Author Name:   parikshitsingh

it is a general overview of how the court has interpreted the term Industry...

Interpretation of word Industry

1.1 Industry – Etymology
ž Comes from Latin word “industria” which means diligence, assiduity; systematic labour,

1.2 Industry in NORMAL Parlance
• In the ordinary sense industry or business means an undertaking where capital and labour co-operate with each other for the purpose of producing wealth and for making profits.

• Industry can be defined as: ‘Any type of Economic Activity producing GOODs or SERVICES‛

• ‘It is part of a chain – from raw materials to finished product, finished product to service sector, and service sector to research and development.‛

• ‘It includes AGRICULTURE, MANUFACTURING and Services

1.3 Industry as a process

1.4

1. Primary Industry
• This involves RAW MATERIALS or NATURAL RESOURCES (before PROCESSING)

• Raw Materials can be: - Quarried, - Mined all below the earths surface, Drilled for, INCLUDING: Coal Mining, Oil Drilling, Gold Mining , Grown - Collected , -INCLUDING: Farming and Forestry - Fishing

2. Secondary Industry
• This involves a PRODUCT from Primary Industry which is PROCESSED or MANUFACTURED into another product Processing of Raw Materials (where raw materials are changed into something different)- Oil refined to make Petrol - Fish is processed to make Fish Fingers, Wheat ground to make Flour, Trees are sawn to make Timber

• Manufacturing of Raw Materials (different parts assembled to make a finished product) - Steel Making - Making Ships/Cars/Televisions - Building Roads and Houses

• (the FINISHED PRODUCT from one Secondary Industry may be the Raw Material from another e.g. One factory may make tyres which are then sent on to be used in a Car Plant)

3. Tertiary Industry
• This provides a SERVICE. It involves a wide range of services INSTEAD of making anything and is the LARGEST group of industries in MEDCs

• Examples of so-called ‘Service Industries‛, Teaching, Nursing, Retail, Civil Service, Police Force , Transport

4. Quaternary Industry
• This involves a small group of RESEARCH and DEVELOPMENT industries‛

• It is the newest industrial sector (often linked with Tertiary) and is growing rapidly due to developments in INFORMATION TECHNOLOGY and COMMUNICATION. It focuses on the LATEST TECHNOLOGY

• Examples of ‛Quaternary Industries‛: Designing new computers/writing computer software, Researching new medicines and medical equipment, genetically modifying plants and animals for farming and new forms of communication through satellites and fibre optics.

2.1 Legal Definition under section 2 (j) of Industrial Disputes Act:

Þ Business, trade, undertaking or manufacture or calling of employers

Þ And includes any calling service employment handicraft or industrial occupation or avocation of workmen

• It is observed that ‘undertaking’ in the first part and industrial occupation or avocation in the second part of s. 2(j) of the Industrial Disputes Act, 1947 obviously mean much more than what is meant by trade or business.

• The definition was apparently intended to include within its scope what might not strictly be called a trade or business. Neither investment of capital nor profit making motive is essential to constitute an industry. A public utility service such as railways, telephones, and the supply of power, light or water to the public may be carried on by private companies or a business corporation, and even if these public utility services are carried on by local bodies like a Municipality, they do not cease to be an industry.

Key words:
• Workman means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, Technical, Operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied. It includes industrial disputes arising out of dismissal, discharge or retrenchment. It excludes persons subject to defence forces, police force and prison service. It excludes persons who are mainly employed in managerial or Administrative capacity.

• Definitions of trade on the Web[1]:

Þ the commercial exchange (buying and selling on domestic or international markets) of goods and services; "Venice was an important center of trade ...

Þ the skilled practice of a practical occupation; "he learned his trade as an apprentice"

Þ engage in the trade of; "he is merchandising telephone sets"

Þ the business given to a commercial establishment by its customers; "even before noon there was a considerable patronage"

Þ turn in as payment or part payment for a purchase; "trade in an old car for a new one"

Þ deal: a particular instance of buying or selling; "it was a package deal"; "I had no further trade with him"; "he's a master of the business deal"

Þ be traded at a certain price or under certain conditions; "The stock traded around $20 a share"

Þ craft: people who perform a particular kind of skilled work; "he represented the craft of brewers"; "as they say in the trade"

Þ exchange or give (something) in exchange for

· Definitions of business on the Web:
Þ a commercial or industrial enterprise and the people who constitute it; "he bought his brother's business"; "a small mom-and-pop business"; "a ...

