CHANAKYA NATIONAL LAW

UNIVERSITY

PROJECT WORK ON:Whether Government Department is an

Industry?

SUBMITTED TO: Dr.S.C.Roy

(Faculty of Labour Law)

SUBMITTED BYKRISHNA CHAITANYA

ROLL NO. 935
4th SEMESTER

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ACKNOWLEDGEMENT
Writing a project is one of the most significant academic challenges I have ever faced.
Though this project has been presented by me but there are many people who remained in
veil, who gave their support and helped me to complete this project.
First of all I am very grateful to my subject teacher Dr. S.C. Roy, without the kind
support of whom and help; the completion of the project was a Herculean task for me.
He gave his valuable time from his busy schedule to help me to complete this project
and suggested me from where and how to collect data.
I am very thankful to the librarian who provided me several books on the topic which
proved beneficial in completing this project.
I acknowledge my friends who gave their valuable and meticulous advice which proved
to be very useful and could not be ignored in writing this project. I want to convey a most
sincere thanks to my seniors for helping throughout the project.

OBJECT OF THE STUDY :

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The objects of the study are the following:1. To understand the definition of industry and critically analyse it.
2. To know whether government department is an industry through decided case laws.

HYPOTHESIS:
The hypothesis of the researcher is that despite having the working principle, there is still
a problem in deciding whether different government departments come under the
definition of industry.

METHODOLOGY:
In this project doctrinal method of research will be used. Doctrinal method refers to
library research, research done upon some texts, writings and documents. It also includes
the research done upon the internet.

Table of Contents
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1. Introduction-----------------------------------------------------------05
2. Definition of the term Industry----------------------------------08
3. Whether government department is an industry?----------------10
4. Case law and its Analysis--------------------------------------------19
5. Conclusion and Suggestions----------------------------------------Bibliography---------------------------------------------------------------20

1. INTRODUCTION
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Change is a phenomenon that twists the very fabric of the society. When the world
entered 19th century, the discovery era had just passed by and the era of invention had
begun, and it was out of these inventions that companies were born. Out of a filament
bulb Thomas Elva Edison set up the General Electric Company and from a car Henry
Ford went on to set up The Ford Motor Company. Eventually Industries became a crucial
part of our society; the rapidness took place after the kick start of the Industrial
Revolution in England.
Applying law to the concept of Industry, when a dispute arises in the industry there is law
which is compiled with the rules and regulations to resolve the Issues. Coming to the
Indian scenario there is Industrial Disputes Act, 1947, which controls the disputes arising
in the Industries. The question raised was what comes under the definition of Industry.
The literal meaning of the Industry is economic activity concerned with the processing
of raw materials and manufacture of goods in factories. As per Section 2(j) of the
industrial disputes Act defines Industry means any business, trade, undertaking, or
calling of employers and includes any calling, service, employment, handicraft, or
industrial occupation or avocation of workmen. The definition of industry is adapted from
the Australian legislation, The Conciliation and Arbitration Act 1904 inscribed in section
4 which is interpretation section defines industry as Industry means business, trade,
manufacture, undertaking, calling, service, or employment, on land or water, in which
persons are employed for pay, hire, advantage, or reward, excepting only persons
engaged in domestic service, and persons engaged in agricultural, viticulture,
horticultural, or dairying pursuits.1
Until specific legislative mandates emerge from Parliament the court may mould the old,
but not make the new law. Interstitially, from the molar to the molecular is the limited
legislative role of the Court, as Justice Holmes said. This was observed by
Justice Krishna Iyer in Gujarat Steel Tubes Ltd. 2 V. Mazdoor Sabha , but, only if he could
have kept his words in words in Bangalore Water Supply and Sewerage Board v. A.
Rajappa, where he actually drafted a new definition of the term industry assuming the
role of a crusader-legislator. The broad sweep of the judgment brought within the
Industrial Dispute Act several institutions like educational institutions, solicitors offices,
State departments and even charitable institutions.
1 http://foundingdocs.gov.au/resources/transcripts/cth6_doc_1904.pdf, Section 4 of the
Commonwealth Conciliation and Arbitration Act, 1904
2 http://lex-warrier.in/2014/06/come-definition-industry/#identifier_0_5130
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The attention of the Supreme Court has recently been drawn to the definition of the term
industry as stated in the Industrial Disputes Act, 1947. The uncertainty with regard to
the definition assumes great importance as the machinery for the settlement of industrial
disputes can only be set in motion when there exists a dispute relating to industry.
However, it is next to impossible to classify a dispute as industrial or non-industrial
without being certain of what exactly the term industry encompasses within its scope.
One of the most momentous decisions in this regard was Bangalore Water Supply and
Sewerage Board v. A. Rajappa which overruled numerous other decisions of the Supreme
Court but simplified the task for the legislature by placing major issues in the right
perspective, major policy issues being best decided by the legislature and not by the
judicial process. It is the analysis of this very judgement which is the subject of this
paper.
The world is whirling forward holding the standard of advancement as
industrialization. Industry involves an employer and employee, and progress postulates
harmony and justice in industrial relations. Whether the system is capitalist or socialist, if
friction and break-down afflict the smooth working of an industry, flames of strike and
lock-out will spoil or stall production and victimize the society which is the ultimate
beneficiary of the industrial discipline and the consequent flow of goods and services. 3
The Industrial Disputes Act was enacted with the purpose of providing machinery for the
settlement of industrial disputes which had become a common feature due to industrial
unrest in the post-war time where problems arose out of constant strife between the
employers and employees. The consequence was a fall in production.
The object of labour legislations is to ensure fair wages and to prevent disputes so that
production may not be adversely affected.4 The objects of the said Act are laid down as:5
(i) Promotion of measures for security, amity and good relations between the employer
and the employee.
(ii) Investigation into and settlement of industrial disputes between the employers and
the employees, employers and employers, and employees and employees.
(iii) Prevention of illegal strikes and lock-outs.
3 V. Krishna Iyer, Industrial Jurisprudence, The Hindu, July 10, 2001.
4 Banaras Ice Factory Ltd. v. Its Workmen, AIR 1957 SC 168.
5 Workmen of Dimakuchi Tea Estate v. Management of Dimakuchi Tea Estate, AIR 1958.
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(iv) Relief to workers in the matters of lay-off and retrenchment.

