unit.
(c) If in a pious or altruistic mission many employ themselves, free or for small
honoraria, or likely return mainly by sharing in the purpose or cause, such as lawyers
volunteering to run a free legal services clinic or doctors serving in their spare hours in a

free medical centre or ashramites working at the bidding of the holiness, divinity or like
central personality and the services are supplied free or at nominal cost and those who
serve are not engaged for remuneration or on the basis of master and servant,
relationship, then, the institution is not an industry even if stray servants, manual or
technical, are hired. Such eleemosynary or like undertakings alone are exemptnot
other generosity, compassion, developmental passion or project.
IV The dominant nature test :
(a) Where a complex of activities, some of which qualify for exemption, others not,
involves employees on the total undertaking, some of whom are not 'workmen' as in the
University of Delhi Case or some departments are not productive of goods and services
if isolated, even then, the predominant nature of the services and the integrated nature
of the departments as explained in the Corporation of Nagpur, will be true test. The
whole undertaking will be 'industry' although those who are not 'workmen' by definition
may not benefit by the status.
(b) Notwithstanding the previous clauses, sovereign functions, strictly understood, alone
qualify for exemption, not the welfare activities or economic adventures undertaken by
government or statutory bodies.
(c) Even in departments discharging sovereign functions, if there are units which are
industries and they are substantially severable, then they can be considered to come
within Section 2(j).
(d) Constitutional and competently enacted legislative provisions may well remove from
the scope of the Act categories which otherwise may be covered thereby.
CHAPTER-2
ISSUES FOR RECONSIDERATION
Sovereign Functions:
According to Bangalore Water Supply and Sewerage Board v. A. Rajappa sovereign
functions of the State cannot be included in industry. They can aptly be termed as the
primary and inalienable functions of a constitutional government. Services governed by
Articles 309 to 311 of the Constitution of India, by the enactments dealing with the
Defense Forces and other legislation dealing with employment under statutory bodies
may, expressly or by necessary implication, exclude the operation of the Industrial
Disputes Act, 1947. The functions which are strictly performed by State are inalienable
functions of Government such as maintaining law and order, making laws, defense, and
justice dispensation. It is only these functions where the State enterprise can escape
from the coil of industrial law.
But present stage is a stage of welfare State where State has to perform so many
functions for the welfare of citizens. At the stage of laissez faire, maintenance of law and
order and defense were the only functions to be performed by States and the traditional
concept of sovereign functions was including only maintenance of law and order and
defense of State. But in a welfare State government has to perform so many functions,
apart from maintenance of law and order and defense of State, as enshrined under the
Directive Principles of State Policy in part IV of the Constitution of India. Every
democratic state in the welfare society has to achieve a goal of wellbeing of its citizens
and part IV requires State to achieve the goal. It imposes a duty on the State to

undertake may activities and therefore the extent of sovereign functions may not be
confined to the three wings but there may be other functions which are inalienable. In
view of the constitutional duty imposed on State to undertake many activities as
provided by Part IV of the Constitution of India, the extent of sovereign functions may
not be confined to aforesaid functions in as much as other functions may also be
inalienable and they would not be, undertaken by any private agency in a meaningful
way.
In Shrimali v. District Development Officer , wherein there was an undertaking of famine
and draught relief works by State government by introducing certain schemes to provide
relief and some works were also provided to the affected people, instead of distributing
doles. The question arose that whether such functions be sovereign functions. It was
held that it would be difficult to hold the undertaking to be an industry. What really
follows from this judgment is that apart from the aforesaid three functions, there may be
some other functions also regarding which a view could be taken that the same too is a
sovereign function.
As to which function could be, and should be, taken as regal or sovereign function was
again examined in N. Nagendra Rao v. State of AP , in which case Sahai J. speaking for
the Bench examined this question in detail and observed that it would all depend on the
nature of the power and manner of its exercise. As per the decision in this case, one of
the tests to determine whether the executive function is sovereign in nature is to find out
whether the State is answerable for such action in Courts of Law. It was state by Sahai
J. that acts like defense of the country, raising armed forces and maintaining it, making
peace or war, foreign affairs, power to acquire and retain territory, are functions which
are indicative of external sovereignty and are political in nature. They are, therefore, not
amenable to the jurisdiction of ordinary civil courts inasmuch as the State is immune
from being sued in such matters. But, then according to this decision the immunity ends
there. It was then observed that in a welfare State, functions of the State are not only
the defense of the country or administration of justice or maintaining law and order but
extends to regulating and controlling the activities of people in almost every sphere,
educational, commercial, social, economic, political and even marital. Because of this
the demarcating line between sovereign and non-sovereign powers has largely
disappeared.
The aforesaid shows that if we were to extend the concept of sovereign functions to
include all welfare activities, the ratio in Bangalore Water Supply case would get eroded
and substantially.
And in fact there are sets of cases who have actually dissented from Bangalore Water
Supply v. A. Rajappa on the concept of sovereign functions or regal functions, though
they have not challenged it. Because of the sets of dissenting cases the confusion that,
are governmental functions, stricto sensu, industrial and if not, what is the extent of the
immunity of instrumentalities of government, still persists. In Des Raj v. State of Punjab
it was held that having regard to the activities of irrigation department of State of Punjab
and applying the tests laid down in various decisions of Supreme Court and particularly
applying the dominant nature test enunciated in Bangalore Water Supply case it must
be held that the irrigation department of State of Punjab is an industry.
Now it was the turn of telecommunication and postal department to be scrutinized.
Regarding telecommunication and postal department also there were conflicting

