Bangalore Water Supply v/s A. Rajappa & Others AIR 1978 SC 548
Author– Smruthi A Y , a Student of Ramaiah College of Law
Facts of the case:
The respondent employees filed a Claims Application No. 5/72 under Section 33C (2) of the Industrial Disputes Act, claiming that the punishment was imposed in violation of natural justice principles after being fined by the Appellant Board for misconduct and having various sums recovered from them. The appellant Board raised a preliminary objection before the Labor Court, arguing that the Board, a statutory body carrying out what is essentially a regal function by providing citizens with basic amenities, is not an industry within the meaning of the expression under section 2(j) of the Industrial Disputes Act, and that as a result, the employees were not workmen and the Labor Court had no jurisdiction to decide the workmen’s claim.
After this objection was overturned, the appellant Board filed two Writ ‘Petitions with the Bangalore-based Karnataka High Court. Section 2(i) of the Industrial Disputes Act, 1947 states that the appellant Board is industry, and the Division Bench of the High Court dismissed the petitions on that basis.
The appeals by Special Leave were referred to a larger Bench for consideration in light of the potential for confusion resulting from the proliferation of cases in a field where the average person must comprehend and apply the law as well as the desire for a thorough, definitive, and unambiguous definition of what constitutes an industry under the terms of the Industrial Disputes Act.
Issues involved in the case:
- The case concerned whether the Bangalore Water Supply and Sewerage Board would be considered an “industry” under Section 2(j) of the Industrial Dispute Act, and more specifically, what constitutes an “industry” in this context?
- Are Institutions of Charity Industries?
- Do clubs and other groups that prioritize camaraderie and self-help over profit-making fall inside the definitional circle?
- Would one classify a research institute, university, college, or school as an industry?
- Could the office of a lawyer, chartered accountant, physician, or member of any other liberal profession be classified as an industry?
- In a strict sense, are governmental functions industrial? If not, how much are government agencies exempt from legal action?
- Which roles in the industry will be Sovereign or Regal?
- Is the Industry of Municipal Corporations?
- Is a Hospital an Industry?
- What does the word “industry” mean?
Laws applicable:
As per Section 2(j) of The Industrial Disputes Act, 1947, “industry” refers to any organized activity conducted in conjunction between an employer and his employees (regardless of whether the employees are directly employed by the employer or through an agency, such as a contractor) for the purpose of producing, supplying, or distributing goods or services in order to fulfill human desires (excluding spiritual or religious desires). This can occur whether or not:
- capital has been invested for the purpose of conducting such an activity; or
- The activity is conducted with the intent to profit, and this includes:
(a) any activity carried out by the Dock Labor Board, which was established in accordance with section 5A of the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948);
(b) any activity related to an establishment’s promotion of sales, business, or both. but excludes:
1. any agricultural operation, unless it is integrated with another activity (i.e., any activity mentioned in the preceding clause’s provisions) and that other activity is the primary one.
2. hospitals, pharmacies, 3.schools, scientific, research, or training facilities, 4. establishments owned or operated by groups that are entirely or primarily involved in providing philanthropic, social, or charitable services; 5.khadi or village industries; 6.any government activity related to the sovereign functions of the government, such as all the work done by the Central Government’s departments on space, atomic energy, and defense research; or 7. any domestic service; or 8.any activity carried out by a co-operative society, club, or other similar body of individuals, provided that the number of people employed by the co-operative society, club, or other similar body of individuals in relation to such activity is less than ten; or 9.any activity carried out by an individual or body of individuals practicing a profession, if the number of people employed by the individual or body of individuals in relation to such profession is less than ten.
Section 33C of The Industrial Disputes Act, 1947 states that if a worker has a right to receive from their employer any money or benefit that can be calculated in monetary terms, and if there is any doubt as to how much money is owed or how much a benefit should be calculated, the question may be decided, subject to any rules made under this Act, by any Labor Court that the appropriate Government may designate in this regard; 1 within a period not to exceed three months.
With the caveat that the presiding officer of a Labor Court may, for reasons to be documented in writing, prolong the time by whatever further term he may deem appropriate in the event that he feels it is necessary or expedient to do so.
