The definition of the term "Industry" is perhaps the most significant and intensely debated concept in Indian Labour Law, as the applicability of the entire Industrial Disputes Act, 1947 (ID Act) and the associated machinery for dispute resolution hinges upon this definition.
The evolution of this definition—from a narrow commercial meaning to a wide, expansive socio-economic concept—is chronicled through landmark Supreme Court judgments, culminating in the authoritative "Triple Test."
I. Statutory Definition and Early Judicial Interpretation
A. The Definition (Section 2(j))
The ID Act provides an initial, broad definition:
"Industry means any business, trade, undertaking, manufacture, or calling of employers and includes any calling, service, employment, handicraft or industrial occupation or avocation of workmen."
The ambiguity in the definition lies in the wide scope of terms like "undertaking" and "service," leading to a judicial dilemma: should activities like hospitals, universities, and government welfare departments be included?
B. The Initial Expansive View (D.N. Banerji v. P.R. Mukherjee, 1953)
The Supreme Court first interpreted the definition expansively, holding that the term "undertaking" must be read in a wider sense than mere business or trade.
Key Finding: The Court ruled that even activities carried on by a municipality (like sanitation and conservancy services) fell within the definition of "Industry," emphasizing that the determining factor is the nature of the activity, not the presence of a profit motive. The organization of the activity must resemble a trade or business.
C. The Narrowing Phase (Safdarjung Hospital Case, 1967)
Later, the Court adopted a restrictive approach, holding that institutions primarily involved in charitable or sovereign functions were excluded.
The Reversal: In the Safdarjung Hospital Case, the Court held that hospitals were not industries because their primary purpose was philanthropic, relying on the motive rather than the organizational structure. This created legal confusion and excluded large sections of organized labour from the protection of the ID Act.
II. The Definitive Test: Bangalore Water Supply v. A. Rajappa (1978)
The judicial conflict and resulting chaos forced a seven-judge Constitution Bench of the Supreme Court to deliver a final, comprehensive definition in Bangalore Water Supply & Sewerage Board v. A. Rajappa (1978). This landmark judgment rejected the restrictive approach and established the definitive "Triple Test"and the "Dominant Nature Test."
A. The Triple Test
The Court, led by Justice V. R. Krishna Iyer, held that an activity is an "Industry" if it fulfills the following three elements, regardless of profit motive or whether it is carried out by the government:
Systematic Activity: The activity must be carried on in an organized and systematic manner.
Cooperation of Employer and Employee: The activity must be produced by the co-operation between the employer and his workmen.
Production of Goods or Services: The activity must result in the production or distribution of goods or services calculated to satisfy human wants and wishes (excluding purely spiritual or religious services).
B. The Dominant Nature Test
Where an organization performs complex activities (some sovereign, some commercial), the test of predominant nature is applied:
Principle: The Court must look at the predominant activity of the undertaking as a whole. If the integral part of the activity satisfies the Triple Test, the entire undertaking should be regarded as an Industry.
Integrated Departments: If departments are integrated (i.e., one department's failure affects the main activity), and the main activity is industrial, the integrated departments are included.
Exclusion of Sovereign Functions: The only exception explicitly maintained was the exclusion of purely "Regal" or "Sovereign Functions" of the State (e.g., legislative bodies, the judiciary, defense, and maintenance of law and order).
C. Impact of the Rajappa Verdict
The Rajappa case dramatically broadened the scope of "Industry," ensuring that the protection of the ID Act was extended to:
Statutory Bodies (like the Bangalore Water Supply Board itself).
Hospitals (public and private, regardless of charitable status).
Educational Institutions (though this remains a point of contention and legislative attempts were made to exclude them).
Research Institutions (if organized systematically with employer-employee cooperation).
III. Legislative Response and Current Status
The Rajappa judgment, while lauded for promoting social justice, was criticized by the government and industry for bringing essential non-profit services under the strict regime of the ID Act.
A. The 1982 Amendment (Un-notified)
In response, Parliament passed the Industrial Disputes (Amendment) Act, 1982, which sought to restrict the definition by excluding specific categories like:
Hospitals or dispensaries.
Educational, scientific, research, or training institutions.
Institutions engaged substantially in charitable, social, or philanthropic services.
B. Current Legal Status
Crucially, the 1982 Amendment was never brought into force (notified) by the Central Government. Therefore, the expansive definition of "Industry" based on the Triple Test laid down in the Bangalore Water Supply Case (1978) technically remains the governing law in India today. This continued uncertainty highlights the ongoing struggle between judicial attempts to enforce social justice and governmental attempts to promote industrial ease.
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