Redefining industry in stagesThe evolution of the concept of ‘industry’ is an interesting study of industrial jurisprudence. In the Industrial Disputes, 1947 ‘industry’ has been defined as ‘any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft or industrial occupation or avocation of workmen.’ The first part of the definition of industry determines an industry with reference to the employer; the second part is from the standpoint of the employees. This has been taken from the Commonwealth Conciliation and Arbitration Act, 1904 of Australia.
In a series of judgments as in The State of Bombay vs The Hospital Mazdoor Sabha (1960), the Supreme Court was of the view that the conventional meaning of trade and business had lost some of its validity for the Industrial Disputes Act which was a welfare legislation for the benefit of workers. By eliminating the purpose of an industrial activity as earning of profits or income or returns, the Court brought into the sweep of an industry activities such as charities. Even activities such as education, recreation, research and the like that benefit the community as a whole came under the level of industry through liberally interpreting the definition. At the same time, in another set of cases, a restricted and conventional meaning has been given to the term ‘industry’ by a number of High Courts and it was held that a liberal profession such as that of an attorney was not an industry because the attorney does not carry on his profession with the active cooperation of his employees. Similarly, in University of Delhi vs Ram Nath (1963), the Apex Court held that an educational institution was not an industry as every activity which involves the relationship of an employer and employee is not necessarily an industry. Further, in the case of the Management of Safdarjung Hospital, New Delhi vs. Kuldip Singh Sethi (1970), a bench of six Judges of the Supreme Court unanimously held that Safdarjung Hospital was not an industry. In this case the Bench held that an industry as defined in the Act exists only when there is a relationship of employer and employee, the former engaged in business, trade, undertaking, manufacture or calling, service, employment, handicraft or industrial occupation or avocation. But every case of employment is not necessarily an industry. However, in Bangalore Water Supply and Sewerage Board vs. A. Rajappa (1978), a larger Bench of seven Judges of the Supreme Court overruled this restrictive interpretation by a majority of five with two dissenting and pronounced that ‘any systematic activity organized by cooperation between employer for the production and/or distribution of goods and services calculated to satisfy human wants and wishes is an Industry.’ The word ‘Socialist’ was inserted in the Preamble of the Constitution in 1976 (w.e.f. 3.1.1977) by the 42nd Amendment Act and the presence of Justice V.R. Krishna Iyer, the socialist Judge on the Bench industrialized research and academic institutions, hospitals and office of professionals with a socialistic zeal. The umbrella extended was so wide as to even encroach the regal or sovereign function of State as the interpretation of the term ‘sovereign’ as fluid and complex as that of ‘industry’ but what constitute a sovereign function excludes industry from its scope and industrial law has no application on it. Trade unions welcomed this industrialisation of organizations that were not industries in popular perception. At the same time, the Apex Court, while widening the scope of industry, recorded its anxiety, saying, “In view of the difficulty experienced by all of us in defining the true denotation of the term ‘industry’ and divergence of opinion in regard thereto as has been the case with the Bench also, we think it is high time that the Legislature steps in with a comprehensive Bill to clear up the fog and remove the doubts and set at rest for all the controversy which crops up from time to time in relation to the meaning of the aforesaid term rendering it necessary for larger Benches of this Court to be constituted which are driven to the necessity of evolving a working formula to cover particular cases.”
Recommendations of National Commissions on Labour
The first National Commission on Labour, 1969 observed that ‘the definition of industry, as it has been interpreted, is very comprehensive in scope. Questions arose from time to time whether hospitals, clubs, municipalities, educational institutions, etc., fell within the scope of the term. In deciding these issues, it has been generally held by courts/tribunals that profit motives or money considerations for the services rendered is not an essential characteristic; that while the regal and sovereign functions of the State are outside the scope of the definition, other functions of Government which are not of a regal character, fall within the definitions. Religious or humanitarian institutions, private and domestic activities-liberal profession, are outside the purview of industry. The office of Chartered Accountants, Solicitors are not industry nor are educational institutions or clubs run solely for the benefit of their members. Research institutions maintained by industry and employing technical and other staff, however fall within the scope of the term’. The Report of the 2nd National Commission on Labour, 2002, in pursuance of which 44 labour laws have been simplified and rationalised in four Codes by the present Government has no observation on this issue.