Judgement:
In support of its ruling that the Bangalore Water Supply and Sewerage Board is within the scope of the industry, the court provided a detailed definition of the term.
The meaning of “industry,” as stated in Section 2(j) and clarified by Banerjee, is broad. The following conditions must be met for there to be a plausible “industry” in that enterprise:
(i) systematic activity;
(ii) organized by cooperation between employer and employee (the direct and substantial element is chimerical);
(iii) for the production and/or distribution of goods and services calculated to satisfy human wants and wishes (not spiritual or religious but inclusive of the material things or services geared to celestial bliss e.g. making, on a large scale, Prasad or food):
a. Whether a venture is in the public, joint private, or other sectors, the lack of a profit motivation or gainful purpose is irrelevant.
b. The actual emphasis is functional, and the nature of the activity—with a particular focus on the relationships between employers and employees—is the deciding factor.
c. Just because philanthropy drives an organization does not mean it can no longer operate as a trade or company.
Despite the fact that Section 2(j) employs words with the greatest amplitude in its two limbs, their meaning cannot be expanded beyond what is necessary.
Analysis of the case:
The legislature and the executive branch should take note of the decision made by a five-judge Supreme Court bench, which suggests creating a larger bench to reevaluate how industry is defined in laws that have been in place since 1978. The central question in State of Uttar Pradesh v. Jasbir Singh, which was heard alongside nine other civil appeals, was whether the Bangalore Water Supply case, which expanded the definition of industry, should remain the supreme law of the land for the purposes of applying under the Industrial Disputes Act 1947.
Outraged by the Bangalore Water Supply case verdict, employers in numerous government ministries and service establishments demanded to be excluded from the IDA’s purview. Following that, the IDA was amended by Parliament in 1982 with the goal of removing a wide range of institution types from the definition. The amendment was never informed, though.
In light of the executive’s failure to publicize and enforce the updated restrictive definition of industry, the newest order from the Bench, presided over by Justice N. Santosh Hegde, maintains that the Iyer Bench order requires a reconsideration. In court, the government argued that the 1982 amendment was not notified since there was no other mechanism in place for employees of establishments covered by the change to file concerns.
The apex court states that: In India, where there are few public job prospects, an overly expansive interpretation of the notion of industry may discourage private development. But neither economic theory nor the decades-long expansion of market economies in industrialized nations bear witness to the fact that protecting workers’ fundamental rights stands in the way of advancement. Therefore, the new ruling’s observations on macroeconomic trends appear to be nothing more than conjecture.
In this instance, the court expanded the definition of industry to encompass a larger range of activities involving an employer-employee relationship by using a liberal construction.
Triple test:
The triple test is a working principle that the Supreme Court developed following the Bangalore Water Supply case. It states that there should be systematic activity organized by cooperation between the employer and employee, for the creation and/or provision of products and services that are intended to satiate the needs and desires of people.
In this instance, the following points were also stressed:
1. Services focused on heavenly joy or spiritual or religious matters are not included in the industry.
2. Whether an endeavor is undertaken in the public, joint, private, or another sector, the lack of a profit motivation or gainful purpose is inconsequential.
3. The nature of the activity, with a particular emphasis on the employer-employee connection, is the crucial test, and the genuine focus is functional.
4. The presence of philanthropy in an organization does not mean that it is no longer a trade or company.
As a result of the ruling in this case, organizations that meet the triple test mentioned above—professions, clubs, cooperatives, educational institutions, research institutes, charitable endeavors, and other kindred endeavors—cannot be excluded from the purview of section 2(j) of the Act.
Conclusion:
By rendering a decision in the Bangalore Water Supply case, the Supreme Court has reinstated judicial discipline and averted needless commotion in the field of labor law. The case has been implemented as national law ever since the Apex Court’s seven judges provided a broad interpretation of industry under the Act.
The broad definition of industry provided by the Bangalore Water Supply case was narrowed by the 1982 amendments made by the Parliament. Hospitals, dispensaries, educational, scientific, and research or training institutes, as well as establishments providing charitable or social philanthropic services, were to be excluded by the revised definition. Additionally, it was suggested that the government’s sovereign duties be excluded, such as research into space exploration, atomic energy, and military.