INDUSTRY

How is ‘Industry’ Defined Under Labour Laws in India?

Industrial Disputes Act, 1947 came into effect immediately after independence and
the object of the Act was to provide for effective machinery for investigation and
settlement of industrial disputes. Section 2(j) of the Act of 1947 provides for
definition of Industry.

The definition of Industry as provided in Section 2(j) of the Industrial Disputes Act,
1947 reads as under,

“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;”

No write up on the subject, in the backdrop of labour laws in India, is possible

without referring to the land mark judgement of the Hon’ble Supreme Court,
Bangalore Water Supply and Sewerage Board V/s A. Rajappa and Ors., decided on
21.2.1978 and 7.4.1978. In this landmark judgement 7 judge bench of the Hon’ble
Supreme Court considered pros and cons of the definition of Industry, referred
earlier pronouncements and decided the scope of definition of Industry under the
Industrial Disputes Act, 1947.

The judgement of the Hon’ble Supreme Court in the matter of Bangalore Water
Works consists of 182 paragraphs and has considered all the previous cases on the
subject. The summary of the judgement is as under –

a) Where (I) Systematic activity (II) Organised by Co-operation between employer

and employee (III) For the production and/or distribution of goods and services
calculated to satisfy human wants and wishes (inclusive of material things or
services geared to celestial bliss i.e. making on large scale or Prasad or food is an
industry)

b) Absence of profit motive or gainful objective is irrelevant, be the venture in the

public, joint, private or other sector.

c) If the nature of activity is with special emphasis on employer, employee

relationship and true focus is functional.

d) If the organisation is trade or business, it will be covered by the definition of

Industry though organisation is philanthropic.

With this judgement, besides manufacturing activity, professions such as Attorney,

activities like Clubs, Educational Institutions, Co-operatives, Research Institutes, and
Charitable Projects were also covered. Respective category of professions, clubs, co-
operative etc may qualify for exemption from the definition of Industry. As held by
the Hon’ble Supreme Court in this judgement, if no employees are entertained but in
minimal matters, marginal employees are hired without destroying the non
employee character of the unit.
Even pious or altruistic missions have been considered to be out of the ambit of the
definition of Industry if mainly drawn, by sharing in the purpose or common cause,
for E.g. – lawyers volunteering to run a free legal services clinic or doctors serving in
their spare hours in a free medical centre or Asharm-ites working at the bidding at
the Holiness, Divinity and the services are supplied free or at nominal costs and
those who serve are not engaged for remuneration or on the basis of Master and
Servant relationship.

Even in case of sovereign functions if there are units which are Industries and which
are substantially severable then they were considered to be falling within the ambit
of definition of Industry. Constitutional and competitively enacted legislative
provisions removing certain activities from the scope of the Act, which otherwise are
likely to be covered by the interpretation of Industry, were held to be out of ambit of
the definition of Industry.

The Hon’ble Supreme Court held that in deciding whether an enterprise is an

industry, the absence of profit motive or gainful objective is irrelevant. The Hon’ble
Supreme Court also held that whether the venture is public/joint or private or other
sector is also irrelevant. The Hon’ble Apex Court also observed that absence of
capital does not qualify an enterprise for exemption from the scope of Section 2(j) of
the Act.

The Hon’ble Supreme Court also observed that welfare economic activities
undertaken by the Government or statutory bodies not being sovereign functions are
covered by the definition of Industries. The judgement also brought research
institutes, educational institutions, hospitals, professions like attorney, co-operative
societies, clubs, philanthropic enterprises, performing business functions within the
definition of Industry. Charitable Institutions make no profits but hire the services of
employees as in other like businesses.

The Hon’ble Supreme Court held that from the point of view of workers there is no
charity, they are concerned about the disposal of end products. The Hon’ble
Supreme Court felt that noble objectives, pious purposes are no reasons to bring
charitable institutions out of the definition of Industry. The Hon’ble Supreme Court
also felt that if kind hearted businessmen or high minded industrialist or service
minded operated, hire employees and provide services to the lowly and the lost, the
needy and ailing, without charging them any price or receiving a negligible return is
a charity but as far as workmen are concerned, they contribute their labour in return
for wages and conditions of service and therefore such an activity is covered by the
definition of Industry. While holding that Attorney’s office is an industry, the Hon’ble
Supreme Court in the same judgement excluded single lawyer, rural medical
practitioner or urban doctor with little assistant and/or menial servant. The Hon’ble
Supreme Court also held that if Club or other like collective has basic and dominant
self service mechanism, presence of stray employees will not bring such a club
within the definition of Industry, however the Hon’ble Court also observed that there
should be absence of employer-employee co-operation. The Club should be self
serving and should not hire employees to manage their activities except part time
sweeper etc.

