Thirty-eight years later, Supreme Court still debating definition of “industry”

It was in the year 1978 that a 7-judge Bench of the Supreme Court pronounced upon the definition of ‘industry’ under Section 2(j) of the Industrial Disputes Act, 1947. By a majority of 5:2, the court held that the definition of industry is of wide amplitude. Or did they? Thirty-eight years after the judgment was delivered, the question remains unanswered..Last week a 7-judge Bench of the Supreme Court presided by Chief Justice TS Thakur reserved judgment on whether the definition of industry should be decided by a 9-judge Bench..Background.The issue at the heart of the matter, one that is also considered a clash of economic and social viewpoints, pertains to the scope of ‘industry’ under the ID Act and has seen conflicting judgments and interpretations..The seminal moment was the case of Bangalore Water Supply and Sewerage Board v. A Rajappa & Ors. In this case, employees of the Bangalore Water Supply and Sewerage Board were fined for misconduct. These employees started litigation under the ID Act claiming violation of principles of natural justice. The Board’s contention was that it was a statutory body, one that did not all under an “industry” in section 2(j) of the Industrial Disputes Act. Consequently the employees were not workmen and the Labour Court did not have jurisdiction to decide their claim..The case reached the Supreme Court which constituted a 7-judge Bench to finally settle the issue. The Bench composed of M Hameedullah Beg, YV Chandrachud, PN Bhagwati, VR Krishna Iyer, Jaswant Singh, VD Tulzapurkar and DA Desai..Since Chief Justice Beg was to retire on February 21, 1978 the Bench delivered the judgment on that very day, concluding that the appeal should be dismissed. The above conclusion was unanimous. Justice VR Krishna Iyer penned the judgment on behalf of himself, Bhagwati, and Desai JJ. in what is widely considered to be the majority opinion. Justice Beg delivered a separate judgment..Interestingly, three Judges, Chandrachud J. Jaswant Singh and Tulzapurkar JJ., did not deliver their separate opinions on the day the judgment was delivered. They only said that they would deliver their separate opinions later..The judgments.Justice Krishna Iyer in his majority judgment held that ‘industry’ as defined in Section 2(j) has a wide import. He however, also held that the meaning of the words in the section cannot be magnified to overreach itself..Excerpts from the judgment are given below:. ‘Industry’, as defined in Section 2(j) and explained in Banerji, (supra), has a wide import..(a) Where (i) systematic activity, (ii) organized by co-operation 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 material things or services geared to celestial bliss i.e. making, on a large scale or prasad or food), prima facie, there is an ‘industry’ in that enterprise..(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 employer-employee relations ….II. Although Section 2(j) uses words of the widest amplitude in its two limbs, their meaning cannot be magnified to over reach itself…… .(b)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..(c) 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)..Chief Justice Beg delivered a concurring but separate opinion. By his own admission, there was a certain degree of hurriedness in which he gave his opinion..“I have contended myself with a very brief and hurried outline of my line of thinking partly because I am in agreement with the conclusions of my learned brother Krishna Iyer and I also endorse his reasoning almost wholly, but even more because the opinion I have dictated just now must be given today if I have to deliver it at all. .From tomorrow I cease to have any authority as a Judge to deliver it. Therefore, I have really no time to discuss the large number of cases cited before us, including those an what are known as ‘‘sovereign’’ functions’. .From Paragraph 163 onwards, Beg J seems to have dissented from the opinion of his other three brethren with regard to excluding only certain State-run industries from the purview of the Act. According to him, that was a matter purely of legislation and not of interpretation..Following Beg J’s retirement, Chandrachud J. took over as the CJI and he delivered his separate opinion which was obviously neither seen by Beg CJ nor dealt with by the other three judges: Krishna Iyer, Bhagwati and Desai JJ..In his separate opinion, Chandrachud J. did not fully agree with the opinion of Krishna Iyer J. that the definition of ‘industry’ although of wide amplitude can be restricted to take out of its purview certain sovereign functions of the State limited to its ‘inalienable functions’ and other activities which are essentially for self and spiritual attainments..A separate opinion was delivered much later by Jaswant Singh J. for himself and Tulzapurkar J., after they had gone through the separate opinion given by Chandrachud CJI (as he then was)..The opinion of Jaswant Singh J. for himself and Tulzapurkar J. was the dissenting opinion. They held that they were not agreeable with categories 2 and 3 of the charities excluded by Krishna Iyer J..