The function of law is to intervene and, by a just process, resolve the dispute.
The term industry is defined in Section 2 (j) of the Industrial Dispute Act in these words,
industry means any business, trade, undertaking, manufacture or calling of employees
and includes any calling, service, employment, handicraft or industrial occupation or
avocation of workman. The definition has undergone variegated judicial interpretations.
A definition is ordinarily the crystallization of legal concepts promoting precision and
rounding off blurred edges but the definition in Section 2 (j) viewed in retrospect has
achieved the opposite.
Starting form D.N. Banerjee v. P.R. Mukherjee and passing through various cases
Supreme Court has given conflicting decision regarding definition of the term industry. In
some cases Supreme Court has, having liberal attitude, given a very wide interpretation
and in some cases a narrow interpretation has been given. A bench of seven Judges in
Bangalore Water Supply and Sewerage Board v. A. Rajappa , wherein the question was
whether the activity of the Board fell within the ambit of industry, it went haywire and
far beyond the confines of the case in the name of judicial activism to bring every
conceivable activity in the sweep of the industry. The meaning which was given to the
term industry is so wide and wild that it covers perhaps any systematic activity under
the sun leading to obscurity.
Bangalore Water Supply and Sewerage Board v. A. Rajappa, still holds the field as it was
the largest Judge Bench decision on the issue but there are cases which have, though not
permissible under the doctrine of precedent, decided in contrary to the decision of the
Bangalore Water Supply case. A five judge Bench of the Supreme Court has decided to
refer the matter of reviewing the Bangalore Water Supply case to a larger Bench.

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2. DEFINITION OF THE TERM INDUSTRY