The interpretation of the definition of Industry by the Hon’ble Supreme Court

brought a large ambit of activities under the definition of Industry. A large number
of institutes, particularly, charitable institutes, universities approached the Union of
India for an amendment in the definition of Industry and accordingly Industrial
Disputes Act, was amended in the year 1982. Sub section 2 of Section 1 of the
 Amendment Act states that the Act shall come into force on such a date as the
Central Government may, by notification in the Gazette, appoint. However, although
the Act has amended the definition of Industry in 1982, the amended provision is
not brought into force.

On this background, in the year 2005, the Hon’ble Supreme Court, 5 Judge Bench,
decided on 5.5.2005, in the matter of State of UP V/s Jai Bir Singh, that the cases
stated in the cause title be placed before the Hon’ble Chief Justice of India for
constituting a suitable larger bench for reconsideration of the judgement of Supreme
Court in the case of Bangalore Water Works. The latest perusal of the records of the
Supreme Court of India show that, the said matters are presently pending before a 7
Judge Bench of the Hon’ble Supreme Court.

On this background, in today’s business world the definition of Industry as held by

the Hon’ble Supreme Court, in the year 1978, certainly requires reconsideration not
only from the point of view of amendment of 1982 but also from the point of view of
present industrial/business scenario. Today with liberalization, a manufacturer in
India may have to compete with manufacturer from all over the world. In the
business world, what matters most is competitiveness and pricing with quality.
Therefore if Indian business houses have to compete with manufacturers in China
where restrictions are not as severe as in India, the manufacturers in India will not
be able to compete with their Chinese counterparts. While doing so, however,
welfare of the workforce and compliance with Indian employment laws shall also
have to be kept in mind.

The Constitution of Bench is pending since 2005. It is not certain when finally Bench
will be constituted and judgment will come. Till that time the law as set by
Bangalore Water Works will prevail. Based on the judgement of Bangalore Water
Works by the Hon’ble Supreme Court the following activities have been considered
‘Industry’ by various Courts;

 Public Works Department of Government (State of Punjab V/s Hari Dass & Anr,
1999)
 Doordarshan (All India Radio V/s Santosh Kumar, 1998)
 Tata Sports Club (Ratilal B Ravji V/s Tata Sports Club & Anr., 1997)
 Research Institute (Central Council for Research in Ayurveda and Siddha V/s Central
Government Industrial Tribunal & Anr, 2010

This write up is placed to enable the viewers of the site to understand intricacies of
definition of Industry.

Industry, 'Industrial dispute' and 'workman' taken in the extended significance,

or exclude it. Though the word 'undertaking' in definition of industry is wedged in
between business and trade on the one hand and manufacture on the other, and
though therefore it might mean only a business or trade undertaking, still it must
be remembered that if that were so, there was no need to use the word separately
from business or trade. The wider import is attracted even more clearly when we
look at the latter part of the definition which refers to 'calling, service,
employment, or industrial occupation of, avocation of workman. 'Undertak-ing'
in the first part of the definition and 'industrial occupation or avocation in the
second part obviously mean much more than what is ordinarily understood by
trade or business.

The definition was apparently intended to include within scope what might not
strictly be called a trade or business venture, Bangalore Water Supply and
Sewerage Board v. A. Rajappa, AIR 1978 SC 548: (1978) 36 FLR 266: (1978) 1 LLJ
349 SC: (1978) 11 LLJ 73 SC: (1978) 2 SCC 213: (1978) 3 SCR 207. Means (1)
Diligence in the performance of task (2) Systematic labour for some useful
purpose esp., work in manufacturing or production (3) A particular form or
branch of productive labour; an aggregate of enterprises employing similar
production and marketing facilities to produce items having markedly similar
characteristics, Black's Law Dictionary, 7th Edn., p. 779. The word industry is not
to be read in isolation. It must be read in the context of the phrase which it define,
realizing that the function of a definition is to give precision and certainty to a
word or phrase which would otherwise wague and uncertain, but not contradict
or supplant it altogether, B.N. Banerji v. R.P. Mukherjee, (1954) SCR 302. Means
any business, trade, undertaking, manufacture or calling of employers and
includes any calling, service, employment, handicraft, or industrial occupation or
avocation of workmen. [Industrial Disputes Act, 1947, s. 2 (j)] Means any
industry or business in which any trade, occupation or subject field in engineering
or technology [or any vocational course] may be specified as a designated trade.
[Apprentices Act, 1961 (52 of 1961), s. 2 (k)] Means any industry specified in
Schedule I, and includes any other industry added to the Schedule by notification
under s. 4. [Employees' Provident Funds and Miscellaneous Provisions Act, 1952
(19 of 1952), s. 2 (i)] The Ahmedabad Textile Industries Research Association
carries on an activity which clearly comes within the definition of the word
'industry' in s. 2(j) and which cannot be assimilated to a purely educational
institution and hence when a dispute arises between it and some of its employee,
it is an industrial dispute which could be properly referred for adjudication under
the Act.