decisions wherein in some cases the department was held to be an industry and is
some cases the conclusion was opposite. In Sub Divisional Inspector of Post v.
Theyyam Joseph , wherein respondent was appointed as a substitute to the regularly
appointed ED Packer, who had not joined duty after training. The appointment so made
dehors the rule. About two years later his services were terminated. It was held that
India as a sovereign, socialist, secular, democratic, republic has to establish an
egalitarian social order under the rule of law. The welfare measures partake the
character of sovereign function and the traditional duty to maintain law and order is no
longer the concept of the sovereign function. The Directive Principle of State Policy
under Part IV of the Constitution of India and the performance of duties, provided
therein, are constitutional functions. One of the functions of the State is to provide
telecommunication facilities to general public and an amenity, and so is an essential
part of the sovereign functions of the State as a welfare state. It is, therefore, not an
industry.
Incidentally this decision was rendered without any reference to the seven-judge Bench
decision in Bangalore Water Supply case. In a latter two judge Bench decision in
Bombay Telephone Canteen Employees Association case this decision was followed for
taking the view that the Telephone Nigam is not an industry.
Then came General Manager, Telecom. V. A. Sriniwas Rao , which overruled the
Theyyam Joseph case and it was held that Theyyam Joseph is in direct conflict with the
seven-Judge Bench decision in Bangalore Water Supply case and it is not permissible
to take a contrary view or to bypass that decision so long as it holds the field.
Such conflict again arose in Chief Conservator of Forest v. Jagannath Maruti Kondare
and State of Gujarat v. Pratamsingh Narsinh Parmar , where in the former case forest
department of State of Maharashtra was held to be an industry and in the later case it
was held that forest department of State of Gujarat is not an industry. In the case of
Chief Conservator of Forest v. Jagannath Maruti Kondare , scheme named Panchgaon
Parwati Sheme was framed as per the government resolution based on the policy
decision taken in April 1976. The scheme was to be initially for a period of five years
and an area of about 245 hectares situated in a hill platue on the southern outskirts and
within easy access of Pune city was selected for creation of a park under bioaesthetic
development for the benefit of the urban population. The appellant conservator of
forests contended that the scheme as well as the social forestry work undertaken had to
be regarded as part of inalienable or sovereign functions of the State and therefore not
an industry within the meaning of the Industrial Dispute Act, 1947.
Rejecting the contention the Supreme Court held that the dichotomy of sovereign and
non-sovereign functions of the State does not really exist. Whether a particular function
of the State is or is not a sovereign function, depends on the nature of the power and
manner of its exercise. The Scheme in question cannot be regarded as a part of
inalienable or inescapable function of State for the reason that the scheme was
intended even to fulfill the recreational and educational aspiration of the people. There
can be no doubt that such a work could well be undertaken by an agency which is not
required to be even an instrumentality of the State. Therefore the forest department of
the State is an industry.
But then in State of Gujarat v. Pratamsingh Narsinh Parmar , wherein the question for
consideration was whether the forest department in the State of Gujarat where the

