Definition of “Industry” | Day 3: Supreme Court reserves judgement on 48-year old interpretation

Singh: Scheme of the Act already balances interests

Singh began with the scheme of the ID Act and the concept of public utility services under Section 2(n). He said the First Schedule of the ID Act initially had five entries added through legislation. Later entries were added by notification. This, he said, shows that Parliament was aware of what it was including as “industry.” Referring to Schedule I, he pointed out that sectors such as transport, banking, cement, coal and cotton textiles were included early on.

Singh said the Act contains “a series of safety valves,” pointing to provisions such as Sections 9A, 9B, 19(4), 36A and 36B, which allow the appropriate government to exempt industries in public interest. Section 9B, he said, permits exemption of an entire industry where there are serious repercussions to public interest.

At this point, he said he was “surprised” by the stand of the States. If they believe certain sectors should be excluded, “they have entire power” under the Act. Instead, they are asking the Court to do it for them. “They will shoot the gun on the shoulders of the Supreme Court,” he said, and then tell workers that the Court has let them down. He added that after decades of Bangalore Water Supply, the Court cannot now be asked to reinterpret the provision. “You cannot cry after 48 years,” he said.

Hansaria: Triple test explains, does not expand the definition

Hansaria submitted that the triple test in Bangalore Water Supply does not expand the definition of “industry” but only explains it. Any business, trade or undertaking, he said, will involve systematic activity, cooperation between employer and employee and the production or distribution of goods or services.

He said the Act was enacted to protect workers “who have no bargaining power and are at the mercy of the employer.” Referring to Section 11A, he said that without the Act, remedies like reinstatement would not be available. He added that unfair labour practices cannot be addressed unless the activity falls within “industry.”

He said narrowing the definition would take away these protections, noting that States across political lines have approached the Court seeking such a result.

Kothari: “Route to workers’ rights is through industry”

Senior Advocate Jayna Kothari submitted that the definition of “industry” must be interpreted in light of the purpose of the IDA: to protect workers and ensure they are not left without remedies.

Relying on D.N. Banerji v P.R. Mukherjee (1952), she said that the meaning of a provision must also be understood in its context and setting. She argued that statutory interpretation cannot be confined to literal meanings and must reflect the purpose of the law.

Kothari contended that Bangalore Water Supply correctly adopts this approach. Referring to Justice Krishna Iyer’s judgement, she submitted that the Act is a welfare legislation and must be read keeping in mind Articles 38, 39, 42 and 43A. 

On sovereign functions, she submitted that the exception is narrow. Referring to Bangalore Water Supply, she said only functions “strictly understood” as sovereign are excluded, not welfare or economic activities carried out by the State. She relied on Agricultural Produce Market Committee v Ashok Harikuni  (2000) to argue that not every governmental function is sovereign and that the nature of the activity is what matters.

She argued that expanding the sovereign exception would leave large sections of workers without remedies under the Act. Referring to sanitation and hazardous cleaning workers, she said these are among the most vulnerable workers, often employed by municipalities and local bodies. Excluding such activities from “industry” would deny them protections such as reinstatement, compensation and safe working conditions.

Sankarnarayan: No justification to dilute a wide definition of “industry”

Sankaranarayan addressed two aspects: sovereign functions and charitable activities. On charitable activity, he referred to Justice Krishna Iyer’s judgement in Bangalore Water Supply and the limited exception carved out for certain clubs. He said Justice Iyer drew a distinction between clubs like the Madras Gymkhana and small community clubs formed by individuals for their own recreation, which are “self-serving,” and only such clubs were excluded. He submitted that over time, these limited exceptions have expanded into “many categories of activities exempted from the operation of the definition clause.” He then posed the question: if there is no doubt about the meaning of the words in Section 2(j), and that they are of wide amplitude, “what justification can one seek for diluting the concept of industry as envisaged by the legislature?”

Relying on State of  Bombay v Hospital Mazdoor Sabha (1960), he submitted that the judgement was correct in holding that hospitals are industries, but not in excluding certain activities from the definition. He added that Bangalore Water Supply has been consistently followed showing that in several cases the Court has applied the majority judgement. He submitted that if activities such as defence research, military establishments or forests are excluded, workers in such sectors would cease to be “workmen,” since the concept of industry is “inextricably tied” to that of workmen.

On sovereign functions, he referred to Bangalore Water Supply and said the exemption is limited. He submitted that when a statute applies and makes no exception, the State cannot claim exclusion. He pointed out that the absence of an alternative remedy for those who may not be considered industries was one of the reasons why the 1982 amendment was not brought into force. He submitted that there is no basis to dilute the wide definition adopted in Bangalore Water Supply.

Cama: Charity and industry are antithetical

Cama said the case presents an “all or nothing” situation. “The other side says include all, and this side… says our individual should not be covered. This is a peculiar litigation,” he said. He clarified at the outset that there can be no doubt that an industry carried on by the government remains an industry. However, the activity must still satisfy Section 2(j) and fall within “business, trade or undertaking.”

