Conceptual Analysis of Industry

What is Industry?

The term “industry” is a fundamental concept under labour laws, particularly in the Industrial Disputes Act, 1947. It plays a crucial role in determining the applicability of labour protections and dispute resolution mechanisms. The definition and scope of “industry” have been shaped by statutory provisions and judicial interpretations.
As per section 2(j) of Industrial Disputes Act, “any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft or industrial occupation or avocation of workmen”.

Key Elements of the Definition

1. Systematic Activity: The activity must be organized and carried on in a systematic or methodical manner. It shouldn’t be casual or isolated.
2. Cooperation Between Employer and Workman: There must be a relationship and cooperation between employers and workmen for the activity to be considered an industry. This highlights the element of organized labor.
3. Production, Supply, or Distribution of Goods or Services: The activity generally involves the production, supply, or distribution of goods or services aimed at satisfying human wants and needs (not necessarily spiritual or religious needs, but including material services).
4. No Profit Motive Necessary: The presence or absence of a profit motive is not a conclusive factor in determining whether an activity is an industry. Even non-profit organizations can be considered industries if they fulfill the other criteria.
5. Focus on Functional Test: The courts have emphasized a functional approach, looking at the nature of the activity and the relationship between employers and employees.
6. Human wants or wishes: the goods or services produced must cater to human wants or wishes, excluding purely religious or spiritual activities.

“Triple Test” laid down in Bangalore Water Supply case:

The court in Bangalore Water Supply case, provided a comprehensive interpretations of “industry”. It established a landmark triple test for determining whether an activity qualifies as an industry:

1. Systematic Activity: The enterprise must be engaged in systematic activity.
2. Cooperation Between Employer and Employee: The activity must be organized through cooperation between employer and employee.
3. Production/Distribution of Goods and Services: The activity must be for the production and/or distribution of goods or services calculated to satisfy human wants and wishes.
   
   If these three elements are present, there is prima facie an “industry.”

Exclusions:
– casual activities without organizational structure
– activities predominantly of a religious or spiritual nature.
– purely charitable venture without employees.

Examples of activities considered as Industry: Manufacturing units; service industries like hotels, hospitals, educational institutions; public utilities like water supply and electricity.

Activities excluded from Industry:
– Domestic services
– Religious or spiritual organizations
– Activities performed by individuals without employer-employee relationships.

Importance of the Definition

1. Applicability of Labour Laws: only establishments classified as industries are subject to labour laws like the Industrial Disputes Act.
2. Resolution of Disputes: employees of an industry are entitled to raise disputes and seek remedies for unfair labour practises.
3. Welfare benefits: the definition ensures that workers in organised sectors are protected by legal safeguards.

The definition of “industry” is crucial because the Industrial Disputes Act, 1947, primarily applies to disputes arising in an “industry.” Only if an establishment is considered an “industry” do the provisions of the Act regarding workmen, industrial disputes, conciliation, adjudication, lay-off, retrenchment, etc., become applicable.

The interpretation of “industry” has been dynamic and has evolved through numerous court cases, reflecting the changing socio-economic landscape. The current understanding emphasizes the systematic cooperation between employers and employees in activities that provide goods or services to meet human needs, with less emphasis on the motive behind the activity.

Case Laws

Bangalore Water Supply & Sewerage Board v. A. Rajappa

Facts: Rajappa was an employee of the Bangalore Water Supply Board, and a dispute arose between the employees and the board regarding a fine imposed on them due to alleged misconduct. The employees believed that the fine was unreasonable and unfair. Consequently, they decided to take action against the board, filing a suit under Section 33(1) of the Industrial Disputes Act, 1947, arguing that the fine was in violation of the principles of natural justice.
Issue: Whether a statutory body engaged in activities essential for providing basic amenities to citizens, which were considered as sovereign functions, could be classified as an “industry” under the definition provided in Section 2(j) of the Industrial Disputes Act, 1947?
Judgement: The court examined the definition of the word “industry” and established a triple test to determine whether an activity qualifies as an industry. The criteria are as follows:
1. There must be a systematic activity.
2. An employer-employee relationship must exist.
3. There must be production of goods or services.
Religious or spiritual activities are not classified as “industry,” even if they generate revenue, because they generally do not involve a standard employer-employee relationship.
Additionally, if a board is performing a sovereign function that does not fall under the definition provided in section 2(j) of the relevant Act, it will be considered an industry. This sovereign function acts as an exemption. It is important to note that profit motive is not a determining factor in defining an industry. Furthermore, an organization engaged in trade or business does not lose that classification simply because it is driven by philanthropic motives.
Court finally held that the Board is an industry within the meaning of section 2(j) of Industrial Disputes Act.

State of U.P. v. Jai Bir Singh

Facts: The respondents, who were workers, were terminated by the Uttar Pradesh State Warehouse Corporation, a statutory body, without any formal inquiry and without following the procedures outlined in the Industrial Disputes Act. The respondents sought protection under this Act as workers, arguing that the corporation qualifies as an industry. They also referenced the previously decided case, Bangalore Water Supply & Sewerage Board v. A. Rajappa AIR 1978 SC 548, asserting that it is a binding decision that should not be overturned.
Issue: Whether the term “industry” is applicable to the “social forestry” department of state?
Whether certain categories of activities, including sovereign functions of the State, should be excluded from the purview of the definition of “industry” under the Act?
Judgement: Due to the complexities and varying interpretations of the term “industry,” this case was referred to a larger bench of the Supreme Court for a more authoritative and comprehensive ruling.
The court found that the decision in the Bangalore Water Supply case was not unanimous. One of the judges stated that the definition of “industry” is quite broad and vague, making it difficult to define precisely through judicial interpretation. The court acknowledged in the Bangalore Water Supply case that its decision was merely a temporary solution until the Legislature could provide a more precise definition. The court emphasized that while the interest of workers is important, the objective of the Act is to protect the interests of both employers and employees. Furthermore, the sovereign functions of the government are limited to its Constitutional responsibilities. The broad interpretation of the definition of “industry” is hindering the implementation of the amended definition. As noted in the Safdarjung case, an industry must represent a trade or business in a commercial sense.
The court in this case only interpreted the term “industry” instead of determining the “social forestry” is an “industry”.