“We are inclined to think that the definition is limited to those activities systematically or habitually undertaken on commercial lines by private entrepreneurs with the cooperation of employees for the production or distribution of goods, or for the rendering of material services to the community at large or a part of such community. .It is needless to emphasise that in the case of liberal professions, the contribution of the usual type of employees employed by the professionals to the value of the end product (viz. advice and services rendered to the client) is so marginal that the end product cannot be regarded as the fruit of the cooperation between the professional’ and his employees.” .The confusion begins.The different judgments in Bangalore Water Supply case led to different interpretations by later benches. Noteworthy are two judgments – Chief Conservator of Forests [1996] 2 SCC 293 Pratamsingh Narsinh Parmar [2001] 9 SCC 713..On the question of whether ‘social forestry’ department of State, which is a welfare scheme undertaken for improvement of the environment, would be covered by the definition of ‘‘Industry’’ under S. 2(j) of the Industrial Disputes Act, 1947, the aforesaid Benches of the Supreme Court culled out differently the ratio of the decision in the Bangalore Water Supply case..This issue of conflict in the interpretation came to fore in the case of State of Uttar Pradesh v. Jai Bir Singh and connected matters heard along with it. A 3-judge Bench which noticed the conflict between the two aforesaid cases referred the matter to a Constitution bench..The 5-judge Constitution Bench.The case was heard by the Bench comprising Justices N Santosh Hegde, KG Balakrishnan, DM Dharmadhikari, Arun Kumar and BN Srikrishna..In its judgment delivered on May 5, 2005, the Bench had this to say about the lack of unanimity among the members of the 7-judge Bench in he in the Bangalore Water Supply case:.“….the decision of Bangalore Water is not a unanimous decision. Of the five Judges who constituted majority, three have given a common opinion but two others have given separate opinions projecting a view partly different from the views expressed in the opinion to see the opinions delivered by the other judges subsequent to his retirement. .Krishna Iyer J., and the two judges who spoke through him did not have the benefit of the dissenting opinion of the other two judges and the esparto, partly dissenting opinion of Chandrachud J. as those opinions were prepared and delivered subsequent to the delivery of the judgment in the Bangalore Water case.”.The Bench made its disagreement with, what is considered as the majority view in Bangalore Water supply, apparent..The judgment reads,.“With utmost respect, the statute under consideration cannot be looked at only as a worker-oriented statute. The main aim of the statute as is evident from its preamble and various provisions contained therein, is to regulate and harmonize relationships between employers and employees for maintaining industrial peace and social harmony. The definition clause read with other provisions of the Act under consideration deserves interpretation keeping in view interests of the employers, who has put his capital and expertise into the industry and the workers who by their labour equally contribute to the growth of the industry.”.The court also noted that an excessive emphasis on the rights of workers, and undue curtailment of the rights of the employers have given rise to large number of industrial and labour claims resulting in awards granting huge amounts of back wages for past years..“Industrial awards granting heavy packages of back wages, sometimes result in taking away the very substratum of the industry. Such burdensome awards in many cases compel the employer having moderate assets to close down industrial causing harm to interests of not only the employer and the workers but also the general public who is the ultimate beneficiary of material goods and services from the industry.”.It made it clear that over expansive interpretation of the definition of ‘industry’ might be a deterrent to private enterprise in India where public employment opportunities are scarce..“Exploitation of workers and the employers has to be equally checked. Law and particularly industrial law needs to be so interpreted as to ensure that neither the employers nor the employees are in a position to dominate the other. Both should be able to cooperate for their mutual benefit in the growth of industry and thereby serve public good.”.The Bench, therefore, proceeded to refer the case to a larger Bench..“….we find there are compelling reasons more than on before us for making a reference on the interpretation of definition of ‘industry’ in section 2(j) of the Act, to a larger Bench and for reconsideration by it, if necessary, the decision rendered in the case of Bangalore Water Supply and Sewerage Board. The larger Bench will have to necessarily go into all legal questions in all dimensions and depth.”.The 7-judge Bench.The immediate question before the 7-judge Bench was whether the case should be referred to a 9-judge bench or not..Senior Advocate Sunil Gupta, appearing for the petitioner State submitted that the matter should be referred to a larger Bench considering that there was no consensus among the judges in Bangalore Water Supply. Further, the fact that there was no discussion among the judges and some judges did not see the judgments written by other judges were also cited by him..He buttressed this argument by alluding to the recent decision of the court in the NEET matter wherein one of the reasons given by the court while recalling its own judgment was that there was no discussion among the judges while giving the judgment..Senior Advocates Indira Jaising, CU Singh and Colin Gonsalves argued against the reference..Legislation the solution?.What is noteworthy is that after the Bangalore Water Supply judgment, the Legislature had intervened and amended Section 2(j)..However, the amendment has not been brought into force even after 34 years thus making the outcome of the case all the more relevant..Looking at the law through the prism of other allied subjects does make the subject a whole lot more interesting, and this particular case is one classic example..Krishna Iyer J. who was known for his communist leanings gave it the employee friendly interpretation. Likewise, did the personal viewpoints of dissenting judges and subsequently the 5-judge Constitution Bench also impact the judgments written by them?.When Marx, laissez faire and industrial revolution creep into judgments (refer page 12 of the 5-judge Bench judgment), it is clear that there is no effort to hide the obvious.