respondent was appointed as a clerk can be held to be an industry within the meaning
of the said expression under the Industrial Dispute Act, so that an order of termination,
without complying with the provisions of Section 25-F of the Act would get vitiated. It
was held that if a dispute arises as to whether a particular establishment or part of it
where an appointment has been made is an industry or not, it would be for the person
concerned who claims the same to be an industry, to give positive facts for coming to
the conclusion that it constitute an industry. Ordinarily a department of government
cannot be held to be an industry and rather it is a part of the sovereign functions. The
respondent in the writ petition had made no assertion with regard to the duty which e
was discharging and with regard to the activity of the organization where he had been
recruited, though no doubt he had been contended that the order of dismissal was
vitiated for non compliance of Section 25-F. In the absence of assertion by the petitioner
as well as the job of the establishment where he had been recruited, the High Court
wholly erred in law in applying the principles enunciated in Jagannath Maruti Kondhare
to hold that the forest department could be held to be an industry.
Due to the apparent conflict between these two cases, again a matter was referred to
the constitutional Bench of five judges in State of UP v. Jai Bir Singh . In this case it was
held that a caveat has to be entered on confining sovereign functions to the traditional
so described as inalienable functions comparable to those performed by a monarch, a
ruler or a non-democratic government. The learned judges in the Bangalore Water
Supply a Sewerage Board case seem to have confined only such sovereign functions
outside the purview of industry which can be termed strictly as constitutional functions
of the three wings of the State i.e. executive, legislature and judiciary. The concept of
sovereignty in a constitutional democracy is different from the traditional concept of
sovereignty which is confined to law and order, defense, law making and justice
dispensation. In a democracy governed by the Constitution the sovereignty vests in the
people and the State is obliged to discharge its constitutional obligations contained in
the Directive Principles of the State Policy in Part - IV of the Constitution of India. From
that point of view, wherever the government undertakes public welfare activities in
discharge of its constitutional obligations, as provided in part-IV of the Constitution, such
activities should be treated as activities in discharge of sovereign functions falling
outside the purview of industry. Whether employees employed in such welfare
activities of the government require protection, apart from the constitutional rights
conferred on them, may be a subject of separate legislation but for that reason, such
governmental activities cannot be brought within the fold of industrial law by giving an
undue expansive and wide meaning to the words used in the definition of industry.
Purpose of the Act:
In Bangalore Water Supply and Sewerage Board v. A. Rajappa , Krishna Iyer, J.,
speaking for himself and on behalf of the other two Honble Judges agreeing with him,
proceeded to deal with the interpretation of the definition of industry on a legal premise
that the Industrial Dispute Act is a worker oriented Statute and so must be construed
accordingly. There are sets of cases, though they do challenge the decision in
Bangalore Water Supply case, but actually dissented from it. But for the first time, in
year 1998, a two Judge Bench decision, in Coir Board v. Indira Devi P.S. called for a
reconsideration of the law as laid down by Bangalore Water Supply and Sewerage
Board . In this case there was a coir board situated in Ernakulam performed the

following functions:- (i) promotion of coir industry; (ii) opening of markets for achieving
the object in (i); and (iii) providing facilities to make coir industrys products more
marketable. The court came to a prima facie conclusion that the coir board is not set up
to run any industry. Further it was held that looking to the uncertainty prevailing in this
area and in the light of the experience of the last two decades in applying the test laid
down in the case of Bangalore Water Supply and Sewerage Board , it is necessary that
the decision in Bangalore Water Supply and Sewerage Boards case is re-examined.
The experience of the last two decades does not appear to be entirely happy. Instead of
leading to industrial peace and welfare of the community (which was the avowed
purpose of artificially extending the definition of industry), the application of the
Industrial Disputes Act to organizations which were, quite possibly not intended to be so
covered by the machinery set up under the Industrial Disputes Act, might have done
more damage than good, not merely to the organisations but also to employees by the
curtailment of employment opportunities.
. Hence an order of reference to Chief Justice for constituting a larger Bench of more
than seven Judges, if necessary was passed. However when the matter was listed
before a three-Judge Bench, the request for constituting a larger Bench was refused
both on the ground that the Industrial Dispute Act had undergone an amendment and
that the matter did not deserve to be referred to a larger Bench as the decision of seven
Judges in Bangalore Water Supply case was binding on the Benches of lesser strength.
But such inhibitions did not limit the power of a five Judge Bench which was constituted
on a reference made due to apparent conflict between the judgment of two different
Benchs of the Supreme Court. The experience of judges in Coir Board case was not
derived from the case in which the observations were made. The experience was from
the cases regularly coming to this Court through the labour courts. It is experienced by
all dealing in industrial law that over-emphasis on the rights of the workers and undue
curtailment of the rights of the employers to organize their business, through
employment and non-employment, have given rise to large number of industrial and
labour claims resulting in awards granting huge amounts of back wages for past years,
allegedly as legitimate dues of the workers, who are found to have been illegally
terminated or retrenched. Industrial awards granting heavy packages of back wages
sometimes result in taking away the very substratum of the industry. Such burdensome
awards in many cases compel the employer having moderate assets to close down
industries causing harm to interests of not only the employer and the workers but also
the general public who is the ultimate beneficiary of material goods and services from
the industry. The awards of reinstatement and arrears of wages for past years by labour
courts by treating even small undertakings of employers and entrepreneurs as
industries is experienced as a serious industrial hazard particularly by those engaged in
private enterprises. The experience is that many times idle wages are required to be
paid to the worker because the employer has no means to find out whether and where
the workman was gainfully employed pending adjudication of industrial dispute raised
by him.
In State of UP v. Jai Bir Singh , it was held that with utmost respect, the statute under
consideration cannot be looked at only as a worker-oriented statute. The main aim of
the statute as is evident form its preamble and various provisions contained therein, is
to regulate and harmonise relationships between employers and employees for

