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SUPREME COURT OF INDIA
M.H. BEG, C.J.I., Y.V. CHANDRACHUD, P.N. BHAGWATI, V.R. KRISHNA IYER, JASWANT SINGH, V.D. TULZAPURKAR AND D.A. DESAI, JJ.**
Bangalore Water Supply and Sewerage Board, Appellant
Versus
A. Rajappa and others, Respondents.
Civil Appeals Nos. 753-754, 1544-1545 of 1975; 1171 of 1972; 1555, 2151 and 2119 of 1970; 898 of 1976, 1132-1135 of 1977; Spl. Leave Petn. (Civil) No. 3359 of 1977
Decided on 21-2-1978 and 7-4-1978.
Advocates appeared
Mr. S. V. Gupte, Att, Genl. (M/s. S. V. Subrahmanyam, M. Veerappa and K. N. Bhat, Advs. with him), for Appellants in C. A. Nos. 753-754; Mr. M. K. Ramamurthi, Sr. Adv. (in C. A. 753) Mr. M. C. Narasimhan, Adv. (in C. A. 754); Mr. N. Nettar, Adv. and Mr. J. Ramamurthi, Adv., for Respondents; M/s. R. K. Garg, S. C. Agarwal, V. J. Francis, and Mr. A. Gupta, Advs., for Intervener; Mr. G. B. Pai, Sr. Adv (M/s. O. C. Mathur, D. N. Mishra, Shri Narain and K. J. John. Advs. with him), for Interveners (T. B. Hospital); Mr. Naunit Lal and Miss Lalita Kohli, Advs., for Appellant in C. A. Nos. 1544-1545; Mr. P. P. Rao, Sr. Adv. (Mr. G. N. Rao, Adv. with him), for R. 1 in C. A. 1545; Mr. P. P. Rao, Sr. Adv. (Mr. T. V. S. N. Chari and Mr. Ashwani Kumar, Adv. with him), for R. 3 in C. A. 1545; Mr. I. N. Shroff and Mr. H. S. Parihar, Advs., for Appellant in C. A. No. 1171/72; Mr. S. K. Gambhir, Mr. Mohan Jha and Miss B. Ram Rakhiani, Advs., for Respondent in C. A. 1171/72; Mr. K. Rajendra Chowdhary, Adv. (Mr. E. C. Agrawala, Adv.), for Appellant in C. A. 1555/70; Mr. L. M. Singhvi, Sr. Adv. (M/s. H. K. Puri, Miss Ashoka Jain, M. L. Dingra, Vivek Seth and H. L. Kumar, Advs. with him), for Appellant in C. A. No. 2151; M/s. A. K. Gupta and Aruneshwar Gupta, Advs., for Respondent in C. A. No. 2151; Mr. V. M. Tarkunde, Sr. Adv. (M/s. O. C. Mathur, Shri Narain, K. J. John Advs. with him), for Appellant in C. A. No. 898; Mr. Madan Mohan, for Respondent in C. A. 898; In Person, for Applicant/Intervener in 898; Mr. A. K. Sen, Sr. Adv. (Mr. E. C. Agarwala, Adv. with him), for Appellant in C. As. Nos. 1132-1135; Mrs. Urmila Kapoor, Mrs. Shobha Dikshit, Miss Kamlesh Bansal, Advs., for Respondent in 1132-1135; Mr. A. K. Ganguli and Mr. D. P. Mukherjee, Advs., for Appellant in C. A. 2119/70; M/s. R. K. Garg, S. C. Agarwala and V. J. Francis and A. Gupta, Advs., for Respondent in 2119/70; Mr. D. V. Patel, Sr. Adv., Mr. M. V. Goswami and Mr. Ambrish Kumar, Adv., for Petitioner in S. L. P. No. 3359/77; Mr. P. G. Gokhale, 552 Mr. P. H. Parekh, Mrs. Manju Sharma, Mr. Railash Vasdev and Mr. C. B. Singh, Advs., for Respondent in S. L. P. No. 3359.
