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The Bangalore Water Supply v/s R. Rajjapa

Facts Of The Case
The respondent employees were fined by the Appellant Board for misconduct and various sums were recovered from them. Therefore, they filed a Claims Application No. 5/72 under Section 33C (2) of the Industrial Disputes Act, alleging that the said punishment was imposed in violation of the principles of natural justice.

The appellant Board raised a preliminary objection before the Labour Court that the Board, a statutory body performing what is in essence a regal function by providing the basic amenities to the citizens, is not an industry within the meaning of the expression under section 2(j) of the Industrial Disputes Act, and consequently the employees were not workmen and the Labour Court had no jurisdiction to decide the claim of the workmen.

This objection being over-ruled, the appellant Board filed two Writ 'Petitions before the Karnataka High Court at Bangalore. The Division Bench of that High Court dismissed the petitions and held that the appellant Board is industry within the meaning 'of the expression under section 2(i) of the Industrial, Disputes Act, 1947.

The appeals by Special Leave, considering the chances of confusion from the crop 'of cases in an area where the common man has to understand and apply the law and the desirability that there should be, comprehensive, clear and conclusive declaration as to what is an industry under the Industrial Disputes Act as it stands were placed for consideration by a larger Bench.

Bangalore Water Supply vs. R Rajappa & Others.
Citations: 1978 AIR 548, 1978 SCR (3) 207
Corum: Beg, M. Hameedullah (Cj), Chandrachud, Y.V., Bhagwati, P.N., Krishnaiyer, V.R. & Tulzapurkar, V.D., Desai, D.A. & Singh, Jaswant
Date Of Judgment: 21/02/1978

Issues Involved�
  1. 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?
  2. Whether Charitable Institutions Are Industries?
  3. Do clubs and other organizations whose general emphasis is not on profit-making but fellowship and self-service fit into the definitional circle?
  4. Would a university or college or school or research institute be called an industry?
  5. Could a lawyer's chamber or chartered accountant's office, a doctor's clinic or other liberal profession's occupation or calling be designated an industry?
  6. Are governmental functions, strict sense, industrial and if not, what is the extent of the immunity of instrumentalities of government?
  7. Whether Sovereign or Regal functions will be industry?
  8. Whether Municipal Corporations Industry?
  9. Whether Hospital is Industry?
  10. What is the meaning of the term 'industry'?

Rules/ Laws Applicable�

Section 2 (j) in The Industrial Disputes Act, 1947

(j) " industry" means any systematic activity carried on by co- operation 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 satisfy human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature), whether or not:
(i) any capital has been invested for the purpose of carrying on such activity; or
(ii) such activity is carried on with a motive to make any gain or profit, and includes-
(a) any activity of the Dock Labour Board established under section 5A of the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948 );
(b) any activity relating to the promotion of sales or business or both carried on by an establishment. but does not include:
  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. Explanation - For the purposes of this sub- clause," agricultural operation" does not include any activity carried on in a plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951 ); or
  2. hospitals or dispensaries; or
  3. educational, scientific, research or training institutions; or
  4. institutions owned or managed by organizations wholly or substantially engaged in any charitable, social or philanthropic service; or
  5. khadi or village industries; or
  6. 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
  7. any domestic service; or
  8. any activity, being a profession practiced by an individual or body or individuals, if the number of persons employed by the individual or body of individuals in relation to such profession is less than ten; or
  9. any activity, being an activity carried on by a co- operative 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;]

Section 33C in The Industrial Disputes Act, 1947

(2) Where any workman is entitled to receive from the employer any money or any benefit which is capable of being computed in terms of money and if any question arises as to the amount of money due or as to the amount at which such benefit should be computed, then the question may, subject to any rules that may be made under this Act, be decided by such Labour Court as may be specified in this behalf by the appropriate Government; 1 within a period not exceeding three months:]

Provided that where the presiding officer of a Labour Court considers it necessary or expedient so to do, he may, for reasons to be recorded in writing, extend such period by such further period as he may think fit.]

It held that the Bangalore Water Supply and Sewerage Board will fall under the definition of the industry and by justifying this it gave an elaborating definition of industry.
'Industry', as defined in Section 2(j) and explained in Banerjee, 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:
  1. Absence of profit motive or gainful objective is irrelevant, be the venture in the public, joint private or other sector.
  2. The true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer-employee relations.
  3. If the organization is a trade or business it does not cease to be one because of philanthropy animating the undertaking.
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 Banerjee and in this judgment, so also, service, calling and the like. This yields the inference that all organized activity possessing the triple elements, although not trade or business may still be industry (provided the nature of the activity, viz. the employer employee 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.

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 industrial disputes between employer and workmen, the range of this statutory ideology must inform the reach of the statutory definition.