According to section 2(j) of the Act: Industry means any business, trade, undertaking,
manufacture or calling of employees and includes any calling, service, employment,
handicraft or industrial occupation or avocation of a workman. This definition has its
roots embedded in Section 4 of the Commonwealth Conciliation and Arbitration Act,
1904 of Australia6, which states the definition of industry as: (i) Any business, trade,
manufacture, undertaking or calling of employers on land or water; (ii) Any calling,
service, employment, handicraft or industrial occupation or avocation of employers on
land or water; and (iii) Any branch of an industry or a group of industries.
In the Bangalore Water Supply case, a seven-judge bench was constituted especially to
examine the definition of industry and lay down the law on the subject. The Bench was
presided over by Justice V. R. Krishna Iyer who assumed the role of a crusader-legislator
and drafted a new definition of the term industry. Their ruling was a result of the
various disputes arising in establishments that are not manufacturing industries but
belong to categories of hospitals, educational and research institutions, Governmental
departments, public utility services, professionals and clubs. The definition was
accordingly expanded to cover those establishments which involved an employeremployee relationship, irrespective of the objectives of the organization in question.
The development of the definition of industry has developed in many stages, the
definition of industry has been interpreted many times, there was no fixed definition of
industry and its scope has also not ascertained. First stage is 1953 to 1962 in this era the
definition of industry has gone wide in nature. Cases which were decided in this time
frame are as follows:
In Corporation of the city of Nagpur vs. Its employees 7, The question raised in this case
was whether the court had to consider the corporation would be an industry within the
meaning of section 2(j) of industrial dispute act, 1947. Therefore the court could not press
the expression undertaking into service. But the municipal activity was brought within
the ambit of words business or trade and distinction was drawn between the legal and
6 http://www.legalservicesindia.com/article/article/bangalore-water-supply-case-533-1.html
7 AIR 1960 SC 675
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municipal functions of the municipal bodies. The Supreme Court in this case made very
significant observations while holding that court in this case made very significant
observations while holding that corporation is an industry while engaged in the non-regal
functions but while discharging regal functions of sovereign nature the position is totally
different. The regal functions described as primary and inalienable functions of the
state, though delegated to the corporation, are necessarily excluded from the purview of
the definition of industry.
In D.N.Banerji v P.R. Mukherjee8 the question that was raised was whether Municipality
is an industry. The Supreme Court held though municipal activity could not be regarded
as business or trade it would fall within the scope of the expression undertaking and
it is an industry. Neither investment of capital nor profit making motive is essential to
constitute an industry as they are generally necessary in a business. Hence, the nonprofit
undertakings of the municipality were included in the concept of an industry, even if there
is no private enterprise. A Public Sector such as railways, telephones, and the supply of
power, light or water to the public may be carried on by private companies or
business corporations and if this PSU (Public Sector Undertaking) is carried on by local
bodies like a Municipality they do not cease to be an industry. The municipal undertaking
engaged in public utility services without profit motive falls within the definition of
industry. In the 2nd Stage 1963 to 1978, the definition has undergone narrow
interpretation in this era all the cases were held not to be industry.
In Madras Gymkhana club Employees Union vs. Gymkhana club 9, the supreme court
attempted to keep the two notions concerning the employees and the employees apart and
expressed the opinion that the denotation of the term Industry is to be found in the first
part, relating to the employers and the connotation of the term is intended to include the
second part relating to the workman and concluded that nonprofit making members
club are not employed in trade or industry. In this case the court held that the club is not
an industry.
In this 1962 NNUC Employees V. IT 10 case the question was whether a solicitors firm is
an industry or not. It was held that a solicitors firm carrying on the work of an attorney is
not an industry, although specifically considered it is as an industrial concern. There are
8 AIR 1953 SC 582
9 [1967] 2 LLJ 720, 729(SC), Per Hidayatulah J.
10 AIR 1962 SC 1080
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different categories of servants employed by a solicitor. There is no interdependent or

