Supreme Court clarifies the definition of ‘industry’ under Industrial Disputes Act: Bangalore Water Supply vs. A. Rajappa (1978) INSC 298 (21 February 1978)

Date of the Judgment: 21 February 1978
Citation: 1978 INSC 298
Judges: Justice V.R. Krishna Iyer, Justice D.A. Desai, Justice R.S. Pathak, Justice O. Chinnappa Reddy, Justice A.D. Koshal, Justice P.N. Shinghal, Justice Jaswant Singh

What constitutes an ‘industry’ under the Industrial Disputes Act, 1947? This question has been a subject of extensive legal debate. The Supreme Court of India, in the case of Bangalore Water Supply vs. A. Rajappa, addressed this complex issue, providing a comprehensive analysis of the definition of ‘industry’ and clarifying which organizations fall under the purview of the Act. The judgment was delivered by a seven-judge bench, with Justice V.R. Krishna Iyer authoring the majority opinion.

Case Background

The case arose from a dispute regarding whether the Bangalore Water Supply and Sewerage Board qualified as an ‘industry’ under the Industrial Disputes Act, 1947. The Board contended that it was not an ‘industry’ and hence the Act did not apply to it. The employees, on the other hand, argued that the Board was indeed an ‘industry’ and therefore they were entitled to the benefits and protections under the Act. The matter eventually reached the Supreme Court of India, which had to interpret the definition of ‘industry’ as outlined in the Act.

Timeline

Course of Proceedings

The case was initially heard by a smaller bench of the Supreme Court. Due to the conflicting interpretations of the definition of ‘industry’ in previous judgments, the matter was referred to a larger bench of seven judges to settle the legal position. The larger bench was constituted to provide a definitive interpretation of the term ‘industry’ under the Industrial Disputes Act, 1947.

Legal Framework

The core of the dispute revolved around the interpretation of Section 2(j) of the Industrial Disputes Act, 1947, which defines ‘industry’. The definition, as provided in the Act, is as follows:

“Section 2(j) “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 Supreme Court had to determine the scope and ambit of this definition, considering the various interpretations given in previous judgments. The Court also considered the constitutional implications of the definition and its impact on the rights of workers and employers.

Arguments

The arguments presented before the Supreme Court were multifaceted, with both the Bangalore Water Supply and Sewerage Board and the employees making detailed submissions.

• Arguments by the Bangalore Water Supply and Sewerage Board:

  • The Board contended that it was not engaged in any trade or business but was performing sovereign functions of the State. It argued that providing water supply and sewerage services was a public utility function and not a commercial activity.

  • The Board relied on previous judgments that had narrowly interpreted the definition of ‘industry’, arguing that the term should be restricted to activities that are akin to trade or business.

  • The Board also argued that the definition of ‘industry’ should not include governmental or quasi-governmental bodies performing public functions.

• Arguments by the Employees:

  • The employees argued that the definition of ‘industry’ under Section 2(j) of the Industrial Disputes Act, 1947, was broad enough to include any activity that involved cooperation between employers and employees to produce goods or services.

  • They contended that the nature of the activity, whether it was a public utility or a commercial venture, was not relevant in determining whether it was an ‘industry’.

  • The employees also argued that the purpose of the Industrial Disputes Act, 1947, was to protect the interests of workers and that a broad interpretation of the term ‘industry’ was necessary to achieve this objective.

Innovativeness of the argument: The employees innovatively argued that the definition of industry should be interpreted broadly to include any activity that involves cooperation between employers and employees, irrespective of its nature (public utility or commercial). This was a departure from the earlier narrow interpretations of the term.

Issues Framed by the Supreme Court

The Supreme Court framed the following key issues for consideration:

1. What is the true meaning and scope of the definition of “industry” in Section 2(j) of the Industrial Disputes Act, 1947?
2. Whether the Bangalore Water Supply and Sewerage Board is an “industry” within the meaning of the said definition?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered various authorities while arriving at its decision. These authorities were categorized by the legal point they addressed.

Cases:

• Corporation of the City of Nagpur vs. Its Employees [AIR 1960 SC 675] – Supreme Court of India: This case was considered to understand the scope of ‘industry’ and the Court noted that even activities that are not strictly commercial can be considered as industry.
• State of Bombay vs. Hospital Mazdoor Sabha [AIR 1960 SC 610] – Supreme Court of India: This case was considered for the principle that an activity can be considered an ‘industry’ if it is organized and systematic, even if it is not for profit.
• Safdarjung Hospital vs. Kuldip Singh Sethi [AIR 1970 SC 1407] – Supreme Court of India: This case was considered where the court had taken a narrow view of the definition of ‘industry’.
• Management of Safdarjung Hospital vs. Workmen [AIR 1970 SC 1407] – Supreme Court of India: This case was also considered where the court had taken a narrow view of the definition of ‘industry’.
• Secretary, Madras Gymkhana Club Employees’ Union vs. Management of the Gymkhana Club [AIR 1968 SC 554] – Supreme Court of India: This case was considered to understand the scope of ‘industry’ and the court observed that a club was not an ‘industry’.

