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Evolution Of Definition Of Industry Under Labour Law

The definition of Industry was under Section 2(j) of the Industrial Dispute Act, 1948 prior to Industrial Relations code, 2020.

Section 2(j)of the ID act, 1948 "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.

The scope and ambit of Industry were kept on changing through a catena of judicial pronouncement over several decades. the major issue was relating to what all comes under the meaning of the industry. The reason is that if an organization or an entity falls under the ambit of the industry then the ID Act, 1948 applies to the employees and employers of such organization. Thereby, both have a remedy under which they can raise the grievances.

The landmark judgement through which the definition of the industry has been constantly subjected to changes.

This can be broadly classified into three different eras:
  1. Pre-1963
    In 1953, the Supreme Court in D.N Banerji vs. P.R Mukherji[1], held that an organization run by the municipality constitute an industry. The Court observed by giving a wider interpretation to the later part of the definition under Sec.2(j) of ID Act, 1948 which refers to calling service, employment or industrial occupation or avocation of workmen". The definition prime facie intended to include within its scope what might not firmly be called a trade or business. Entities with Investment of capital or profit-making motive does not constitute an industry.

    In 1960 in both these cases State of Bombay vs. Hospital Mazdoor Sabha[2] & Corp. of the city of Nagpur vs. its Employees & Ors.[3]

    The court in these cases interpreted the definition widely and held that the second part of the definition ("includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen") implies providing an inclusive definition.

    However, the definition does not include the legal or sovereign function of the state. In the Hospital Mazdoor Sabha case, it was held that the hospital was an industry.
     
  2. Between 1963 And 1978
    In 1963, the Supreme Court in the University of Delhi vs. Ram Nath[4], had reversed the above trend by interpreting the definition of industry narrowly thereby holding that Delhi University cannot be considered an industry. This created the thought that the university of Delhi case was decided not on the ground of logic but on the basis of a sense that if the scope of the Industrial dispute Act is enlarged to cover educational institutions it might have an adverse effect on discipline in educational institutions.

    Subsequently, in the years 1967 and 1969 in the case of Madras Gymkhana Club Employees' Union vs. Management of Gymkkhana Club[5] & Cricket Club of India vs. Bombay Labour Union[6] respectively held that the clubs' having membership was not an industry.

    In 1970, in the case of Management of Safdarjung Hospital v/s. Kuldip Singh Sethi[7], The Apex Court Overruled the Hospital Mazdoor Sabha case and held that the hospital is not an industry. In this case, the issue arises "whether a firm of solicitors constitutes an industry?". And it was held that the essential basis of industrial disputes is that the dispute must arise between capitalist and labour in enterprises were capitalist and labour combine to produce commodities or provide service.

    A person following a liberal profession does not carry on his profession in any intelligible sense without the active cooperation of his employees and the principal, if not sole, capital which he brings into his profession is his special or intellectual & educational equipment. Therefore, a profession like that of an attorney/lawyer/solicitor must be considered to be outside the definition of industry.
     
  3. Post 1978
    During the post-1978 period again the trend started changing the Court had taken a wider approach and sought to make it a comprehensive definition that will serve the purpose of the needs of the society.

    In 1978, in the Landmark case of Bangalore Water Supply and Sewerage Board v. A. Rajappa[8], The Supreme Court by given liberal interpretation to the word industry and held that hospitals, clubs, and educational institutions, research and charitable institutions as industries.

    It overruled its earlier decisions given in the cases of Safdarjung Hospital vs. K.S sethi, National Union of commercial Employees vs. M.R Meher[9], University of Delhi v. Ram Nath, Madras Gymkhana club employees vs. Management of Gymkhana club and cricket club of Inida vs. Bombay Labour Union.

The court had laid down a triple test to determine whether an organization is an industry or not.
  1. Where:
    1. systematic activity,
    2. organized by co-operation between employer and employee
    3. 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 i.e. making, on a large scale or prasad or food), prima facie, there is an 'industry' in that enterprise.
  2. Absence of profit motive or gainful objective is irrelevant, be the venture in the public, joint, private or other sectors.
  3. The true focus is functional and the decisive test is the nature of the activity with special emphasis on employer-employee relations.
  4. If the organization is a trade or business, it does not cease to be one because of philanthropy animating the undertaking.

Subsequently, after this case, there was an amendment was made in 1982 to Section(j) which was in consonance with the judgement of the Bangalore water supply case. (The amendment is to date not notified.)