essential cooperation between the firm and its employees and the work done by the typist,
or stenographer or by menial staff is not directly concerned with the services rendered by
the solicitor to their client. Therefore solicitor firm was held not to be an industry6.
In Osmania University vs. Industrial Tribunal Hyderabad 11, a dispute having arisen
between the Osmania University and its employees, the high court of Andhra Pradesh
after closely examining the Constitution of the University, held the dispute not to be in
connection with an industry. The correct test, for ascertaining whether the particular
dispute is between the capital and labour, is whether they are engaged in cooperation or
whether dispute has arisen in activities connected directly with, or attendant upon, the
production or distribution of wealth12.
Case Analysis of Bangalore WaterSupply and Sewerage Board V. R. Rajappa13.
After the BWSSW case everything under the sun is considered as industry the working
principle came into prominence which is regarded as crucial test which determines the
organisation whether it is an industry or not. In the second stage of all the cases which
delivered that all organizations are not industries overruled after the Bangalore water
supply case.
Facts of the case :
The appellant Board raised a preliminary objection before the Labour Court that the
Board, a statutory body performing what is in essence a regal function by providing the
basic amenities to the citizens, is not an industry within the meaning of the expression
under section 2(j) of the Industrial Disputes Act, and consequently the employees were
not workmen and the Labour Court had no jurisdiction to decide the claim of the
workmen. This objection being overruled, the appellant Board filed two Writ Petitions
before the Karnataka High Court at Bangalore. The Division Bench of that High Court
dismissed the petitions and held that the appellant Board is industry within the meaning
of the expression under section 2(i) of the Industrial, Disputes Act, 1947. The appeals by
Special Leave, considering the chances of confusion from the crop of cases in an area
11 [1960] I LLJ 593 [AP]
12 S.N. Mishra, Labour and Industrial Laws, Ed., 25th, 2009, New Delhi, Central Law
Publications, P.30
13 AIR (1978) S.C. 610
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where the common man has to understand and apply the law and the desirability that
there should be, comprehensive, clear and conclusive declaration as to what is an industry
under the Industrial Disputes Act as it stands were placed for consideration by a larger
Bench
Issue :
Whether Bangalore Water Supply and Sewerage Board will fall under the definition of
Industry and what is an Industry under Section 2(j) of the Industrial Dispute Act?
Judgment : It held that the Bangalore Water Supply and Sewerage Board will fall under
the definition of the industry and by justifying this it gave an elaborating definition of
industry. Industry, as defined in Section 2(j) and explained in Banerjee, has a wide
import.
(a) Where (i) systematic activity, (ii) organized by cooperation 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
e.g. making, on a large scale, 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 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.
Although Section 2(j) uses words of the widest amplitude in its two limbs their meaning
cannot be magnified to overreach itself.
Undertaking must suffer a contextual and associational shrinkage as explained in
Banerjee case and in this judgment, so also, service, calling and the like. This yields the
inference that all organized 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 what we find in trade or business. This takes into
the fold of industry undertakings, callings and services adventure analogous to the
carrying on of trade or business. All features, other than the methodology of carrying on
the activity viz. in organizing the cooperation between employer and employee may be
dissimilar. It does not matter, if on the employment terms there is analogy.
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Application of these guidelines should not stop short of their logical reach by invocation
of creeds, cults or inner sense of incongruity or other sense of motivation for or resultant
of the economic operations. The ideology of the Act being industrial peace, regulation
and resolution of industrial disputes between employer and workmen, the range of this
statutory ideology must inform the reach of the statutory definition.
Analysis : In the present case the court by applying liberal interpretation gave a wider
meaning to the definition of industry so as to include all kinds of activities wherein there
is an employer and employee relationship.
Triple Test : After the Bangalore Water supply case the Supreme Court came up with a
working principle called as triple test.
* There should be systematic Activity.
* Organised by Cooperation between employer and employee.
* For the production and/or distribution of goods and services calculated to satisfy
human wants and wishes14.
The following points were also emphasised in this case15:
1. Industry does not include spiritual or religious services or services geared to celestial
bliss.
2. Absence of profit motive or gainful objective is irrelevant, be the venture in the public,
joint, private or other sector.
3. The true focus is functional and the decisive test is the nature of the activity with
special emphasis on the employer employee relationship.
4. If the organization is a trade or business it does not cease to be one because of
philanthropy animating the undertaking .
Therefore the consequences of the decision in this case are that professions, clubs,
educational institutions cooperatives, research institutes, charitable projects and other
kindred adventures, if they fulfil the triple test stated above cannot be exempted from the
scope of section 2(j) of the Act

14 Bangalore WaterSupply and Sewerage Board V. R. Rajappa, AIR (1978) S.C. 610
15 S.N. Mishra, Labour and Industrial Laws, Ed., 25th, 2009, New Delhi, Central Law
Publications, P.25
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3. WHETHER GOVERNMENT DEPARTMENT IS AN INDUSTRY?

