Definition of “Industry” | Day 2: Respondents defend wide interpretation of “industry”

Hegde: Definition is a collective enterprise, not independent parts

Hegde submitted that as per Management of Safdarjung Hospital v Kuldip Singh Sethi (1970), the definition must be read as a whole and denotes a collective enterprise.

He argued that in Bangalore Water Supply, the majority accepted that the definition is in two parts but departed from Safdarjung in application. According to him, the inclusive second limb independently expanded the definition to cover any calling.

Justice Dipankar Datta said there is a “basic fallacy” in the submission. He said one has to see what the industrial dispute is and understand the definition of industry based on an industrial dispute.

Hegde then addressed profit motive and submitted that while profit may not be the purpose of the activity, the activity must bear an analogy to trade and business. CJI Surya Kant observed that the element of profit motive is irrelevant and that even if the primary object is to generate employment and not profit, it may still be an industry.

Hegde submitted that many charitable activities are organised somewhat analogous to commerce and that if it is analogous to commerce, that would be the test. CJI Surya Kant noted that Justice Jaswant Singh had disagreed on hospital and charitable activities in Bangalore Water Supply. Justice Joymalya Bagchi observed that the distinction on profit is not one of substance but of degree, referring to Justice Krishna Iyer’s categorisation in Bangalore Water Supply.

Hegde added that Bangalore Water Supply itself pointed out that the definition of “industry” is a wide definition as intended by the legislature and that the Court must not interfere.

Farasat: Triple test not wrong but incomplete

Farasat submitted that two questions arise:  First, whether the Court should limit Bangalore Water Supply at the level of the definition itself, in which case carving out exceptions may not be necessary. Second, whether there was a need to identify separate categories if the definition is so restricted.

Farasat argued that the triple test is not wrong, but incomplete. He proposed that the Court take the test as it is and add a limiting principle. According to him, an enterprise must have a commercial object or at least an objective analogous to trade and business. He said this portion is drawn from Safdarjung and that he has consciously not used profit, as it is a more aggressive term.

He added that industry should be limited to services that primarily operate through physical or manual labour. Referring to the origins of industrial dispute, he said it arose from the industrial revolution in England and expanding it to all services merely because the word “services” is used would be out of text, especially in the case of intellectual services.

On this basis, Farasat argued that non-commercial enterprises, whether governmental or private, including charitable institutions and professional services such as doctors and lawyers, would stand excluded. He added that introducing a limiting principle of commercial activity would make it unnecessary to carve out sovereign functions separately, as activities under the Directive Principles would stand excluded unless carried out on commercial terms.

At this stage, Justice Datta asked whether under Article 226 courts would examine facts and evidence in the same manner as an industrial tribunal, observing that the power is limited. Justice S.C. Sharma said that before administrative tribunals, employees do not get the same opportunity to prove misconduct as before industrial tribunals. Farasat responded that service law provides protection through central and state administrative tribunals and maintained that it is better than the ID Act.

Gupta: “Commercial lines” must guide Section 2(j)

Gupta said his submissions were confined to the scope of Section 2(j).

He submitted that the approach in Bangalore Water Supply is not appropriate for all activities. According to him, the paradigm proceeds on the basis that any structured activity involving employer and employee, producing something that satisfies human needs, is industry. He said, “this paradigm has to shift.”

Referring to the scheme of the ID Act, he said that while it begins with disputes, it goes on to deal with strikes, lockouts, layoffs and unfair labour practices. Not every activity involving employer and employee is intended to fall within it. He described the present position as “a problem looking for a solution,” where a dispute mechanism is extended to all areas of human activity.

Gupta argued that the operative test is whether the activity is carried out “on commercial lines.” Profit, he said, is not determinative. Charitable activity may generate surplus, but that does not make it commercial. Illustrating this, he referred to temple administration and said that surplus generated from a few temples is used to run others. Activities such as publication of books or distribution of prasad are for spiritual purposes. Justice B.V. Nagarathna intervened, “we say a temple is not a commercial establishment within the Shops and Establishments Act.” She asked, “does it come under undertaking then?”

Gupta submitted that the present approach treats “every aspect of human activity” as industry, which leads to difficulty in cases like temples where “there is no layoff and retrenchment.” He reiterated that the test is whether the activity is carried out on commercial lines.

He also cautioned that the Court should not use “the behemoth of the ID Act” to address such situations when other mechanisms such as civil courts, writ courts and tribunals are available.

Jaising: Reference proceeds on “incorrect information”

Jaising said that the reference is based on “incorrect information” on whether there is a conflict between judgements. Tracing the trajectory, she said the matter first went before a three-judge Bench, which took the view that there was a conflict between Conservator of Forests v. Jagannath Maruti Kondhare (1995) and State of Gujarat v. Pratamsingh Narsinh Parmar (2001) on sovereign functions and on that assumption referred it further.

According to her, “there is no conflict.” She pointed out that Parmar itself records that “no contention has been raised that this is an industry.” CJI Surya Kant responded, “we are not going to hold that the reference was defective.”

