From 1978 :-
Bangalore Water supply& Sewerage Board V. A. Rajappa (1978)- The Court said that an
industry is continuity, is an organized activity, is a purposeful pursuit – not any isolated
adventure, desultory excursion or casual, fleeting engagement motivelessly undertaken. Such
is the common feature of a trade, business, calling, manufacture – mechanical or handicraft-
based – service, employment, industrial occupation or avocation… The expression
‘undertaking’ cannot be torn off the words whose company it keeps. Decisive principles for
identifying ‘industry’ under the ID Act which were summarised as:
(a) Where (i) systematic activity, (ii) organised by co-operation between employer and
employees, (iii) for the production and/or distribution of goods and services calculated to
satisfy human wants and wishes prima facie, there is an ‘industry’ in that enterprise. (triple
test)
(b) Absence of profit motive or gainful objective is irrelevant, be the venture in the public,
joint, private or other sector.
(c) The true focus is functional and the decisive test is the nature of the activity with special
emphasis on the employer-employee relations.
(d) If the organisation is a trade or business, it does not cease to be one because of
philanthropy animating the undertaking.
(e) ‘Undertaking’ must suffer a contextual and associational shrinkage; so also, service,
calling and the like. Thus all organised activity possessing the triple elements, although not
trade or business, may still be ‘industry’ provided the nature of the activity, viz. the employer-
employee basis, bears resemblance to trade or business.
(f) However, where a complex of activities, some of which qualify for exemption, others not,
involves employees on the total undertaking, some of whom are not “workmen” as in Delhi
University or some departments are not productive of goods and services if isolated, even
then, the predominant nature of the services and the integrated nature of the departments as
explained in Corporation of Nagpur will be the true test. The whole undertaking will be
‘industry’ although those who are not ‘workmen’ may not benefit by the statute.
(g) Applying the aforesaid tests to the specific cases, activities such as (i) professions, (ii)
clubs, (iii) educational institutions, (iv)co-operatives, (v) research institutes, (vi) charitable
projects and(vii) other kindred adventures, if they fulfil the triple tests (supra),cannot be
exempted from the scope of section 2(j).
(h) A restricted category of professions, clubs, co-operatives and even gurukulas and
little research labs may qualify for exemption if in simple ventures, substantially, and
going by the dominant nature criterion, substantively, no employees are employed but
in minimal matters marginal employees are hired without destroying the non-employee
character of the unit.
(i) If, in a pious or altruistic mission many employ themselves, free or for small honoraria or
like return, mainly drawn by sharing in the purpose or cause, such as lawyers volunteering to
run a free legal services clinic or doctors serving in their spare hours in a free medical centre
or ashramites working at the bidding of the holiness, divinity or like central personality, and
the services are supplied free or at nominal cost and those who serve are not engaged for
remuneration or on the basis of master and servant relationship, then the institution is not an
industry even if stray servants, manual or technical, are hired. Such eleemosynary or like
undertakings alone are exempt—not other generosity, compassion, developmental passion or
project.
(j) Notwithstanding the previous clauses, sovereign functions, strictly understood (alone)
qualify for exemption, not the welfare activities or economic adventures undertaken by
government or statutory bodies.
(k) Even in departments discharging sovereign functions, if there are units which are
industries and they are substantially severable, then they can be considered to come within
section 2(j).
In view of the aforesaid tests laid down by it, the court had no hesitation in specifically
overruling Safdarjung, Solicitor’s, Gymkhana Club, Delhi University and other rulings
whose ratio ran counter to the principles laid down in this case.
As per Section 2(j) of Industrial Disputes Act,1947 “Industry” means any systematic
activity carried on by co-operation 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 on 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( 9 of 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 agricultural operation except where such agricultural operation
is carried on in an integrated manner with any other activity (being
any such activity as is referred to in the foregoing provisions of this
clause) and such other activity is the predominant one.
Explanation:- For the purposes of this sub-clause ,” agricultural operation” does not include any
activity carried on in a plantation as defined in clause (f) of section 2 of the Plantation Labour
Act,1951; or
2) hospitals or dispensaries; or
3) educational, scientific, research to 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 co-operative 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;
In All India Radio v. Santosh Kumar (1998), it was held that functions carried on by All
India Radio and Doordarshan cannot be said to be confined to sovereign functions as they
carry on commercial activities for profit by broadcasting or telecasting commercial
advertisements through their various stations and kendras by charging fee.
In Physical Research Laboratory v. K.G. Sharma (1997) in carrying on fundamental
research regarding the origin and evolution of the universe and atmosphere of earth which
was more in the nature of governmental or sovereign function. The court held that, although
PRL was carrying on the activity of research in a systematic manner with the help of its
employees, yet its object was not to render services to others, nor in fact it did so except in an
indirect manner. Holding that PRL was not an ‘industry.
Chief Conservator of Forests v. Jaganath Maruti Kondhare (1996) Forest Department is an
Industry.
Supreme Court in State of Gujarat v. Pratamsingh Narsingh Parmar (2001) took the view
that ordinarily departments of a government cannot be held to be an ‘industry’ and rather it is
a part of the sovereign function. Forest Department is not an Industry.
The Constitution Bench of five judges in State of U.P. v. Jai Bir Singh (2005) after
considering the rival contentions and closer examination of the decision in Bangalore Water
Supply, held that a reference to a larger bench for reconsideration of the decision was
required.