According to Bangalore Water Supply and Sewerage Board v. A. Rajappa 16 sovereign
functions of the State cannot be included in industry. They can aptly be termed as the
primary and inalienable functions of a constitutional government. Services governed by
Articles 309 to 311 of the Constitution of India, by the enactments dealing with the
Defense Forces and other legislation dealing with employment under statutory bodies
may, expressly or by necessary implication, exclude the operation of the Industrial
Disputes Act, 1947.17 The functions which are strictly performed by State are inalienable
functions of Government such as maintaining law and order, making laws, defense, and
justice dispensation. It is only these functions where the State enterprise can escape from
the coil of industrial law.
But present stage is a stage of welfare State where State has to perform so many functions
for the welfare of citizens. At the stage of laissez faire, maintenance of law and order and
defense were the only functions to be performed by States and the traditional concept of
sovereign functions was including only maintenance of law and order and defense of
State. But in a welfare State government has to perform so many functions, apart from
maintenance of law and order and defense of State, as enshrined under the Directive
Principles of State Policy in part IV of the Constitution of India. Every democratic state
in the welfare society has to achieve a goal of wellbeing of its citizens and part IV
requires State to achieve the goal. It imposes a duty on the State to undertake many
activities and therefore the extent of sovereign functions may not be confined to the three
wings but there may be other functions which are inalienable. In view of the
constitutional duty imposed on State to undertake many activities as provided by Part IV
16AIR (1978) S.C. 610
17 http://www.legalservicesindia.com/article/article/bangalore-water-supply-case-533-1.html
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of the Constitution of India, the extent of sovereign functions may not be confined to
aforesaid functions in as much as other functions may also be inalienable and they would
not be, undertaken by any private agency in a meaningful way.
In Shrimali v. District Development Office18, wherein there was an undertaking of famine
and draught relief works by State government by introducing certain schemes to provide
relief and some works were also provided to the affected people, instead of distributing
doles. The question arose that whether such functions be sovereign functions. It was held
that it would be difficult to hold the undertaking to be an industry. What really follows
from this judgment is that apart from the aforesaid three functions, there may be some
other functions also regarding which a view could be taken that the same too is a
sovereign function.
As to which function could be, and should be, taken as regal or sovereign function was
again examined in N. Nagendra Rao v. State of AP 19 , in which case Sahai J. speaking for
the Bench examined this question in detail and observed that it would all depend on the
nature of the power and manner of its exercise. As per the decision in this case, one of the
tests to determine whether the executive function is sovereign in nature is to find out
whether the State is answerable for such action in Courts of Law. It was stated by Sahai J.
that acts like defense of the country, raising armed forces and maintaining it, making
peace or war, foreign affairs, power to acquire and retain territory, are functions which are
indicative of external sovereignty and are political in nature. They are, therefore, not
amenable to the jurisdiction of ordinary a civil court in as much as the State is immune
from being sued in such matters. But, then according to this decision the immunity ends
there. It was then observed that in a welfare State, functions of the State are not only the
defense of the country or administration of justice or maintaining law and order but
extends to regulating and controlling the activities of people in almost every sphere,
educational, commercial, social, economic, political and even marital. Because of this the
demarcating line between sovereign and non-sovereign powers has largely disappeared.
The aforesaid shows that if we were to extend the concept of sovereign functions to
include all welfare activities, the ratio in Bangalore Water Supply case would get eroded
and substantially.

18 (1989) 1 GLR 396

19 1994 AIR 2663, 1994 SCC (6) 205
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And in fact there are sets of cases who have actually dissented from Bangalore Water
Supply v. A. Rajappa on the concept of sovereign functions or regal functions, though
they have not challenged it. Because of the sets of dissenting cases the confusion that, are
governmental functions, stricto sensu, industrial and if not, what is the extent of the
immunity of instrumentalities of government, still persists. In Des Raj v. State 20 of
Punjab21 it was held that having regard to the activities of irrigation department of State
of Punjab and applying the tests laid down in various decisions of Supreme Court and
particularly applying the dominant nature test enunciated in Bangalore Water Supply case
it must be held that the irrigation department of State of Punjab is an industry.
Now it was the turn of telecommunication and postal department to be scrutinized.
Regarding telecommunication and postal department also there were conflicting
decisions wherein in some cases the department was held to be an industry and is some
cases the conclusion was opposite. In Sub Divisional Inspector of Post v. Theyyam
Joseph22 , wherein respondent was appointed as a substitute to the regularly appointed ED
Packer, who had not joined duty after training. The appointment so made dehors the rule.
About two years later his services were terminated. It was held that India as a sovereign,
socialist, secular, democratic, republic has to establish an egalitarian social order under
the rule of law. The welfare measures partake the character of sovereign function and the
traditional duty to maintain law and order is no longer the concept of the sovereign
function. The Directive Principle of State Policy under Part IV of the Constitution of
India and the performance of duties, provided therein, are constitutional functions. One of
the functions of the State is to provide telecommunication facilities to general public and
an amenity, and so is an essential part of the sovereign functions of the State as a welfare
state. It is, therefore, not an industry.
Incidentally this decision was rendered without any reference to the seven-judge Bench
decision in Bangalore Water Supply case. In a latter two judge Bench decision in Bombay
Telephone Canteen Employees Association case this decision was followed for taking
the view that the Telephone Nigam is not an industry. Then came General Manager,
Telecom. V. A. Sriniwas Rao23 , which overruled the Theyyam Joseph case and it was
held that Theyyam Joseph is in direct conflict with the seven-Judge Bench decision in
20 1988 AIR 1182
21