Ahmedabad Textile Industry's Research Association v. State of Bombay, AIR 1961

SC 484: (1961) 2 SCR 480. The word 'industry' in this definition mustake its
colour from the definition and discloses that a workman is to be regarded as one
employed in an industry if he is following one of the vocations mentioned in
conjunction with his employers engaged in the vocations mentioned in relation to
the employers. An industry is to be found when the employers are carrying on any
business, trade, undertaking, manufacture or calling of employers. If they are not,
there is not industry as such, Management of Safdarjung Hospital v. Kuldip Singh
Sethi, AIR 1970 SC 1407: (1970) 1 SCC 735: (1971) 1 SCR 177. The linch-pin of the
definition of industry is to ascertain the systematic activity which the organisation
is discharging namely whether it par takes the nature of a business or trade, or is
an undertaking or manufacture or calling of employers. If it is that and there is
co-operation of the employer and the employee resulting in the production of
material services, it is an industry notwithstanding that is objects are charitable
or that it does not make profit or even where profits are made, they are not
distributed among the members, Management of the Federation of Indian
Chamber of Commerce and Industry v. Their Workman, Shri R.K. Mittal, AIR
1972 SC 763: (1972) 1 SCC 40: (1972) 2 SCR 353. The word 'industry' is defined in
s. 2(j) of the Industrial Dispute Act, 1947 and that section reads: '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; This definition is in two parts. The first part says that it
means any business, trade, undertaking, manufacture or calling of employers and
then it goes on to say in the second part that it includes any calling, service,
employment, handicraft, or industrial occupation or avocation of workmen.
'Industry is ordinarily something employers create or undertake' is gradually
yielding place to the modern concept which regards industry as a joint venture
undertaken by employers and workmen - an enterprise which belongs equally to
both. an activity can be regarded as an 'industry' within the meaning of s. 2(j)
only if there is relationship of em-ployer and employees and the former is
engaged in 'business, trade, undertaking, manufacture or calling of employers'
and the latter, 'in any calling, service, employment, handicraft or industrial
occupation or avocation'. Though 'undertaking' is a word of large import and it
means anything undertaken or any project or enterprise, in the context in which
it occurs, it must be read as meaning an undertaking analogous to trade or
business. In order that an activity may be regarded as an undertaking analogous
to trade or business, it must be 'organised or arranged in a manner in which trade
or business is generally organised or arranged.' It must not be casual nor must it
be for oneself nor for pleasure. And it must first on cooperation between
employer and employees who associate together with a view to production, sale or
distribution of material goods or material services. It is entirely irrelevant
whether or not there is profit motive or investment of capital in such activity,
Workmen of Indian Standards Institu-tion v. Management of Indian Standards
Institution, AIR 1976 SC 145: (1975) 2 SCC 847: (1976) 2 SCR 138. The definition
of the word 'industry' in clause (b) of the Explanation to that section is
undoubtedly unduly wide since it includes 'any business, profession, trade,
undertaking or manufacture', Maharao Saheb Shribhim Singhji v. Union of India,
AIR 1981 SC 234: (1981) 1 SCC 166. Industry' means: (a) any business, trade,
manu-facture, undertaking or calling of employers; (b) any calling, service,
employment, handicraft or industrial occupation or a vocation of employees; and
includes: (i) agriculture and agricultural operations; (ii) any branch of any
industry or group of industries which the State Government may, by notification,
declare to be an industry for the purpose of this Act. The M.P. Khadi and Village
Industries Board is an 'industry' within the meaning of s. 2(19) of the M.P.
Industrial, Relations Act, 1960. One of the functions of the Board is to support,
encourage, assist and carry on khadi and village industries and in the matter
incidental to such trade or business, Gopal v. Administrative Officer, AIR 1986 SC
504: (1985) 4 SCC 138: (1985) Supp 2 SCR 641. When personal services are
rendered to the members of a society and that society is constituted only for the
purposes of those members to engage the services of such employees, its activity
cannot be treated as an industry nor are they workmen, MGT of Som Vihar Apt
Owners Housing Maintenance Society Ltd. v. Workmen, (2002) 9 SCC 652: AIR
2002 SC 2530 (2531). [Industrial Disputes Act, (14 of 1947), s. 2(j)]