Industrial Disputes (Amendment) Act 1982
The Statement of Objects and Reasons of this Amending Act noted that, “While referring the recommendations of the first National Commission on Labour and the Supreme Court’s decision in the Bangalore Water Supply case, it was proposed to redefine the term ‘industry’. It was also proposed to exclude from its scope, institutions like hospitals and dispensaries, educational, scientific research or training institutes, institutions engaged in charitable, social and philanthropic services, etc., in view of the need to maintain in such institutions an atmosphere different from that in industrial and commercial undertakings and to meet the special needs of such organisations. It was also proposed to exclude sovereign functions of Government including activities relating to atomic energy, space and defence research from the purview of the term industry. However, keeping in view the special characteristics of these activities and the fact that their workmen also need protection, it was proposed to have a separate law for the settlement of individual grievances as well as collective disputes in respect of the workmen of these institutions.” The Amendment Act, 1982 amended the definition of ‘industry’ under Section 2(j) as any systematic activity carried on by cooperation 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 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, (b) any activity relating to the promotion of sales or business or both carried on by an establishment, but does not include (1) any agriculture operation except where such agriculture operation is carried on in an integrated manner with any other activity which is predominant one and also Plantation as defined in Plantations Labour Act, 1951 (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 Governments 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 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 cooperative 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. While appreciating the Recommendations of the 1st Labour Commission and judicial activism, Parliament amended the concept of industry to de-industrialize certain institutions with the object to throw a shield against excess trade unionism and to maintain the ambience required for such organisations but 38 years elapsed without giving effect to this amendment and during this period the judiciary continued to remind us of the need to reform and clear the uncertainty prevailing on this issue. In Coir Board, Ernakulam, Cochin & another vs Indira Devi & Others (1998), the Supreme Court observed: “Instead of leading to industrial peace and welfare of the community (which was the avowed purpose of artificially extending the definition of industry), the application of the Industrial Disputes Act to organizations which were, quite possibly, not intended to be so covered by the machinery set on under the Industrial Disputes Act might have done more damage than good, not merely to the organizations but also to employees by the curtailment of employment opportunities.” The Bench suggested that the matter be reexamined by a larger Bench to reconsider the decision in Bangalore Water Supply case. Nothing happened and successive Central Governments lacked the courage or political will to enforce the 1982 Amendment. The obvious compulsion was not to antagonize trade unions as all major political parties have their trade union fronts and there is competitive trade unionism to maintain the status quo and vote banks. In the last monsoon session, Parliament has passed the Industrial Relations Code, 2020 with a definition of industry, taking substantially from the first part of the 1982 Amendment, but cautiously adopted the exclusion part. The Bangalore Water Supply case decision has also been accommodated to the extent possible and with minimum exclusion of certain activities and sectors including sovereign function. Under Section 2 (p) of the Code ‘industry’ means any systematic activity carried on by co-operation between an employer and worker (whether such worker is 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 gain or profit, but does not include – (i)institutions owned or managed by organizations wholly or substantially engaged in any charitable, social or philanthropic service; or (ii) any activity of the appropriate Government relatable to the sovereign functions of the appropriate Government including all the activities carried on by the departments of the Central Government dealing with defence research , atomic energy and space; or (iii) any domestic service; or (iv) any other activity as may be notified by the Central Government. The Rules of this Code have been notified for public comment and the provisions of the Code would be implemented shortly. Hospitals, Universities, Scientific Research and Training Institutes, Co-operative societies, Clubs, offices of professionals and significantly, agriculture have not been excluded in this definition as was done in the 1982 Amendment Act. Industrial Relations Code has prescribed measures to minimize the numbers of trade unions in an industry. As a welcome measure for employers, the threshold has been raised to 300 from 100 to waive the prior permission of the appropriate Government to declare closure or to retrench, or for lay off. Industrial establishment having 300 or more workers are required to have Standing orders under the new law. Earlier, the threshold was 100 or more under the Industrial Employment (Standing Orders) Act 1946. On the other hand, the definition of industry is apparently a conciliatory gesture to the trade unions as it liberally and impliedly extends the umbrella to include organizations excluded in the 1982 Amendment, not enforced till date, while at the same time, the Central Government reserves the right to notify and further exclude other activities. While considering the new farm laws to reform the agricultural sector, it appears that this concept of industry is a sustained release reform capsule planned to be administered cautiously, sensing the time, compatibility and adaptability of a specific sector. The writer is an Advocate and labour law expert.