Þ commercial enterprise: the activity of providing goods and services involving financial and commercial and industrial aspects; "computers are now widely used in business"

Þ occupation: the principal activity in your life that you do to earn money; "he's not in my line of business"

Þ a rightful concern or responsibility; "it's none of your business"; "mind your own business"

Þ an immediate objective; "gossip was the main business of the evening"

Þ the volume of commercial activity; "business is good today"; "show me where the business was today"

Þ business concerns collectively; "Government and business could not agree"

Þ clientele: customers collectively; "they have an upper class clientele"

Þ incidental activity performed by an actor for dramatic effect; "his business with the cane was hilarious"

3. Phases Of Interpretation Of Word Industry
v 1st phase 1953 to 1962-wider meaning

v 2nd phase 1963 to 1978- narrow meaning

v 3rd phase BWSSB v A.Rajappa [AIR 1978 SC5 48] -reviewed the earlier cases and widest meaning was given

v 1978 Parliament Reacts and amends Industry- not brought in to effect so far

v 4th phase-Reservations about the correctness of BWSSB case-Requested the CJI to constitute a larger bench than BWSSB case to explain what is industry- State of U.P v Jai Bir Singh [(2005) 5 SCC1]

3.1 Phase I – Era Of Wide Interpretation
1. One of the first cases to be decided on this issue was D.N. Banerji vs. P.R. Mukherji [2]
Þ The question before the court was whether a municipality may be considered an industry. They applied what was later called the

Þ ‘Analogous Activity Test’ ; according to which the definition under s.2(j), that is, ‘any undertaking or calling’ must be understood to mean such undertaking or calling which are analogous to the carrying on of a trade, business or manufacture’. Thus a municipal corporation was held to be an ‘industry’ even though it was engaged in sanitation and conservation without any profit-motives or investment of any capital, which were held irrelevant for an industry


2. In State of Bombay vs. Hospital Masdoor Sabha[3]
Þ An industrial undertaking was held to imply any ‘systematic activity’ undertaken for production or distribution of goods or services ‘to the community at large’ with the help of employees. Hence, hospitals were held to come under the definition of industry.

Þ Noscitur a sociis (“known from its associates”)

o Where a word has many meanings, the ambiguity can be resolved by the company it keeps

o The Internal Revenue Code provided tax relief for “income resulting from exploration, discovery, or prospecting, or any combination of the foregoing, extending over a period of more than 12 months.”

o Edwin Land, inventor of the Polaroid camera, claim that he “discovered” the Polaroid process, and was entitled to tax relief. This was denied by Tax Court and affirmed by the First Circuit.

o G.D. Searle, a drug company, discovered two new drugs, including Dramamine. It paid the tax and sued for a refund, which was upheld by the Seventh Circuit.

o The Supreme Court agreed to review the cases because of the conflict between the Circuits. Jarecki v. Searle 367 U.S. 301 (1961) Opinion by Chief Justice Earl Warren: The maxim noscitur a sociis, that a word is known by the company it keeps, while not an inescapable rule, is often wisely applied where a word is capable of many meanings in order to avoid the giving of unintended breadth to the Acts of Congress. … The application of the maxim here leads to the conclusion that ‘discovery’ in 456 [‘income resulting from exploration, discovery, or prospecting’] means only the discovery of mineral resources.”Searle was reversed.

3. National Union of Commercial Employees vs. M.R. Meher (Solicitor Case)[4]: whether Liberal professions come under the definition of ‘industry’. The court held that they do not come under the definition of ‘industry’ because a professional does not carry on his profession with the ‘direct and substantial’ cooperation of his employees, but brings to bear his own intellect on the work he does. Therefore for an activity to be eligible as an ‘industry’, the relationship between employer and his workmen on the one hand and goods produced or services rendered by the enterprise on the other hand must be ‘direct and essential’

3.2 Phase II- Era Of Strict Interpretation: Trend 1963 To 1978
a. In this period the trend was narrowing down the meaning of the term industry. University of Delhi-v-Ramanath [5]the SC held that University is not an industry-because:

Þ Main scheme of an educational institution is imparting education

Þ Teaching is not with in the purview of industry as there is no commercial motive

Þ The subordinate staff play a minor or insignificant role in the process of imparting education

Þ Permitting the insignificant role of the subordinate staff to lend the colour of industry is unreasonable.

b. Cricket Club of India-v-Bombay Labour union[6]: The SC held that Cricket Club is not an Industry.

o The Clubs activity is basically promotion of the game of Cricket.

o It is a self serving institution

o It is not carrying any trade or business.

o In the course of promoting the game it has incidentally earned some profits.

o It is not set up for earning profits.

c. In the Management of Safdarjung Hospital-v-Kuldip Singh Sethi[7], the SC held that Hospital is not an industry.

