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Bangalore Water Supply Case

India is surviving gracefully in this fast-moving world through it's economic engines. One of the most important economic engine is the Laborers, and 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 interpretations.

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

FACTS:
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 labour dispute.

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
fine.

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".

Decision/ Judgment:
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:
  1. There should be an establishment of a systematic activity.
  2. The systematic activity should be between the employee and the employer in the establishment.
  3. 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).

Certain other points, such as the following, were also observed to be significant in nature, while determining any establishment as an Industry:
  • 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 test.

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, the Constituent 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 following:
  • 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.

References:
  1. 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).
  2. 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).
Written By:
  1. Ananya Trivedi, Student at JECRC University, Jaipur
  2. Utsav Mishra, Student at Sharda University, Greater Noida

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