Section 2(j) "industry" means any systematic activity carried on by cooperation between an employer and his workmen (whether such workmen are employed by such employer directly or by or through any agency, including a contractor) for the production, supply or distribution of goods or services with a view to satisfying human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature),

whether or not:
  1. Any capital has been invested for the purpose of carrying on such activity; or
  2. Such activity is carried on with a motive to make any gain or profit,

And includes:
  1. Any activity of the Dock Labour Board established under section 5A of the Dock Workers (Regulation of Employment) Act, 1948;
  2. Any activity relating to the promotion of sales business or both carried on by an establishment, club or other like body of individuals in relation to such activity is less than ten;

At the same instant there was a list provided by it which expressly states what all does not fall under the definition of industry' the list is as follows:

  1. Any agricultural operation except where such agricultural operation is carried on in an integrated manner with any other activity (being any such activity as is referred to in the foregoing provisions of this clause) and such other activity is the predominant one.
  2. educational, scientific, research or training institutions; or
  3. institutions owned or managed by organizations wholly or substantially engaged in any charitable, social or philanthropic service; or
  4. khadi or village industries; or hospitals or dispensaries
  5. Any activity of the Government relatable to the sovereign functions of the Government including all the activities carried on by the departments of the Central Government dealing with defence research, atomic energy and space; or
  6. Any domestic service; or
  7. Any activity, being a profession practised by an individual or body of individuals if the number of persons employed by the individual or body of individuals in relation to such profession is less than ten; or
  8. any activity, being an activity carried on by a cooperative society or a club or any other like body of individuals, if the number of persons employed by the co-operative society, club or other like body of individuals in relation to such activity is less than ten;

In 2000, the three-judge bench of the Supreme Court in the case of Coir Board Ernakulam Kerela state vs. Indira Devai P.S[10] stated that the judgement delivered by a seven-judge bench in the Bangalore water supply case does not in our opinion, require any reconsideration.

In 2005, the majority opinion by the Supreme Court in State of U.P vs. Jai Bir Singh[11], expressed the view that interpretation was only tentative and temporary till the legislature stepped in and removed vagueness and confusion.

Later on, the Industrial relations Code, 2020 was enacted by repealing 3 laws. (Industrial disputes Act, 1948; the Trade Unions Act, 1926; and the Standing Orders Act, 1946.

Presently, the 'Industry' is defined under Section 2(p) of the IR Code, 2020
"Industry" means any systematic activity carried on by cooperation between an employer and worker (whether such worker is employed by such employer directly or by or through any agency, including a contractor) for the production, supply or distribution of goods or services with a view to satisfying human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature),

whether or not,
  1. Any capital has been invested for the purpose of carrying on such activity; or
  2. Such activity is carried on with a motive to make any gain or profit,

But does not include:
  1. Institutions owned or managed by organisations wholly or substantially engaged in any charitable, social or philanthropic service; or
  2. 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
  3. Any domestic service; or
  4. Any other activity as may be notified by the Central Government;

Conclusion
The definition of industry had evolved over decades and the reason was that there was so much discussion regarding the definition because the scope and ambit of the definition will make many changes in the arena of labour laws since it is taken certain organizations and some it excluded. However, the present IR code, 2020 has been well-drafted by the legislature in such a way that it caters for the present-day needs through its comprehensive and accessible nature of legislature.

End-Notes:
  1. D.N Banerji vs. P.R Mukherji, AIR 1963 SC 58.
  2. State of Bombay vs. Hospital Mazdoor Sabha, AIR 1960 SC 610.
  3. Corp. of the city of Nagpur vs. its Employees & Ors., AIR 1960 SC 675.
  4. University of Delhi vs. Ram Nath, AIR 1963 SC 1873.
  5. Madras Gymkhana Club Employees' Union vs. Management of Gymkkhana Club, AIR 1968 SC 554.
  6. Cricket Club of India vs. Bombay Labour Union, AIR 1969 SC 276.
  7. Management of Safdarjung hospital vs. kuldip singh sethi, AIR 1970 SC 1407.
  8. Bangalore Water Supply and Sewerage Board v. A. Rajappa, AIR 1978 SC 548.
  9. National Union of commercial Employees vs. M.R Meher, AIR 1962 SC 1080.
  10. Coir Board Ernakulam Kerela state vs. Indira Devai P.S, (2000) 1 SCC 224.
  11. State of U.P vs. Jai Bir Singh, (2005) 5 SCC 1.

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