maintaining industrial peace and social harmony. The definition clause read with other
provisions of the Act under consideration deserves interpretation keeping in view
interests of the employer, who has put his capital and expertise into the industry and the
workers who by their labour equally contribute to the growth of the industry. It is a peace
of social legislation. In interpreting, therefore, the industrial law, which aims at the
promotion\of social justice, interests both of employers, employees and in a democratic
society, people, who are the ultimate beneficiaries of the industrial activities, have to be
kept in view. A worker oriented approach in construing the definition of industry,
unmindful of interest of the employer or the owner of the industry and the public, would
be a one sided approach and not in accordance with the provisions of the Act.
Very wide expansion of the term industry:
In Bangalore Water Supply case the term industry was given a very wide expansion
and it included educational institution, charitable institutions and liberal profession into
its wide sweep. The reasoning given as regards the educational institutions was that
they satisfy the triple test and based on its predominant nature it is an industry though
teachers are not workmen. As regards charitable institutions the first two categories- (i)
where the enterprise like any other, yields profits, but they are siphoned off for altruistic
objects; (ii) where the enterprise makes no profit, but hires the services of employees
for producing goods and services- will be industry and the reasoning given was there is
employer-employee relation. In relation to liberal and learned professions, the majority
opinion in Rajappas case was that they will constitute industry and the reasoning given
was that the contribution to the good will and reputation of an organization comes not
only from the professionals but from all others employed under him as well.
The elimination of profit motive or a desire to generate income as the purpose of
industrial activity has led to a large number of philanthropic and charitable activities
being affected by the Industrial Disputes Act. In a number of cases where the
organisation is run by voluntary social workers, they are unable to cope with the
requirements of Industrial Disputes Act. This has led to a cessation of many welfare
activities previously undertaken by such organisations which has deprived the general
community of considerable benefit and the employees of their livelihood. There are
many activities which are undertaken not with a view to secure any monetary returnwhether one labels it as livelihood, income or profit, but for other more generous or
different motives. Such activities would not normally be labeled as industrial activities,
but for the wide interpretation given judicially to the term industry in the Industrial
Disputes Act. For example, a number of voluntary organizations used to run workshops
in order that the poor and more particularly poor or destitute woman may earn some
income. Voluntary welfare organizations organized activities like preparation of spices,
pickles or they would secure small orders from industries for poor woman. A small
number of persons were employed to assist in the activities. The income earned by
these activities was distributed to the women who were given such work. Other
voluntary organizations organized tailoring or embroidery classes or similar activities for
poor woman and provided an outlet for the sale of the work produced by them. These
persons would otherwise have found it impossible to secure a market for their products.
Such organizations are not organized like industries and they do not have the means or
manpower to run them as industries. A large number of such voluntary welfare schemes

have had to be abandoned because of the wide interpretation given to the term industry.
Apart from such activities, there may be other activities also which are undertaken in the
spirit of community service, such as charitable hospitals where free medical services
and free medicines may be provided. Such activities may be sustained by free services,
given by professional men and women and by donations. Sometimes such activities
may be sustained by using the profits in the paid section of that activity for providing
free services in the free section. Doctors who work in these hospitals may work for no
returns or sometimes for very nominal fees. Fortunately, philanthropic instinct is far from
extinct. Can such philanthropic organisations be called industries? The definition needs
re-examination so that, while the workers in an industry have the benefit of industrial
legislation, the community as such is not deprived of philanthropic and other vital
services which contribute so much to its well-being. Educational services and the work
done by teachers in educational institutions, research organisations, professional
activities, or recreational activities amateur sports, promotion of arts--fine arts and
performing arts, promoting crafts and special skills, all these and many other similar
activities also require to be considered in this context.

CONCLUSION
The law in force presently is the interpretation of the original Section 2(j) by Rajappas
Case. Focusing solely on the merits of the case it is a super judgment which has taken
into consideration the social and economic culture of our country. The decision is
distinctly pro-labour as it seeks to bring more activities within the fold of the Industrial
Dispute Act 1947. In practical terms, the labour forces of the country are much better
position now, than they would have been had the amended S. 2(j) been notified. This is
because the amended S. 2(j) excludes some categories of employment which squarely
comes within the fold of Rajappas case.
But at the same time, a glance at the judgment would suggest that it is actually a
different law altogether as compared to the original S. 2(j). The question really is
whether the judiciary is entitled to embark on such an expedition. Even in a democracy,
following the theory of separation of powers, the judiciary has implied authority to fill in
the gaps left by the legislature. But, a glance at Rajappas case and the decisions
preceding it would suggest that the judiciary went far ahead than merely filling the gaps
lift by the legislature.

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