Expanding the Definition of Industry under Labour Law: A Case Study of State of Bombay v/s Hospital Mazdoor Sabha

State of Bombay v. The Hospital Mazdoor Sabha

The Industrial Disputes Act of 1947 seeks to create a harmonious relationship between employers and employees by providing effective dispute-resolution mechanisms. Central to this Act is the definition of "industry" under Section 2(j), which has long been a subject of interpretation and debate due to its broad and ambiguous wording.

This study critically examines the landmark case of the State of Bombay v. Hospital Mazdoor Sabha, where the Supreme Court expanded the definition of "industry" to include hospitals. Through a doctrinal analysis of judicial precedents and academic critique, this paper delves into how the evolving definition of "industry" reflects the judiciary's role in adapting labour law to the changing nature of industrial activities.

By interpreting the term inclusively, the judiciary has ensured broader protections for workers under the Industrial Disputes Act, which remains relevant despite ongoing legislative developments, including the pending implementation of the Industrial Relations Code 2020. This paper contributes to the understanding of how the judiciary has shaped labour laws and impacted sectors like healthcare, significantly altering their relationship with industrial law.

Introduction:
The primary function of the Industrial Dispute Act is to ensure a peaceful and amicable relationship between employer and employee and provide a dispute resolution mechanism that does not compromise the effectiveness or productiveness of the industry.

The term "industry" is defined under section 2(j) of the Industrial Dispute Act of 1947 as "any business, trade, undertaking, manufacture, or calling of employers and includes any calling, service, employment, handicraft or industrial occupation or avocation of workmen." Even a plain reading of this section shows that the definition is wide and unclear.

This ambiguity in the definition, coupled with the ever-increasing kinds of industry in the industrialized world, has necessitated a broader definition. Since the Industrial Relations Code has yet to be implemented, the current definition of industry is the same as in 1947.

Objective:

To identify and understand the relevant facts and arguments of the case.
To understand the validity of various doctrines referred to by the honorable Supreme Court.
To examine the various judicial interpretations of "industry."

Case Overview:

Appellant: State of Bombay and Others Respondents:

Hospital Mazdoor Sabha, a trade union registered under the Industrial Trade Union Act
Vatsal Narayan
Mrs. Ruth Isaac

Facts:

Respondents 2 and 3 were employees of the J.J. Group of Hospitals. They received notices of termination from the hospital superintendent. After their termination, two state employees who had previously been discharged from the Civil Service Department were appointed in their place. Respondents challenged their retrenchment, claiming it was void as it did not comply with mandatory provisions under Sections 25F and 25H of the Industrial Disputes Act.

Contentions:

Appellant's Arguments: The termination order was valid, and the writ petition against J.J. Group was invalid as it did not constitute an "industry" under the Industrial Disputes Act.
Respondents' Arguments: The retrenchment was invalid as it did not comply with Section 25F, which mandates the payment of retrenchment compensation as a condition precedent for retrenchment. And that the Hospital should be included within the definition of "industry" as per Section 2(j) of the Industrial Disputes Act.

Judgment at Lower Court:

Honorable Justice Tendolkar held that it was unnecessary to determine whether the Hospital constituted an industry or not because the impugned order was, anyway, not void.
He observed that non-compliance with Section 25F did not invalidate the termination order since Respondents could seek appropriate remedy under Section 25I.
He believed that non-compliance with mandatory provisions would not render the order invalid, as the money due from the employer could be recovered under Section 25I.
The Supreme Court later rejected this view.
The High Court did not consider the question of the validity of Section 25H.
The writ petition was dismissed.

High Court:

The Court held that the termination order was invalid due to non-compliance with Section 25F.
A need arose to decide if the Act should be applied to hospitals.
The High Court also did not consider the applicability of Section 25H.
The writ petition was allowed.

Supreme Court:

The case was appealed to the Supreme Court. The following issues were raised:

Whether an order in contravention of Section 25F is invalid?
Whether a hospital qualifies as an "industry" under the Industrial Disputes Act?