The ruling by a five-judge Supreme Court Bench, recommending the setting up of a larger Bench to review the definition of industry as interpreted in law since 1978, is a wake up call to the legislature and the executive. The crux of the issue before the court in State of Uttar Pradesh v. Jasbir Singh�taken up along with nine other civil appeals, was whether, for purposes of application of the Industrial Disputes Act 1947, the Bangalore Water Supply case that amplified the definition of industry should continue to be the law of the land.

Employers in many service establishments and Government departments, aggrieved by the ruling in the Bangalore Water Supply case raised demands for their exclusion from the ambit of the IDA. Parliament subsequently passed in 1982 an amendment to the IDA, which sought to exclude many kinds of establishments from the definition. However, the amendment was never notified.

The latest order of the Bench headed by Justice N. Santosh Hegde holds that the Iyer Bench order needs a review in view of the executive's failure to notify and enforce the amended restrictive definition of industry. The Government had explained before courts that the 1982 amendment was not notified in view of the fact that no alternative machinery for redress of grievances of employees in establishments excluded by the amendment had been provided.

The apex court says that:
An over-expansive interpretation of the definition of industry might be a deterrent to private enterprise in India where public employment opportunities are scarce. However, neither economic theory nor the decades of growth of the market economy in developed countries testifies to protection of employees' basic rights being a hurdle to progress. Thus the remarks on macroeconomic tendencies made by the latest ruling seem to be no more than assumptions.

In the present case the court by applying liberal interpretation gave a wider meaning to the definition of industry so as to include all kinds of activities wherein there is an employer and employee relationship.

Triple Test
After the Bangalore Water supply case the Supreme Court came up with a working principle called as triple test:
  • There should be systematic Activity
  • Organized by Co-operation between employer and employee,
For the production and/or distribution of goods and services calculated to satisfy human wants and wishes.

The following points were also emphasized in this case:
  1. Industry does not include spiritual or religious services or services geared to celestial bliss
  2. Absence of profit motive or gainful objective is irrelevant, be the venture in the public, joint, private or other sector.
  3. The true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer- employee relationship
  4. If the organization is a trade or business it does not cease to be one because of philanthropy animating the undertaking
Therefore, the consequences of the decision in this case are that professions, clubs, educational institutions co-operatives, research institutes, charitable projects and other kindred adventures, if they fulfil the triple test stated above cannot be exempted from the scope of section 2(j) of the Act.

Recent Developments
After the Bangalore Water supply case, there is still chaotic situation related to the sovereign functions, as per the previous decisions it is clearly mentioned that sovereign activities are excluded from the definition. Despite having the working principle there is still problem in deciding the problem. Such conflict arose in Chief Conservator of Forest v. Jagannath Maruti Kondare and State of Gujarat v. Pratamsingh Narsingh 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.

The Supreme Court has restored judicial discipline and thereby prevented an unnecessary court-initiated turmoil in the area of labour law by giving a judgment in Bangalore Water Supply case . Seven Judges of the Apex Court had given a widely ranging definition of industry under the Act and ever since, the case has been applied as law throughout the country.

The Parliament which had amended the definition of industry in 1982 restricted the wide meaning given by the Bangalore Water Supply case. The new definition sought to exclude institutions like hospitals, dispensaries, educational, scientific and research or training institutes, institutions engaged in charitable, social philanthropic services. It was also proposed to exclude sovereign functions of the Government including activities like atomic energy, space and defense research.

For all these institutions, a separate body was proposed to be created to address grievances, but after this legislatives mandate, the successive Governments have been reluctant to bring the said law into force by merely issuing a notification.

It remains a debatable point as to what the Apex Court would do if a petition moved for the enforcement of this definition in terms of A. K. Roy v. Union of India where it was held that a legislative mandate cannot be held in abeyance by the ruling politicians for an unreasonable period. In 1998, when a two-Judges Bench of the Kerala High Court sought a reconsideration of the 1978 judgment in the Coir Board case, a three-Judges Bench of Chief Justice A. S. Anand, Justice S. P. Bharucha and M. K. Mukherjee said that the two judges were bound by the judgment of the larger bench in Bangalore Water Supply. In the opinion of the three judges, the said judgment did not require any reconsideration and they also sent out a silent but clear message that they will not step in where political executive has thought it wise to keep off.

The wide definition of industry has given opportunity to both the employer and the employee to raise issues i.e. one trying to pull out of this definition, to be out of the clutches of the said Act, and the other bringing within it to receive benefits under it. Due to the width of the periphery of the word industry, there is a tug-o-war between the two, in spite of the various decision of the Court.

The law in force presently is the interpretation of the original Section 2(j) by Rajappa's 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 Rajappa's 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 Rajappa's case and the decisions preceding it would suggest that the judiciary went far ahead than merely filling the gaps lift by the legislature.

In the current scenario industries' have become one of the most vital parts of the society's smooth run, when there is no harmonious relation between workmen and employee it leads to dysfunction. When the law itself is not clear regarding the term 'industry' it will definitely affect the industry on a large scale. The law in force presently is the interpretation of the original Section 2(j).

Written by: Garima Pahwa - BBA LLB 8th Semester.

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