Þ They overruled the earlier Hospital mazdoor sabha case

Þ Hospitals run by the Government or Charitable institutions are not run on commercial lines.

Þ If a hospital or Nursing home is run on commercial basis then it may be an industry.

Þ The hospitals in question are not industry as they are not run on terms analogous to trade or business.

3.3 Phase Iii- Era Of Widest Interpretation: Bangalore Water Supply Case:
# Triple Test To Analyse The Definition Of Industry-
ž Where there is a systematic activity.

ž Organized by cooperation between employer and employee

ž For the production and or distribution of goods and services calculated to satisfy the human wants and wishes

Þ Specific Exclusion By The Case
ž Industry does not include spiritual or religious services

ž Absence of profit motive or gainful objective is irrelevant

ž The true focus is functional and decisive test is the nature of the activity with special emphasis on the employer-employee relation

ž If the organization is trade or business it does not cease to be one because of the philanthropy animating the undertaking

Þ Dominant Nature Test
The dominant test with special reference to identifying sovereign functions of the state was also laid down in this case; according to which:

(1) where a complex of activities, some of which qualify for exemption, involving employees of a total undertaking, some of whom are not ‘workmen’ as in some departments are not productive if isolated, even then, the predominant nature of the service, as explained in CCN, will be the true test. The whole undertaking will be ‘industry’ and all those who are not ‘workmen’ by definition may not benefit by the status;

(2) Only sovereign functions qualify for exemption, not the welfare activities or economic adventures undertaken by government or statutory bodies;

(3) Even in departments discharging sovereign functions, if there are units which are industries and they are substantially severable, then they may not stand exempted; and

(4) Constitutional and competently enacted legislative provisions may well remove from the scope of IDA categories which otherwise may be covered under it.

3.4 Phase Iv- Legislature Initiative But A Failed One
Parliamentary reaction-1982

· Amendment to section 2(j)- industry

· Amendment barrowed the definition as given in the BWSSB case- Clarified the situation further by stating that employer – employee relation includes employees employed through contractor.

· The definition excludes certain categories of employment from the definition

· "industry"[8] means any systematic activity carried on by co-operation between an employer and his workmen (whether such work- men 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 5 A 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 practised by an individual or body of individuals, if the number of persons employed by the individuals 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 cooperative society, club or other like body of individuals in relation to such activity is less than ten;

4. Present Law:
4.1 Professionals and Domestic Activities:
The court observed that the image of industry is of a plurality of workmen, not of a single assistant or attendant. Also the activity carried must involve the cooperation between the employer and employees, for the object of satisfying material human needs, and for personal pleasure.

The whole purpose of the IDA is to focus on resolution of industrial disputes and regulation of industrial relations and not to interfere with every little carpenter in a village or blacksmith in a town who sits with his son or assistant. The same applies to small professions, domestic servants, solicitors or doctors or rural engineers[9]. But with regard to big solicitors firms, they were held to come under the definition of industry.

4.2 Education
‘….education is not merely industry but the mother of industries’. Krishna Iyer, J.

Three main arguments on which education was held to come under the definition of industry[10]:

(1) The premises relied on was that bulk of employees in universities is the teaching community. The court rejected the numerical strength argument of Delhi University case and observed that the true test is the Predominant nature of the activity. As seen in the case of universities or educational institutions, the nature of the activity is, ex hypothesi, education, which is a service to the community. Therefore, university is an industry;

(2) There are a number of other activities of the university administration, evidently industrial in natures which are severable although supplementary to the main enterprise; and

(3) It was accepted that education is a mission and vocation, rather than a profession or trade or business. But when view from the angle of IDA and as an institution it falls with the purview of IDA.

However the court skirted the issue of whether teachers are workmen or not; hence the question is still at large.

4.3 Charitable Institutions
Krishna Iyer, J. affirmed the decision in Bombay Pinjrapole vs. Their Workmen[11] and held that charitable institutions are industry because share business like orientation and operation. He further categorised charitable institutions into three broad categories.