Established Facts:

The J.J. Group comprises five hospitals.
The Medical College was established with funds from the East India Company's Board of Directors, while the Hospital was funded by Sir J.J. and the Government.
The J.J. Group is under the administrative control of the Surgeon General of the appellant, and the staff are full-time employees of the appellant, with their salaries paid by the appellant.
It also serves as a training ground for students of the Government Medical College run by the appellant.

Supreme Court's Analysis:

Interpretation of "Industry":
Section 2(j) of the Industrial Disputes Act defines "industry" using broad terms like "undertaking," "trade," and "business." The Court emphasized that these terms must be interpreted broadly, given their deliberate usage by the legislature. Therefore, hospitals cannot be excluded from the definition of "industry."
Noscuntur a Sociis Doctrine:
The Court noted that when words with similar meanings are grouped together, they should be understood in relation to one another or according to the context. A general word is to be understood according to the more specific word next to it. This doctrine is much broader than ejusdem generis. However, this rule of construction cannot be used to limit the scope of broader terms deliberately used by the legislature unless there is doubt about their meaning.
Legislative Intent:
The Court paid attention to the uniqueness of the structure of the definition of "industry," which contains two parts. The first part defines the statutory meaning of industry, and the second part mentions several other components of the industry. This makes the definition more inclusive. So, a narrow interpretation of such a term would not align with legislative intent.

The inclusion of hospital services in the First Schedule of the Industrial Disputes Act through Act 36 of 1956 further demonstrated the legislative intent to include hospitals under the definition of industry.

Legislative intent can also be inferred from the definition of employer and Section 2(g)(i), which indicates the application of the Act to activities of the Government that fall within Section 2(j).
Doctrine of Quid Pro Quo:
The Supreme Court rejected the application of the doctrine of quid pro quo and held that no consideration should be given to the profit motive while defining an industry.
Appellant's Contentions:
- The appellant argued that since sovereign functions are not within the meaning of industry, the welfare activities of the state should also be excluded. This was rejected because:
  - Sovereign functions are limited to primary and inalienable functions of the Government.
  - Hospitals operated by non-governmental bodies do not fall within sovereign functions.
  - Section 2(j) is a beneficial measure, and welfare activities are also for the social and economic benefit of society.
- The appellant also contended that an undertaking must exhibit traditional characteristics of trade or business, such as:
  - Investment of Capital
  - Profit-Making Goal
  - Employment of Labor
  - Production or Sale of Goods
  However, the Court clarified that Section 2(j) allows inclusion of activities even without profit motive or capital investment.
Key Question:
What characteristics should an undertaking share with trade or business to qualify as an industry?
Hospitals as Undertakings:
It was questioned whether an activity similar to J.J. Hospital would fall under the definition of "undertaking" if carried out by a private entity. The Court held:
- Hospitals run by private entities are undertakings regardless of profit motive.
- The character of the activity, not the operator or profit motive, is decisive.
Essential Attributes of an Undertaking:
- The activity should be carried out regularly and systematically, not casually or sporadically.
- It must aim to produce or distribute goods or provide material services to the community or part of it.
- Requires cooperation between employers and employees.
- Should be organized similarly to trade or business, not for personal use or pleasure.
- Should aim to meet material human needs or render services to the community.

After this, it was held that J.J. Hospital is undertaking as it involves systematic organization, cooperation between employer and employees, and is providing essential service to the community.

Case Law:

Corporation of Glasgow v. Glasgow Tramway and Omnibus Co. Ltd: Highlighted that if legislative intent is considered, broader definitions can be inferred to define "industry."
D.N. Banerjee v. P.R. Mukherjee: Supported the view that hospitals, whether for-profit or not, qualify as "industries" under the Industrial Disputes Act.
Baroda Borough Municipality v. Workmen
Shri Vishuddhananda Saraswati Marwadi Hospital v. Workmen: Held that the definition of industry is broad and not limited to profit-making enterprises. Hospitals come under the definition of industry.
Brijmohan Bagaria and Chatterjee: Held that individuals in professions based on intellectual skill (e.g., doctors, lawyers) are excluded from the concept of "undertaking."