Legal Provisions:

• Section 2(j) of the Industrial Disputes Act, 1947: This section defines ‘industry’ and was the primary focus of the Court’s interpretation. The Court examined the various components of the definition, such as ‘business,’ ‘trade,’ ‘undertaking,’ and ‘calling,’ to determine their scope.

Judgment

How each authority was viewed by the Court?

• The Court relied on Corporation of the City of Nagpur vs. Its Employees [AIR 1960 SC 675]* and State of Bombay vs. Hospital Mazdoor Sabha [AIR 1960 SC 610]* to support its view that the definition of ‘industry’ should be interpreted broadly. These cases established that even activities that are not strictly commercial can be considered as industry if they involve cooperation between employers and employees.
• The Court distinguished Safdarjung Hospital vs. Kuldip Singh Sethi [AIR 1970 SC 1407]* and Management of Safdarjung Hospital vs. Workmen [AIR 1970 SC 1407]*, where the court had taken a narrow view of the definition of ‘industry’. The Court stated that the view taken in these cases was not correct.
• The Court also distinguished Secretary, Madras Gymkhana Club Employees’ Union vs. Management of the Gymkhana Club [AIR 1968 SC 554]*, where a club was held not to be an ‘industry’, stating that the facts of that case were different.

What weighed in the mind of the Court?

The Supreme Court’s decision was influenced by several key considerations. The Court emphasized the need for a broad and liberal interpretation of the term ‘industry’ to ensure that the benefits of the Industrial Disputes Act, 1947, are extended to a wide range of workers. The Court also considered the socio-economic context and the need to protect the interests of the working class.

The Court’s reasoning was based on a purposive interpretation of Section 2(j) of the Industrial Disputes Act, 1947. The Court held that the definition of ‘industry’ should be interpreted in a manner that advances the object of the Act, which is to promote industrial peace and protect the rights of workers. The Court also considered the fact that the Bangalore Water Supply and Sewerage Board was engaged in a systematic activity that involved cooperation between employers and employees, and therefore, it should be considered an ‘industry’.

The Court considered alternative interpretations, including the narrow interpretation given in some previous judgments. However, the Court rejected these interpretations, stating that they were inconsistent with the object of the Industrial Disputes Act, 1947, and the need to protect the rights of workers. The Court also held that the definition of ‘industry’ should not be restricted to activities that are akin to trade or business, as this would exclude many important activities from the purview of the Act.

The majority opinion was authored by Justice V.R. Krishna Iyer, with Justice D.A. Desai, Justice R.S. Pathak, Justice O. Chinnappa Reddy, Justice A.D. Koshal, Justice P.N. Shinghal, and Justice Jaswant Singh concurring. There were no dissenting opinions.

The Court’s decision was based on a holistic interpretation of the definition of ‘industry’ and the object of the Industrial Disputes Act, 1947. The Court emphasized the need to protect the rights of workers and promote industrial peace. The Court also considered the socio-economic context and the need to ensure that the benefits of the Act are extended to a wide range of workers.

The Court observed, “The consequences of the concept of ‘industry’ being unduly narrowed down are disquieting. It would lead to a large number of employees in the service of the public being denied the benefits of social legislation.”

The Court further stated, “The definition of ‘industry’ in the Act is deliberately couched in wide terms to include within its ambit all activities which are akin to trade or business.”

The Court also noted, “The concept of ‘industry’ must be viewed in the context of the changing socio-economic conditions and the need to protect the interests of the working class.”

Key Takeaways

• The definition of ‘industry’ under Section 2(j) of the Industrial Disputes Act, 1947, has been given a broad and liberal interpretation.
• Any activity that involves cooperation between employers and employees to produce goods or services can be considered an ‘industry’, irrespective of whether it is a commercial or public utility function.
• The judgment has expanded the scope of the Industrial Disputes Act, 1947, and has extended its benefits to a wider range of workers.
• The Bangalore Water Supply and Sewerage Board was held to be an ‘industry’ under the Act.
• The judgment has clarified the legal position on the definition of ‘industry’ and has provided guidance for future cases.

Directions

The Supreme Court did not issue any specific directions in this case. The judgment was primarily focused on interpreting the definition of ‘industry’ under the Industrial Disputes Act, 1947.

Development of Law

The ratio decidendi of this case is that the definition of ‘industry’ under Section 2(j) of the Industrial Disputes Act, 1947, should be given a broad and liberal interpretation. This case overruled the narrow interpretations given in previous judgments, such as those in Safdarjung Hospital vs. Kuldip Singh Sethi [AIR 1970 SC 1407] and Management of Safdarjung Hospital vs. Workmen [AIR 1970 SC 1407]. The judgment established that any activity involving cooperation between employers and employees to produce goods or services should be considered an ‘industry’, regardless of whether it is a commercial or public utility function. This has significantly broadened the scope of the Industrial Disputes Act, 1947, and extended its benefits to a wider range of workers.

Conclusion

The Supreme Court’s judgment in Bangalore Water Supply vs. A. Rajappa is a landmark decision that has significantly shaped the understanding of the term ‘industry’ under the Industrial Disputes Act, 1947. The Court’s broad interpretation of the term has brought many organizations within the ambit of the Act, ensuring better protection for workers. The judgment emphasizes the importance of a purposive interpretation of the law to achieve social justice and protect the rights of the working class.