* (1) W. P. Nos. 868 and 2439 of 1973, D/- 5-7-1974 (Kant); (2) W. A. Nos. 205 and 231 of 1975, D/- 15-4-1975 and 11-6-1975 (Andh Pra); (3) Ref. I. T. No. 183 of 1973, D/- 9-3-1977 (Award of Ind. Tri.-Guj.); (4) Misc. Petn. No. 45 of 1970, D/- 18-8-1971 (Madh Pra); (5) Case No. 428 of 1966, D/- 6-12-1969 (Award of Ind. Tri., W. B.); (6) I. D. No. 23 of 1969, D/ 28-2-1970 (Addl. Ind. Tri., Delhi); (7) L. C. I. D. No. 14 of 1972, D/- 23-1-1976 (Labour Court, Delhi); (8) Adj. Cases Nos. 3-6 of 1976, D/- 25-11-1976 (Ind. Tri. (II) U. P. Luck.); (9) Ref. No. 15 of 1968, D/- 16-4-1970 (Ind. Tri. (I) U. P.-All.).
Army Act, 1950 - Air Force Act, 1950 - Discipline Act, 1934 – Removed from service – Trial court – Claim of compensation - We have, so to speak, to chart what may appear to be a Sea in which the ship of law like ark may have to be navigated. Indeed, Lord Sankey on one occasion, said that Law itself is like the ark to which people look for some certainty and security amidst the shifting sands of political life and vicissitudes of times. The Constitution and the directive principles of State policy, read with the basic fundamental rights, provide us with a compass. This Court has tried to indicate in recent cases that the meaning of what could be described as a basic "structure" of the Constitution must necessarily be found in express provisions of the construction and not merely in subjective notions about meaning of words. Similar must be the reasoning we must employ in extracting the core of meaning hidden between the interstices of statutory provisions – Held, It may be pertinent to mention in this connection that the need for excluding some callings, services and undertakings from the purview of the aforesaid definition has been felt and recognised by this Court from time to time while explaining the scope of the definition of "industry". This is evident from the observations made by this Court in State of Bombay - Speaking for the Bench in State of Bombay v. The Hospital Mazdoor Sabha (AIR 1960 SC 610) (supra) Gajendragadkar, J. (as he then was) observed in this connection thus - It is clear, however, that though S. 2 (j) uses words of very wide denotation, a line would have to be drawn in a fair and just manner so as to exclude some callings, services or undertakings. If all the words used are given their widest meaning, all services and all callings would come within the purview of the definition; even services rendered by a servant purely in a personal or domestic matter or even in a casual way would fall within the definition. It is not and cannot be suggested that in its wide sweep the word "service" is intended to include service howsoever rendered in whatsoever capacity and for whatsoever reason. We must, therefore, consider where the line should be drawn and what limitations can and should be reasonably implied in interpreting the wide words used in S. 2 (j); and that no doubt is a somewhat difficult problem to decide - . 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 co-operation between the professional and his employees fact that the running of clubs is not a calling of the club or its managing committee, that the club has no existence apart from its members that it exists for its members though occasionally strangers also take the benefit of its services and that even with the admission of guests the club remains a members self-serving institution, seems to me, with respect, not to touch the core of the problem. And the argument that the activity of the clubs cannot be described as trade or business or manufacture overlooks, with respect, that the true test can only be whether the activity is organised or arranged in a manner in which a trade or business is normally organised or arranged. I have already said enough on that question - Appeal dismissed
Wide import of "industry": The definition encompasses any business, trade, undertaking, manufacture, or calling of employers, including any calling, service, employment, handicraft, or industrial occupation or avocation of workmen, requiring a broad, functional interpretation informed by the Act's objectives of industrial peace and welfare. (!) (!) (!) (!) (!)
Triple test for prima facie industry: (i) systematic activity; (ii) organized by co-operation between employer and employee (direct and substantial element not chimerical); (iii) for production and/or distribution of goods and services to satisfy human wants and wishes (material things or services, excluding purely spiritual/religious wants). (!) (!) (!) (!) (!)
Irrelevance of profit motive: Absence of profit motive or gainful objective does not exclude an activity from being an industry, regardless of public, joint, private, or other sector. (!) (!) (!) (!) (!) (!)
Functional focus and decisive test: True focus is on the nature of the activity, with special emphasis on employer-employee relations patterned like in trade or business; philanthropy does not alter this if organized similarly. (!) (!) (!) (!)
Contextual shrinkage of terms: "Undertaking," service, calling, etc., must be read in context; organized activity with triple elements, even if not strictly trade/business, qualifies if employer-employee basis resembles trade/business methodology. (!)
Ideology of the Act guides scope: Industrial peace, regulation/resolution of disputes between employers and workmen; creeds, cults, motivations, or economic results do not override; professions, clubs, educational institutions, co-operatives, research institutes, charities qualify if meeting triple tests. (!) (!)