Jaising, however, maintained that “there are errors in the making of the reference” and said this was a reason why it should be returned. She also objected to the manner in which the strength of precedents was being described. She said a seven-judge Bench decision remains a judgement of seven judges “notwithstanding two dissents,” adding, “I am amazed by arguments that Safdarjung is of 6 and  Bangalore Water Supply  is of 5.” Bangalore Water Supply had a 5:2 majority. 

She questioned how a bench of six could be constituted, observing that ordinarily the Court avoids a situation of equal division. The CJI noted that there have been four-judge benches as well.

Jaising: ID Act as beneficial statute; “access to justice” and security of tenure

Jaising argued that Bangalore Water Supply was decided on “classical interpretation of statutes.” She said the ID Act is a beneficial statute, and the principles of interpretation are to read the plain meaning, look at the object of the Act and see how the Act achieves that object. According to her, these principles were applied in Bangalore Water Supply and “no case is made out for revisiting.”

She submitted that the ID Act is a pre-Constitution legislation which gave workmen “security of tenure” that an ordinary civil court cannot provide. A civil court, she said, is bound by the law of master and servant and “at best, it can give you damages,” whereas under the ID Act, especially after the introduction of Section 11A in 1971, reinstatement can be granted.

Referring to Workmen of Firestone Tyre & Rubber Co. v. Management (1976), Jaising submitted that the Court had explained that labour courts can exercise jurisdiction de novo to determine whether dismissal is unfair or disproportionate. CJI Surya Kant noted that this is “the most important component,” observing that under Section 11A, even a tribunal can reduce punishment, a power  which is not even given to the High Court under Article 226. He compared it to Article 142, which grants inherent powers to the Supreme Court to do ‘complete justice’. Jaising said the Act departs from the rule of “hire and fire,” but one concerning security of employment. 

Responding to arguments that government departments should be excluded, she said if employees are covered under Articles 309 or 311, they would not seek protection under the ID Act.

She submitted that the purpose of the Act was access to justice stating that it does not create major substantive rights but provides a forum to challenge unfair, mala fide dismissals. “If we get thrown out of the ID Act, I am covered nowhere,” she said. She further asserted that there is “no ambiguity” in the definition of industry and that disputes between employers and employees are common and resolved in industrial courts.

Jaising: “Commercial motive” argument misplaced

Jaising criticised the argument that only activities with commercial motive can be treated as industry. She said this is the main argument being advanced by the other side and questioned the distinction between profit and surplus, noting that “surplus comes from profit.”

She also addressed the argument on temples and charitable institutions raised by Gupta, stating that even where activities are said to be spiritual, the question of labour cannot be ignored. Referring to the preparation of prasad, she asked, “what about the wages of the person who is making the prasad?” She further relied on Justice Krishna Iyer’s classification in Bangalore Water Supply and submitted that charitable institutions may fall within “industry” except in limited cases of purely spiritual activity or voluntary labour.

She argued that the ID Act itself includes government functions, pointing to the definition of “public utility,” and questioned how it can be argued that government enterprises are excluded.

Jaising: Sovereign functions and limits of exclusion

On sovereign functions, Jaising said the concept is “misplaced in a democratic society.” She submitted: “that which cannot be done by a private party” may fall within sovereign functions but many activities now performed by the State are also carried out by private actors, especially after liberalisation, privatisation and globalisation.

Justice Nagarathna observed that the focus should be on the nature of the activity and not who performs it. Justice P.S. Narasimha noted that sovereign functions were not part of the original definition.

On consequences, she submitted that defining “industry” as in Bangalore Water Supply only provides workmen with a forum to address grievances relating to fair wages, safety and unfair dismissals and “does no more, and no less, than that.”

Singh: No justification to revisit settled law

Singh raised concerns about the practical consequences of reconsidering Bangalore Water Supply. He said the judgement has “held the field” for decades and that many matters have attained finality on its basis. He questioned whether reconsidering the issue on a repealed statute would yield a “fruitful, workable outcome,” and pointed out that any decision would have consequences for pending cases. CJI Surya Kant said the Court would proceed on merits and that if necessary, the doctrine of prospectivity could be applied.

Singh relied on empirical data, stating that Bangalore Water Supply has been cited in at least 84 Supreme Court decisions and 898 High Court decisions. He said at least 31 judgements follow it in labour law and another 20 in statutory interpretation, while only a few have questioned it, including Bombay Telephone Canteen Employees v Union of India (1997), Coir Board v Indira Devi (1992), and Physical Research Laboratory v K.G. Sharma (1997).

He submitted that the contention that Bangalore Water Supply prevented legislative action is “demonstrably wrong.” He argued that the judgement does not restrict sovereign functions, but recognises areas where courts should not intervene.

Referring to the NJAC judgement, he submitted that it examines the circumstances in which long-standing precedents that have held the field may be reconsidered, and when a Bench may depart from such judgements. Justice Datta asked under what circumstances the Court may refuse to answer a reference. Singh responded that he was not challenging the reference but pointed to the difficulty of dealing with a repealed statute. He described it as an “anomalous” situation, where the Court was determining the correctness of judgement that dealt with a repealed statute.

Singh submitted that unless something “shocking” is found in Bangalore Water Supply, there is no reason to depart from it.

The Court will continue to hear arguments tomorrow.