22 1996 AIR 1271, JT 1996 (2) 457

23 SC 1997 11 (131)
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Bangalore Water Supply case and it is not permissible to take a contrary view or to
bypass that decision so long as it holds the field.
Such conflict again arose in Chief Conservator of Forest v. Jagannath Maruti Kondare 24
and State of Gujarat v. Pratamsingh Narsinh Parmar 25, where in the former case forest
department of State of Maharashtra was held to be an industry and in the later case it was
held that forest department of State of Gujarat is not an industry. In the case of Chief
Conservator of Forest v. Jagannath Maruti Kondare , scheme named Panchgaon Parwati
Sheme was framed as per the government resolution based on the policy decision taken in
April 1976. The scheme was to be initially for a period of five years and an area of about
245 hectares situated in a hill platue on the southern outskirts and within easy access of
Pune city was selected for creation of a park under bioaesthetic development for the
benefit of the urban population. The appellant conservator of forests contended that the
scheme as well as the social forestry work undertaken had to be regarded as part of
inalienable or sovereign functions of the State and therefore not an industry within the
meaning of the Industrial Dispute Act, 1947.
Rejecting the contention the Supreme Court held that the dichotomy of sovereign and
non-sovereign functions of the State does not really exist. Whether a particular function
of the State is or is not a sovereign function, depends on the nature of the power and
manner of its exercise. The Scheme in question cannot be regarded as a part of
inalienable or inescapable function of State for the reason that the scheme was intended
even to fulfill the recreational and educational aspiration of the people. There can be no
doubt that such a work could well be undertaken by an agency which is not required to be
even an instrumentality of the State. Therefore the forest department of the State is an
industry.
But then in State of Gujarat v. Pratamsingh Narsinh Parmar 26, wherein the question for
consideration was whether the forest department in the State of Gujarat where the
respondent was appointed as a clerk can be held to be an industry within the meaning of
the said expression under the Industrial Dispute Act, so that an order of termination,
24 AIR (1996) SC 2898
25 2001 (89) FLR 323, JT 2001 (3) SC 326, (2001) ILLJ 1118 SC, (2001) 9 SCC 713, (2001) 2
UPLBEC 956
26 2001 (89) FLR 323, JT 2001 (3) SC 326, (2001) ILLJ 1118 SC, (2001) 9 SCC 713, (2001) 2
UPLBEC 956
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without complying with the provisions of Section 25-F of the Act would get vitiated. It
was held that if a dispute arises as to whether a particular establishment or part of it
where an appointment has been made is an industry or not, it would be for the person
concerned who claims the same to be an industry, to give positive facts for coming to the
conclusion that it constitute an industry. Ordinarily a department of government cannot be
held to be an industry and rather it is a part of the sovereign functions. The respondent in
the writ petition had made no assertion with regard to the duty which e was discharging
and with regard to the activity of the organization where he had been recruited, though no
doubt he had been contended that the order of dismissal was vitiated for non compliance
of Section 25-F. In the absence of assertion by the petitioner as well as the job of the
establishment where he had been recruited, the High Court wholly erred in law in
applying the principles enunciated in Jagannath Maruti Kondhare to hold that the forest
department could be held to be an industry.

Due to the apparent conflict between these two cases, again a matter was referred to the
constitutional Bench of five judges in State of UP v. Jai Bir Singh 27 . In this case it was
held that a caveat has to be entered on confining sovereign functions to the traditional so
described as inalienable functions comparable to those performed by a monarch, a ruler
or a non-democratic government. The learned judges in the Bangalore Water Supply a
Sewerage Board case seem to have confined only such sovereign functions outside the
purview of industry which can be termed strictly as constitutional functions of the three
wings of the State i.e. executive, legislature and judiciary. The concept of sovereignty in a
constitutional democracy is different from the traditional concept of sovereignty which is
confined to law and order, defense, law making and justice dispensation. In a
democracy governed by the Constitution the sovereignty vests in the people and the State
is obliged to discharge its constitutional obligations contained in the Directive Principles
of the State Policy in Part - IV of the Constitution of India. From that point of view,
wherever the government undertakes public welfare activities in discharge of its
constitutional obligations, as provided in part-IV of the Constitution, such activities
should be treated as activities in discharge of sovereign functions falling outside the
purview of industry. Whether employees employed in such welfare activities of the
government require protection, apart from the constitutional rights conferred on them,
may be a subject of separate legislation but for that reason, such governmental activities
cannot be brought within the fold of industrial law by giving an undue expansive and
wide meaning to the words used in the definition of industry.
27 (2005) 5 SCC 169
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Hence the question whether a department of government is an industry or not within the
meaning of Section 2(j) of the Act is a mixed question of law and fact and therefore, it
cannot be allowed to be raised for the first time before the High Court if it has not been
raised before the industrial forum from which the proceedings before the High Court
have arisen.28

