India is surviving gracefully in this fast-moving world through it's economic
engines. One of the most important economic engine is the Laborers
the next most significant being Establishments/ Industries
. Our country has acted
like a guard to protect the laborers, through
the means of various legislations passed in the previous decades, after
independence. Similarly, the nation has been progressing to develop the
Industries too by supporting them by certain relaxations and wide
Bangalore Water Supply & Sewerage Board v. A. Rajappa
� has been a landmark case
in the history of Labour and Industrial Laws in India. This case helped in
clarifying the definition of Industry
in Section 2 (j) of the Industrial
Dispute Act, 1947 and an explanation on what all activities amount to sovereign
functions. This case helped in determining sovereign functions being an
exception to "Industry".
The Section 2(j) of the Industrial Dispute Act, 1947, defines the term
"industry", herein read under as:
"Any business, trade, undertaking, manufacture, or calling of employers and
includes any calling, service, employment, handicraft or industrial occupation
or avocation of workmen".
The sovereign functions include, the functions of the state, the immunities as
enjoyed under Article 309, 310 and 311 of the Indian Constitution and the
Directive Principles of the State Policy (Part IV of the Constitution of India).
Bangalore Water Supply & Sewerage Board v. A. Rajappa
AIR 1978 SC 553
A Rajappa was an employee of the Bangalore Water Supply and Sewerage Board.
There was an existing dispute between the Board and their employees. It was a
The reason behind the dispute was that the Bangalore Water Supply Board imposed
fines on the employees, on account of misconduct by the employees. Here, the
imposed fine was highly unreasonable and unfair. Therefore, the employees
decided to take action against such a heavy
The suit was filed against the Board on such injustice, under Section 33 (2) of
the Industrial Dispute Act, 1947 and contended that the fine was against the
principle of "natural justice".
The Supreme Court of India held that for the definition of the term "industry"
and to make any establishment liable under the definition of the word
"industry", a test should be considered.
The test was named as the "Triple-Test", carrying certain conditions to be
satisfied and proved to declare any establishment under the definition as
mentioned in Section 2 (j) of the Industrial Dispute Act, 1947.
The conditions, given under the "triple test" are as follows:
Certain other points, such as the following, were also observed to be
significant in nature, while determining any establishment as an Industry:
- There should be an establishment of a systematic activity.
- The systematic activity should be between the employee and the employer
in the establishment.
- The activity should give the output resulting out from production of
goods, or, distribution of goods, or, the catering of services (not being
religious or spiritual in nature, exception - prasad making establishment).
- Systematic activity should be done, with the motive of profits or
certain financial gains.
- The systematic activity should be resulting out of co-operation between
the employer and the employee.
- If the organization is a trade or business it does not cease to be one
because of philanthropy animating the undertaking.
Hence, the Board was declared as an Industry.
Establishments With Multiple Activities/Works
There are a number of organizations/ establishments, which occupy their workers/
employees in a number of activities. The Bangalore Water Supply Case, has aided
this query as well, by asserting the dominant-nature
If any organization has numerous job roles, so for those, if any of the
departmental roles have their main function as detrimental under "industry" ,
will be considered as the industry.
Sovereign Functions: As An Exemption
The sovereign functions of the government are not under the definition of the
Section 2 (j) of the Industrial Dispute Act, 1947. But, if there seems to be
departments whose certain sectors perform the works of that governing under the
definition of Industry, then will be considered
as an Industry.
The doctrine of Sovereignty is an immunity of a state. It empowers the state to
use it's supreme authority over a particular area or place. The Bangalore Water
Supply Case, has though tried to include the sovereign function as an exemption
but wasn't successful to determine as to what
all constitutes as the sovereign functions.
The government has been changing with time, previously, the Indian National
Congress, in their 1931 session in Karachi, stated that the Industries, mineral
resources etc., to come under the ambit of Government. In the year 1948, the
Industrial Policy Resolution determined the division of the Industries into two
- one division constituting the state owned industries, whereas the other
division constituting those industries which will be under restriction of state
but will be owned by private owners. While the constitution was being framed,
Assembly didn't recognized the authority of the state over the industries.
Every since then, the dynamics have changed and government though being an
important authority but the managerial responsibilities and day to day
activities being handled by the private employers.
The state functions are not yet contained in terms of definition and the same
can be interpreted as per the discretion. Hence, the core functions of the state
cannot be stated to be one of the factors which constitute the sovereign
functions of the state.
The Picture Today
In the era of industrialization, our country, India, with 47.30% of Labour Force
Participation Rate, needs to have strong implementation of Industrial Laws and
Labour Laws. While, the Bangalore Water Supply Case, gave a very wide
interpretation of the term "industry", the landmark case has created injustice
to a lot of organizations. The case was also one proving that Educational
Institutes, charitable institutions, clubs, solicitor firms etc., come under the
definition of "industry".
Observing the various circumstances, the definition of the term "Industry" was
amended by the means of the Amendment, 2020, whereby, the three new labour codes
were given President's assent. Though very recently, after the Prime Minister
promised to take back the farm laws, the labour unions were also seen actively
participating to repeal the three new codes.
The Amended definition of the term "industry" is as follows:
Under the IR Code the definition of "industry" specifically excludes the
- Institutions owned or managed by organisations wholly or substantially engaged
in any charitable, social or philanthropic service; or
- Any activity of the appropriate Government relatable to the sovereign
functions of the appropriate Government including all the activities carried
on by the departments of the Central Government dealing with defence research,
atomic energy and space; or
- any domestic service; or
- Any other activity as may be notified by the Central Government.
This Amendment gave a relaxation to all those institutes and organizations which
were suffering because of falling under the definition of "Industry". Though the
enforcement date of the three new labour codes is yet to be finalized.
- Indian Labour Force Participation Rate, available at: https://tradingeconomics.com/india/labor-force-participation-rate#:~:text=Labor%20Force%20Participation%20Rate%20in%20India%20increased%20to,Statistics%20and%20Programme%20Implementation%20%28MOSPI%29%203Y%2010Y%2025Y
(last visited November 28, 2021).
- Obham & Associates, Amendment of Labour Laws in India: The Industrial Relations
Code, 2020, available at: Amendment of Labour Laws in India: The Industrial
Relations Code, 2020 - Obhan & Associates (obhanandassociates.com) (last visited
November 29, 2021).
- Ananya Trivedi, Student at JECRC University, Jaipur
- Utsav Mishra, Student at Sharda University, Greater Noida