Judgment:

The Supreme Court held that the J.J. Group of Hospitals constitutes an "industry" under Section 2(j) of the Industrial Disputes Act. The termination of Respondents without complying with Section 25F rendered the retrenchment invalid. The appeal was dismissed with costs.

Evolution of the Hospital as an "industry" after State of Bombay vs Hospital Mazdoor Sabha:

Management of Safdarjung Hospital vs Kuldeep Singh: Reversed the Hospital Mazdoor Sabha judgment. Defined "material services" and excluded professionals like doctors and teachers.
Bangalore Water Supply and Sewerage Board vs. Rajappa: A seven-judge bench offered a broad, rational test to define "industry." Overruled previous decisions and introduced the Triple Test:
1. A Systematic activity
2. Cooperation between employer and employee
3. The production and distribution of goods and services to satisfy human wants and wishes (not spiritual or religious)
Sub-Divisional Inspector of Post Vaikam and Others v Theyyam Joseph and Others: Two-judge bench overruled Bangalore Water Supply without referencing it, causing ambiguity.
Coir Board Ernakulam v Indira Devi: Two-judge bench attempted to redefine "industry"; but a three-judge bench upheld Bangalore Water Supply's authority.
In the Jai Bir Dispute (2005), the Supreme Court overturned Bangalore Water Supply again.

Industrial Relation Code 2020:

Defines "industry" as any organized activity involving employers and workers for manufacturing, delivering, or distributing goods or services to satisfy human wants or wishes, regardless of profit motive or capital investment. The following activities are excluded:

Activities of the Government related to its sovereign functions (e.g., defense research, atomic energy, space)
Domestic services
Activities of institutions owned or managed by organizations engaged in charitable, social, or philanthropic services
Any other activity as may be notified by the Central Government

As the amended definition has not been enforced till today, the triple test and dominant test provided by the Bangalore Water Supply Board vs. A. Rajappa are still relevant.

Conclusion:
The State of Bombay v. Hospital Mazdoor Sabha is a landmark case that played a crucial role in interpreting the term "industry." The central question was whether hospitals fall under the definition of "industry" as per the Industrial Disputes Act. The case provided a broader interpretation of Section 2(j) of the Act, which is significant because it determines whether hospital workers are entitled to the protections under the Industrial Disputes Act.

These protections include safeguards against unlawful termination, unfair labor practices, and access to a comprehensive dispute resolution and grievance redressal mechanism. Hospital workers also gain rights such as re-employment and collective bargaining.

Although maternity benefits are not directly covered under the Industrial Disputes Act, female workers in hospitals classified as "industries" are entitled to such benefits, including paid maternity leave. This broader interpretation of "industry" aligns with labor rights and the welfare obligations of the state.

In addition to expanding the scope of the term "industry," the case helped establish a framework for determining what constitutes an industry, setting limits to its interpretation. This framework would later help form the "triple test" formulated in the Bangalore Water Supply case.

References:

Manav Kirtikumar Thakkar, State of Bombay v. The Hospital Mazdoor Sabha 960 AIR 610, 1960 SCR 2 866: Critical Analysis, 6(1) Int'l J.L. Mgmt. & Human. 2023.
Vijendra Vikram Singh Paul, Analysis of the Definition of "Industry" under Industrial Dispute Act 1947 of India, Manupatra.
Bhushan Tilak Kaul, 'Industry,' 'Industrial Dispute,' and 'Workman': Conceptual Framework and Judicial Activism, 50(1) J. Indian L. Inst. 28.
Avtar Singh & Harpreet Kaur, Introduction to Labour and Industrial Laws.
S.C. Shrivastav, Industrial Relations and Labour Laws.
A.P.A., Meaning of 'Industry' under the Industrial Disputes Act, 1947, 3(2) J. Indian L. Inst. 251-64, http://www.jstor.org/stable/43949706.
Anubhav Khamraoi & Anujesh Shrivastav, A Critical Analysis of Bangalore Water Supply Decision: A Bugaboo of One-Sided Judicial Interpretation Concerning the Meaning of 'Industry', 8(1) J. Glob. Rsch. & Analysis 73-77.

End Notes: