Case analysis of State of UP V.

Jai Bir Singh, 2005

Citation (2005)5 SCC1

Date of
5TH May 2005
Judgment

Court Supreme Court of India

Case Type Civil Appeal

Appellant State of U.P. (Uttar Pradesh)

Respondent Jai Bir Singh

N. Santosh Hegde, K.G. Balakrishnan, D.M. Dharmadhikari, Arun Kumar, B.N.

Bench
Srikrishna

Facts
A Constitution Bench of the Supreme Court of India heard a civil appeal (No. 897 of 2002)
in the State of U.P. vs. Jai Bir Singh case. On May 5, 2005, Justice D.M. Dharmadhikari gave
the verdict. Due to a disagreement between two earlier court rulings, Chief Conservator of
Forests v. Jagannath Maruti Kondhare (1996) and State of Gujarat v. Pratam Singh Narsinh
Parmar (2001), the case was submitted to this five-judge bench. The primary question was
whether a state's "social forestry" department, which was founded as a welfare program for
environmental enhancement, qualified as "industry" under Section 2(j) of the Industrial
Disputes Act, 1947. The court aimed to settle the disagreement over interpretation between
the seven judges' ruling in Bangalore Water Supply and Sewerage Board v. A. Rajappa
(1978) and the two cases cited above. The State of Uttar Pradesh, the appellant, argued that
the definition's wording did not support the broad meaning of the term "industry," as
established in the Bangalore Water case. They contended that government initiatives for the
common good, in accordance with the Directive Principles of State Policy, were to be
regarded as sovereign functions and left out of the concept of industry. The respondents
countered that the Bangalore Water ruling had established a legally enforceable precedent
because it had been upheld for more than 20 years. They implored the court to uphold this
established law. Following a review of numerous rulings and arguments, Justice
Dharmadhikari outlined the main ideas. He pointed out that the broad definition of "industry"
under Section 2(j) includes systematic actions coordinated by employers and employees in
order to manufacture or supply goods and services that meet human needs. The lack of a
profit motivation was not considered significant. The relationship between the employer and
employee as well as the activity's functional aspect were highlighted. Regarding the extent of
sovereign functions, the judge in the Bangalore Water case noted that the opinions of the
judges were not unanimous. He stressed that the argument that not all operations were meant
to be covered was backed by the Industrial Disputes (Amendment) Act 1982, which was the
legislative response to Bangalore Water and excluded certain categories of activity from the
ambit of industry. Judge Dharmadhikari contended that even though the revised clause was
not in effect, it was nevertheless relevant for reading the term as it was in the original
language. The judge concluded by stressing the importance of interpreting the term
"industry" in a comprehensive and contextual manner. He emphasized that although some
actions might be covered by the definition, others, such as volunteer work or self-serving
service without a master-servant relationship, might be exempt.

Issues
1. Whether the “social forestry” department of a state, aimed at environmental
improvement and welfare, falls within the definition of “industry” as per Section 2(j)
of the Industrial Disputes Act, 1947?
2. Whether the interpretation of the term “industry” should encompass activities
organized by cooperation between employers and employees for producing goods and
services to satisfy human needs, even if not driven by profit motive?
3. Whether certain categories of activities, including sovereign functions of the State,
should be excluded from the purview of the definition of “industry” under the Act?
4. Whether the previous precedent set by the Bangalore Water Supply and Sewerage
Board case is binding, and whether it should be reconsidered or overruled?

ARGUMENTS OF THE APPELLANT (STATE OF U.P.)

The expansive interpretation of the term “industry,” as established in the Bangalore Water
case, is not in line with the language of the definition. Activities undertaken by the
government for public welfare, in accordance with the Directive Principles of State Policy,
should be considered sovereign functions and excluded from the scope of “industry.” The
government’s welfare activities, aimed at fulfilling the obligations under the Directive
Principles, should not be categorized as industries, as they are not driven by commercial
motives. The legislature’s response to the Bangalore Water case through the Industrial
Disputes (Amendment) Act, 1982, which excluded certain categories of activities from the
purview of the Act, indicates an intention to limit the scope of the term “industry.”
ARGUMENTS OF THE RESPONDENT (JAI BIR SINGH):
The definition of “industry” under Section 2(j) is broad and encompasses systematic
activities organized by cooperation between employers and employees to produce or
distribute goods and services satisfying human needs. Profit motive is irrelevant for
determining whether an activity is an industry. The Bangalore Water case has been a settled
precedent for over two decades and should not be overturned. The interpretation provided by
the case should continue to guide the understanding of the term “industry.” The legislature’s
amendment of the definition of “industry” in the Industrial Disputes (Amendment) Act,
1982, signifies a response to the Bangalore Water case and should be taken into
consideration, even if the amended provision has not been enforced.

JUDGMENT
The Bangalore Water Supply case required a reference to a larger bench for reconsideration,
according to the Supreme Court's Five Judge Constitutional Bench, which held this after
deliberating over the conflicting arguments made by attorneys representing employers and
employees in its ruling dated May 5, 2005. These reasons included the following: -
1. In the Bangalore Water Supply case, the judges' observations and opinions were given
at various times, which prevented some of the judges from having the chance to hear
what the other judges on the bench had to say. There was no consensus in the
judgments of the justices stated individually at different times, and there was a great
deal of variation in the observations and opinions within the Bench. The judges on the
bench considering the Bangalore Water Supply case acknowledged that the act's
defining language was ambiguous and too broad to have a clear-cut meaning, making
it open to conflicting interpretations. The court was therefore highly critical of the
manner in which the BWSS's verdict was presented, with several judges offering their
opinions in a haphazard manner.
2. Every judge on the bench acknowledged and expressed the opinion that it would have
been preferable for the legislature to step in and define the term industry through an
amendment, so resolving any legal ambiguity. Despite the fact that the legislature
accomplished this by changing the definition of industry, the argument that employees
from particular industrial categories excluded from the altered definition would not
have access to the Alternative Dispute Resolution Mechanism prevented the amended
clause from going into effect. The bench noted that even though 23 years had gone,
the legislature and administration still had not developed a system to implement the
revised definition due to a lack of will, therefore a bigger bench of judges was had to
step in and provide clarification.
 3. Because the observations in even the Bangalore Water Supply case were inconsistent
and contradictory, the legal situation remains unclear as a result. This was shown by
the decision in the case.
Because of this, the five-judge apex court bench in this case felt that the unamended
definition of industry should be interpreted in a way that is neither too literal nor too liberal,
and that a larger bench is required to address all pertinent legal issues in all of their
complexity and depth. As a result, the court decided that a larger bench should be assigned to
review the Bangalore Water Supply case ruling and consider the legislative requirements
from the perspectives of employers and the general public in addition to workers. The court
also stressed the necessity to reevaluate where to draw the line in order to recognize an
institution as an industry and what restrictions should be imposed rationally when reading the
broad language found in section 2(j) of the statute. The court acknowledged that, despite the
difficulty of the issue, the competing interests of employers and employees, as well as the
legislature's and the executive branch's lackadaisical attitude toward implementing the
necessary changes to the definition, have forced this constitutional bench to make the current
reference for the formation of a suitable larger bench in order to reconsider the Bangalore
Water Supply case decision and provide the necessary clarification on certain points.

ANALYSIS
The State of UP v. Jai Bir Singh case was a crucial step taken by the judiciary to clarify the
definition of the term "industry" under the Industrial Disputes Act. This ambiguity had led to
difficulties for the court in determining what establishments fell within the ambit of industry,
which affected both employers and employees. This ambiguity discouraged entrepreneurship
and made employees unsure of whether they could receive relief under the act. Despite 23
years, the legislature and executive failed to clarify the ambiguity surrounding the meaning
and ambit of the term industry, making it essential for the judiciary to intervene and do
justice to all parties involved. The decision in the Bangalore Water Supply case needed
reconsideration by a larger bench due to several reasons. Justice Iyer in the Bangalore Water
Supply case incorrectly assumed that the Industrial Disputes Act should be interpreted in a
"Worker-Oriented" manner, focusing only on workers' rights. However, the Act's main
purpose was to regulate and harmonize relationships between employers and employees,
maintaining industrial peace and social harmony. The judiciary should interpret the laws in a
manner that neither workers nor employers can dominate and coerce one another due to
existing judicial bias. The Supreme Court has also criticized the interpretation of sovereign
functions in the Bangalore Water Supply case, which interpreted sovereign functions to be
limited to constitutional functions of legislature, executive, and judiciary. This interpretation
may have been suited to traditional non-democratic sovereignty but not to modern
constitutional democracy where states engage in various welfare activities in discharge of
their constitutional obligations. Since the landmark decision of Bangalore Water Supply was
pronounced by a Seven Judge Bench, it was necessary for the constitutional bench to refer
the issue to a larger bench, possibly a Nine Judge Bench, to bring about clarity on these
issues and ensure justice for the aggrieved. The larger bench would help restore the faith of
the public in the judiciary, as there had been many contradictory judgments due to the
ambiguity surrounding the definition of the term industry. The nine-judge bench would be
expected to bring an equitable and unambiguous definition of "industry," defining what
industries do not fall within the ambit of industry and its reasons, along with the redressal
mechanism available in cases of dispute. Only establishments and utilities should be
classified and maintained within the purview of the definition of "industry" in which there
exists an employer-employee relation regarding commercial activity.