(1) Where the enterprise, like any other, yields profits but they are siphoned off for altruistic objects;

(2) where the institution makes no profit but hires the services of employees like other businesses but the goods and services are made available, at low or no cost, to the poor and needy; or

(3) Where the establishment is oriented on a humane mission fulfilled by people who work without wages because they share the same passion for the cause.

The first two were held to be industries, whereas the third was not.

4.4 Clubs
The court said that if there is productive cooperation between employer and employee then a conflict is bound arise between them, be it a social club, mutual benefit society, public service or professional office. Tested on this yardstick, most clubs will fail to qualify for exemption.[12] Moreover, there is co-operation between the club management providing the capital, the raw material, the appliances and auxiliaries, the support staff and other permissible services for the price being paid by way of membership fees.

4.5 Co-operatives
A co-operative Society is like legal persons and an employer too. The members and others are employees and the activity shares the nature of trade. Merely because co- operative enterprises deserve state encouragement the definition mat not be distorted. Even if the society is worked by the members only, the entity is an industry because the member-workers are paid wages and there may be disputes between workers and workers or workers and employer. These societies—credit societies, marketing co-operatives, producers' or consumers' societies or apex societies are industries.

4.6 Hospitals
The court was of the opinion that running of hospital is a welfare activity and not a sovereign function and hence is an industry. Hospital facilities, research products and training services are ‘services’ and absence of profit or the performance of functions of training and research, would not take the institution out of the scope of industry.

Therefore HMS was affirmed while Safdarjung Hospital was overruled.

4.7 Research
Research benefits industry. Even though a research institute may be a separate entity disconnected from the many industries which funded the institute itself, it may be regarded as an organisation, propelled by systematic activity, modeled on co- operation between employer and employee and calculated to throw up discoveries and inventions and useful solutions which benefit individual industries and the nation in terms of goods and services and wealth. It follows that research institutes, even though run without profit-motive, are industries.

4.8 Sovereign Functions of the State
BWS was mainly concerned with the categories of the employees who came under the departments charged with the responsibility for constitutional functions of the State.[13] Therefore in this regard the court ruled:

‘Sovereign functions, strictly understood, alone qualify for exemption, not the welfare activities or economic adventures undertaken by government or statutory bodies. Even in departments discharging sovereign functions, if there are units which are industries and they are substantially severable, then they may be considered to come within s. 2(j)’

5 Phase V- Recent Trends:
Post BWS decisions reveal that there has been a shift from the acceptance of such a liberal expansion of the ambit of IDA. In Coir Board, Ernakulam, Cochin vs. Indira Devi[14] the court refused to accept that ‘such a sweeping test was contemplated by the IDA’ or ‘every organisation does useful service and employs people may be labeled as industry’

The bench expressed apprehensions that the application of IDA to all sorts of organizations as per the BWS decision might have done more damage that good not merely to the organisation but also to employees by curtailment of employment opportunities. It recommended that the definition needs to be re-examined.

The underlying reasons for this change in attitude have been adequately addressed by the Court in State of Uttar Pradesh vs. Jai Bir Singh[15] (hereafter referred as Jai Bir case). It hinges on two basic grounds:

(1) That the decision in BWS was not unanimous; and (2) the rejection of doctrine of noscitur-a-sociis

Firstly dealing with the ‘not so apparent split’, in the BWS bench, It is indeed quite apparent the administrative hassles, hindered a timely complete judgment in BWS, with complete agreement with regard to the status of the appellant, but a certain degree of cleavage as far as the other general observations of leading judgment delivered by Iyer, J. on behalf of Desai, J., Bhagwati, J. and himself. The point of departure as has been pointed out by the Jai Bir case itself; between the various opinions and the leading opinion in BWS are the exclusions to the ambit of the term ‘industry’ as opined in the leading judgment. The disagreement as voiced by Beg CJ., is clearly with regard to the exclusion of bodies performing ‘sovereign functions’ and the consequent import of the word ‘sovereign’. A subsequent opinion delivered by Chandrachud J., seems to have project a view that all kinds of organised activities giving rise to employer and employee relationship are covered by the wide definition of 'industry' and its scope may not be restricted by identifying and including certain types of industries and leaving some other types impliedly outside its purview. The abovementioned opinion also dissented to the wide interpretation accorded to the term ‘industry’ as far as its interference in liberal professions was concerned.