4. CASE LAW AND ITS ANALYSIS

In Bangalore Water Supply case the term industry was given a very wide expansion and
it included educational institution, charitable institutions and liberal profession into its
wide sweep. The reasoning given as regards the educational institutions was that they
satisfy the triple test and based on its predominant nature it is an industry though teachers
are not workmen. As regards charitable institutions the first two categories- (i) where the
enterprise like any other, yields profits, but they are siphoned off for altruistic objects; (ii)
where the enterprise makes no profit, but hires the services of employees for producing
goods and services- will be industry and the reasoning given was there is employeremployee relation. In relation to liberal and learned professions, the majority opinion in
Rajappas case was that they will constitute industry and the reasoning given was that the
contribution to the good will and reputation of an organization comes not only from the
professionals but from all others employed under him as well.
The elimination of profit motive or a desire to generate income as the purpose of
industrial activity has led to a large number of philanthropic and charitable activities
being affected by the Industrial Disputes Act. In a number of cases where the organisation
is run by voluntary social workers, they are unable to cope with the requirements of
Industrial Disputes Act. This has led to a cessation of many welfare activities previously
undertaken by such organisations which has deprived the general community of
28 Gujarat Forest Producers, ... vs State Of Gujarat (2004) 1 GLR 752
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considerable benefit and the employees of their livelihood. There are many activities
which are undertaken not with a view to secure any monetary return-whether one labels it
as livelihood, income or profit, but for other more generous or different motives. Such
activities would not normally be labeled as industrial activities, but for the wide
interpretation given judicially to the term industry in the Industrial Disputes Act. For
example, a number of voluntary organizations used to run workshops in order that the
poor and more particularly poor or destitute woman may earn some income. Voluntary
welfare organizations organized activities like preparation of spices, pickles or they
would secure small orders from industries for poor woman. A small number of persons
were employed to assist in the activities. The income earned by these activities was
distributed to the women who were given such work. Other voluntary organizations
organized tailoring or embroidery classes or similar activities for poor woman and
provided an outlet for the sale of the work produced by them. These persons would
otherwise have found it impossible to secure a market for their products. Such
organizations are not organized like industries and they do not have the means or
manpower to run them as industries. A large number of such voluntary welfare schemes
have had to be abandoned because of the wide interpretation given to the term industry.
Apart from such activities, there may be other activities also which are undertaken in the
spirit of community service, such as charitable hospitals where free medical services and
free medicines may be provided. Such activities may be sustained by free services, given
by professional men and women and by donations. Sometimes such activities may be
sustained by using the profits in the paid section of that activity for providing free
services in the free section. Doctors who work in these hospitals may work for no returns
or sometimes for very nominal fees. Fortunately, philanthropic instinct is far from extinct.
Can such philanthropic organisations be called industries? The definition needs reexamination so that, while the workers in an industry have the benefit of industrial
legislation, the community as such is not deprived of philanthropic and other vital
services which contribute so much to its well-being. Educational services and the work
done by teachers in educational institutions, research organisations, professional
activities, or recreational activities amateur sports, promotion of arts--fine arts and
performing arts, promoting crafts and special skills, all these and many other similar
activities also require to be considered in this context.
In Bangalore Water Supply and Sewerage Board v. A. Rajappa , Krishna Iyer, J., speaking
for himself and on behalf of the other two Honble Judges agreeing with him, proceeded
to deal with the interpretation of the definition of industry on a legal premise that the
Industrial Dispute Act is a worker oriented Statute and so must be construed accordingly.
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There are sets of cases, though they do challenge the decision in Bangalore Water Supply
case, but actually dissented from it. But for the first time, in year 1998, a two Judge
Bench decision, in Coir Board v. Indira Devi P.S. called for a reconsideration of the law
as laid down by Bangalore Water Supply and Sewerage Board . In this case there was a
coir board situated in Ernakulam performed the following functions:- (i) promotion of
coir industry; (ii) opening of markets for achieving the object in (i); and (iii) providing
facilities to make coir industrys products more marketable. The court came to a prima
facie conclusion that the coir board is not set up to run any industry. Further it was held
that looking to the uncertainty prevailing in this area and in the light of the experience of
the last two decades in applying the test laid down in the case of Bangalore Water Supply
and Sewerage Board , it is necessary that the decision in Bangalore Water Supply and
Sewerage Boards case is re-examined. The experience of the last two decades does not
appear to be entirely happy. Instead of leading to industrial peace and welfare of the
community (which was the avowed purpose of artificially extending the definition of
industry), the application of the Industrial Disputes Act to organizations which were,
quite possibly not intended to be so covered by the machinery set up under the Industrial
Disputes Act, might have done more damage than good, not merely to the organisations
but also to employees by the curtailment of employment opportunities.
Hence an order of reference to Chief Justice for constituting a larger Bench of more than
seven Judges, if necessary was passed. However when the matter was listed before a
three-Judge Bench, the request for constituting a larger Bench was refused both on the
ground that the Industrial Dispute Act had undergone an amendment and that the matter
did not deserve to be referred to a larger Bench as the decision of seven Judges in
Bangalore Water Supply case was binding on the Benches of lesser strength. But such
inhibitions did not limit the power of a five Judge Bench which was constituted on a
reference made due to apparent conflict between the judgment of two different Benchs of
the Supreme Court. The experience of judges in Coir Board case was not derived from
the case in which the observations were made. The experience was from the cases
regularly coming to this Court through the labour courts. It is experienced by all dealing
in industrial law that over-emphasis on the rights of the workers and undue curtailment of
the rights of the employers to organize their business, through employment and nonemployment, have given rise to large number of industrial and labour claims resulting in
awards granting huge amounts of back wages for past years, allegedly as legitimate dues
of the workers, who are found to have been illegally terminated or retrenched. 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
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having moderate assets to close down industries 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. The awards of reinstatement and arrears of
wages for past years by labour courts by treating even small undertakings of employers
and entrepreneurs as industries is experienced as a serious industrial hazard particularly
by those engaged in private enterprises. The experience is that many times idle wages are
required to be paid to the worker because the employer has no means to find out whether
and where the workman was gainfully employed pending adjudication of industrial
dispute raised by him.