On the meaning of “undertaking,” he said it cannot be read in isolation and must take colour from the surrounding words. “If everything else around it is industry, then surely one word cannot itself stand out,” he submitted, adding that it must be read ejusdem generis with business and trade. Referring to the scheme of the Act, he said an undertaking is nothing but an industry, either in whole or in part.

He submitted that the definition of “industry” has two parts and is “not one continuous definition.” Referring to D.N. Banerjee, he said the width of the definition is reinforced by the second limb.

Cama disagreed with Justice Krishna Iyer’s triple test to the extent of how it deals with employer-employee relationship. “Even if it is purely altruistic, there might be an employer-employee relationship,” he said, adding that this cannot be the determining factor. According to him, the correct approach is first to see whether the activity is in the nature of business, trade or undertaking, and only then whether the person is a workman.

On charity, he said “the concept of charity and the concept of industry are basically antithetical.” He gave the example of free education and supply of goods by the government and submitted that where there is no benefit to the employer or department, it cannot be treated as industry. “There has to be something more than charity,” he said, adding that business or trade cannot exist without a profit motive.

This led to questions from the Bench. Justice B.V. Nagarathna asked why free education should be excluded if “the structure is the same.” Justice Joymalya Bagchi observed that “the idea of profit is more economic than it is of law.” Justice P.S. Narasimha gave the example of outsourced government functions and said workers’ rights would become “terribly dependent” on whether the government performs an activity directly or through contractors.

In response, Cama said that if the object is not to benefit the employer or the department and no fee is charged, it cannot be treated as an industry. On the issue of outsourced functions, he said that even if the result appears unjust, “unjust does not make it correct or legal,” and the Court cannot expand the statute on that basis.

He reiterated that not every employment would amount to an industry. The test, according to him, is first whether the activity falls within business, trade or undertaking, and then whether the person employed is a workman. If the activity itself is not in the nature of business, the existence of a workman would not make it an industry.

Sengupta: Charity begins at home

Sengupta began by taking the Court to the statement of objects and reasons of the ID Act. Referring to dispute resolution, he said the working class asks, “where do you go and what is the alternative forum?”. He submitted that the forum under the ID Act cannot be substituted by civil courts or service tribunals dealing with public employment. Industrial tribunals, he said, have wider powers than ordinary courts and can even “create contract between employer and employee.” 

On the scope of “industry,” Sengupta submitted that the scheme of the Act shows that it applies across sectors, including government employment, and cannot be narrowly confined.

He also referred to the constitutional framework. Noting that the word “socialist” was introduced by the 42nd Amendment in 1976, he said that when Bangalore Water Supply was decided in 1978, “we were already in the socialist era.” Whether employers like it or not, he said, the interpretation of labour law must reflect that constitutional position.

On charity, Sengupta strongly rejected the argument that charitable institutions fall outside “industry.” He added that charity operates vis-à-vis the recipients of goods and services, not the workers who are employed in the establishment. For workers, he said, there is no difference. 

AG: Triple test not conclusive

Venkataramani said the Court must remain anchored to the text of the law, even when dealing with a welfare statute. “The Court will not go beyond the text of the law even if it is for social welfare,” he said. He clarified that the government is “not anti-labour,” but added that in a changing, globalised economy, “we need to take a call on how to manage the affairs.”

Referring to Bangalore Water Supply, he said the judgement has taken the “pendulum to extreme sides.” While the triple test is a “good test” in the context of trade and business, “nobody can go beyond those three tests,” but at the same time, it “cannot be the end-all.”.

He said the approach cannot be reduced to whether a person is employed or exploited. “Exploitation… may be inevitable,” he said, but that does not mean that every activity where someone is employed, including when the government is discharging constitutional functions, must be treated as an industry. He added that while courts may interpret provisions in favour of workers in specific situations, such as bonus or unfair labour practices, the threshold question is whether the activity itself qualifies as an industry. 

He also clarified that merely because something is a public utility service does not mean it is an industry. The activity must independently satisfy the definition. He added that while economic conditions may have changed, “workmen will be workmen, exploitation will always be exploitation,” but certain governmental functions may still require a different approach.

Naphade: Prospective overruling not warranted

In his rejoinder arguments, Naphade submitted that there is no case for applying prospective overruling. Referring to I.C. Golaknath v State of Punjab (1967), he said that doctrine was invoked in a situation where striking down agrarian reforms would have led to “chaotic conditions.” The present case, he said, concerns individual rights and does not raise such concerns.

He said that the fact that Bangalore Water Supply has been followed in several judgements is not a ground to hold it correct. “If the judgement is erroneous, it is erroneous,” he said. 

Drawing a distinction between service law and labour law, he said service law is entirely statutory, while industrial adjudication allows for a broader range of remedies.

On the triple test, he said there is “no answer” as to how it originated and pointed out that it was borrowed from Australian law. He reiterated that repeated application of the test cannot justify retaining it if it is incorrect.

The Court reserved judgement.

Disclaimer: Senior Advocate Jayna Kothari is a Managing Trustee of the Legal Observer Trust, the entity under which SCO operates. Trustees are not involved in shaping day-to-day editorial policy.