Secondly then the doctrine of noscitur-a-sociis as enunciated in HMS, also conceded to the wide interpretation necessitated by the term ‘industry’ as used in the IDA, but called for a line to be drawn in a fair and just manner so as to exclude some calling service or undertakings.

It is pertinent to note that in Jai Bir Case adequately summed up the confusion as follows:

‘this court must, therefore, reconsider where the line must be drawn and what limitations may and must be reasonably implied in interpreting the wide words used in s. 2(j)’

The position since the decision in BWS has thus remained unchanged. The BWS remains the locus classicus as far as the interpretation of the word ‘industry’ is concerned. The ball is in the legislature’s court, and the Supreme Court’s response to the referral hopefully must end in a denial.

6. Suggestions
Though the seven judge bench in the BWS case admirably evolved a triple test in its attempt to extract the true import of the statutory definition of industry, yet it expressly admitted that the problem of what restrictions may and must be read in its policy-oriented to be satisfactorily settled by judicial decisions, and called upon the Parliament to restructure the definition. Even the two dissenting judges supported this call by urging the Parliament to step in with a comprehensive bill to clear the fog and remove the doubts and set at rest once and for all the controversy which crops up from time to time in relation to the meaning of ‘industry’.

The 1982 amendment also in a way added to the confusion because the legislature picked up a chose what ever best suited their interest. This is clear from the fact that undertaking like – hospitals, charitable, research and educational institutions were excluded from the purview of IDA. By this they undid the work done by BWS i.e. affirmed all the cases overruled. Such selective implementation is not in either workmens’ or employers’ interest. Moreover the reason given for no notifying the amendment was that a support system was not in place for those people who stand excluded from the benefits of the enactment.

The IDA being a beneficial legislation imposes certain liabilities on the employer in order to safeguard interests of workers, which has given rise to differences of opinion as to the extent and limits of its scope. The great mass of conflicting judgments has also not helped in clarifying the mist surrounding the enigmatically vague wordings of the statutory definition. In fact in BWS judiciary sincerely tried to channelize the law and there has been increasing demands for re- examination of the liberal judgment. The confusion will further subsist unless concrete and all-out efforts are not made soon enough. Thus there is an urgent need for law reform on this foundational aspect of industrial law.

Abbreviations:
Þ MEDCs- More Economically Developed Countries

Þ BWSSB- Bangalore Water Supply and Sewerage Board Case

Þ BWS- Bangalore Water Supply Case

Þ IDA- Industrial Disputes Act, 1947

Þ HMS- Hospital Mazdoor Sabha Case

Þ CCN- City Corporation, Nagpur Case

References:
1. www.paycheck.in/root_files/Definition of Industry.doc
2. www.hindu.com/2005/05/19/stories/2005051907261200.htm
3. www.indianexpress.com/old/ie/daily/.../07250204.html
4. www.legalserviceindia.com
5. hrylabour.gov.in/id-act.html
10. S.C.Srivastav, Industrial Relations and Labour Laws, Vikas Publishing House, Ed.2006
11. Dr. V.G. Goswami , Labour and Industrial Law, Central Law Agency, 2004, Allahabad
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[1] http://www.google.co.in/search?hl=en&cr=countryIN&client=firefox-a&channel=s&rls=org.mozilla:en-US:official&defl=en&q=define:trade&ei=cFdoS_WnNovY7AOnldnBBg&sa=X&oi=glossary_definition&ct=title&ved=0CAkQkAE
[2] AIR 1953 SC 58
[3] AIR 1960 SC 610
[4] AIR 1962 SC 1080
[5] AIR1963 SC 1873
[6] AIR 1969 SC 276
[7] AIR 1970 SC 1407
[8] Amended definition of 1982
[9] All of these categories of professions do not fall within the definition of industry.
[10] University of Delhi vs. Ram Nath, AIR 1963 SC 1873
[11] AIR 1971 SC 2422
[12] The argument of the exclusive nature of clubs and they not serving the community at large was rejected and the court observed that clubs are open to public for membership subject to their own rules. Whoever fulfils them is free to join.
[13] The same question of whether municipalities come under the definition of industry has been coming before the court since 1950s starting with Banerji’s Case.
[14] AIR 1998 SC 2801
[15] (2005) 5 SCC 1

The  author can be reached at: parikshitsingh@legalserviceindia.com

ISBN No: 978-81-928510-1-3
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