In State of UP v. Jai Bir Singh , it was held that 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 form its preamble and various provisions contained therein, is to
regulate and harmonise 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
employer, 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. It is a peace of social
legislation. In interpreting, therefore, the industrial law, which aims at the promotion\of
social justice, interests both of employers, employees and in a democratic society, people,
who are the ultimate beneficiaries of the industrial activities, have to be kept in view. A
worker oriented approach in construing the definition of industry, unmindful of interest of
the employer or the owner of the industry and the public, would be a one sided approach
and not in accordance with the provisions of the Act.

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5. CONCLUSION
After the Bangalore Water supply case, there is still chaotic situation related to the
sovereign functions, as per the previous decisions it is clearly mentioned that sovereign
activities are excluded from the definition. Despite having the working principle there is
still problem in deciding the problem. Such conflict arose in Chief Conservator of Forest
v. Jagannath Maruti Kondare and State of Gujarat v. Pratamsingh Narsingh Parmar,
where in the former case forest department of State of Maharashtra was held to be an
industry and in the later case it was held that forest department of State of Gujarat is not
an industry. Constitutional Bench of five judges in State of UP v. Jai Bir Singh 29, In this
case it was held that a caveat has to be entered on confining sovereign functions to the
traditional so described as inalienable functions comparable to those performed by a
monarch, a ruler or a nondemocratic government. The learned judges in the Bangalore
Water Supply a Sewerage Board case seem to have confined only such sovereign
functions outside the purview of industry which can be termed strictly as constitutional
functions of the three wings of the State i.e. executive, legislature and judiciary. The
concept of sovereignty in a constitutional democracy is different from the traditional
concept of sovereignty which is confined to law and order, defence, law making and
justice dispensation. In a democracy governed by the Constitution the sovereignty vests
in the people and the State is obliged to discharge its constitutional obligations contained

29 (2005)5 SCC 1
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in the Directive Principles of the State Policy in Part IV of the Constitution of India.
From that point of view, wherever the government undertakes public welfare activities in
discharge of its constitutional obligations, as provided in partIV of the Constitution, such
activities should be treated as activities in discharge of sovereign functions falling outside
the purview of industry. Whether employees employed in such welfare activities of the
government require protection, apart from the constitutional rights conferred on them,
may be a subject of separate legislation but for that reason, such governmental activities
cannot be brought within the fold of industrial law by giving an undue expansive and
wide meaning to the words used in the definition of industry.
In the current scenario industries have become one of the most vital parts of the societys
smooth run, when there is no harmonious relation between workmen and employee it
leads to dysfunction. When the law itself is not clear regarding the term industry it will
definitely affect the industry on a large scale. The law in force presently is the
interpretation of the original Section 2(j). Focusing solely on the merits of the case it is
judgment which has taken into consideration. The decision is distinctly prolabour as it
seeks to bring more activities within the fold of the Industrial Dispute Act 1947. In
practical terms, the labour forces of the country are much better position now, than they
would have been had the amended S. 2(j) been notified. This is because the amended S.
2(j) excludes some categories of employment which squarely comes within the fold of
Rajappas case. But at the same time, a glance at the judgment would suggest that it is
actually a different law altogether as compared to the original S. 2(j). The question really
is whether the judiciary is entitled to embark on such an expedition. Even in a democracy,
following the theory of separation of powers, the judiciary has implied authority to fill in
the gaps left by the legislature. After the Jai Bir Singh case there is no such astonishing
judgement, which has altered the definition. A crucial step should be taken to clear the
lacuna.

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