Restricted exemptions for small-scale: Minimal employees in simple ventures (e.g., small professions, gurukulas, labs) may qualify for exemption if dominant nature is non-employee based. (!)
True charity exemption: Pious/altruistic missions where participants (e.g., volunteers, ashramites) serve without master-servant remuneration basis, free/nominal cost services, exclude industry status; mere generosity or compassion does not exempt. (!) (!)
Dominant nature test: In complex activities, some exempt/others not, predominant nature and integrated departments determine if whole is industry; non-workmen employees do not alter status. (!) (!) (!)
Sovereign functions exemption: Strictly understood sovereign functions (alone) exempt; welfare/economic activities by government/statutory bodies not exempt; severable industrial units in sovereign departments may qualify. (!) (!) (!) (!)
Legislative override possible: Constitutional/legislative provisions may exclude categories otherwise covered. (!)
Overruling of narrow views: Prior restrictive interpretations rejected in favor of expansive, dynamic approach aligned with welfare state needs. (!) (!)
Hospitals as industry: Hospitals (government-run, charitable, research/training) qualify as rendering material services, regardless of profit, sovereign function, or ancillary research/training. (!) (!) (!) (!)
Educational institutions as industry: Universities, colleges, schools, research institutes are industries; education renders service to community; teachers' non-workman status irrelevant; predominant activity is education. (!) (!) (!) (!) (!) (!)
Professions as industry (with limits): Liberal professions (lawyers, doctors, etc.) qualify unless small-scale (e.g., single rural practitioner with minimal help); employee contribution not marginal; rejects direct nexus/partnership tests. (!) (!) (!) (!) (!)
Clubs as industry (mostly): Clubs with employer-employee cooperation for goods/services (e.g., catering, sports) are industries; self-serving members' clubs with minimal hired help exempt. (!) (!) (!) (!) (!)
Charitable/research institutions: Qualify unless fitting true charity exemption (volunteer-based, no wage relations); research produces valuable services/goods. (!) (!) (!)
Co-operatives as industry: Credit/marketing/producers'/consumers' societies are industries due to employer-employee relations and trade-like activities. (!) (!) (!)
Public utility/municipal activities: Water supply, sanitation, education, health departments are industries if analogous to private enterprise. (!) (!) (!) (!)
Integrated/ancillary departments: Administrative, tax, transport units in larger entities qualify if predominant/integrated with industrial activities. (!) (!)
152. Hidayatullah, C. J. considered the facts of the appeals, clubbed together there and held that all the three institutions in the bunch of appeals were not industries. Abbreviated reasons were given for the holding in regard to each institution, Which we may extract for precise understanding:
"It is obvious that Safdarjung Hospital is not embarked on an economic activity which can be said to be analogous to trade or business. There is no evidence that it is more than a place where persons can get treated. This is a part of the functions of Government and the Hospital is run as a Department of Government. It cannot, therefore, be said to be an industry. The Tuberculosis Hospital is not an independent institution. It is a part of the Tuberculosis Association of India. The hospital is wholly charitable and is a research institute. The dominant purpose of the hospital is research and training, but as research and training cannot be given without beds in a hospital, the hospital is run. Treatment is thus a part of research and training. In these circumstances the Tuberculosis Hospital cannot be described as industry.
The objects of the Kurji Holy Family Hospital are entirely charitable. It carries on work of training, research and treatment. Its income is mostly from donations and distribution of surplus as profit is prohibited. It is, therefore, clear that it is not an industry as laid down in the Act."
153. Even a cursory glance makes it plain that the learned Judge took the view that a place of treatment of patients, run as a department of government, was not an industry because it was a part of the functions of the government. We cannot possibly agree that running a hospital, which is a welfare activity and not a sovereign function, cannot be an industry. Likewise, dealing with the Tuberculosis Hospital case, the learned Judge held that the hospital was wholly charitable and also was a research institute. Primarily, it was an institution for research and training. Therefore, the Court concluded, the 593 institution could not be described as industry. Non sequitur. Hospital facility, research products and training services are surely services and hence industry. It is difficult to agree that a hospital is not an industry. In the third case the same factors plus the prohibition of profit are relied on by the Court. We find it difficult to hold that absence of profit, or functions of training and research, take the institution out of the scope of industry.
154. Although the facts of the three appeals considered in Safdarjung (AIR 1970 SC 1407) related only to hospitals with research and training component, the Bench went extensively into a survey of the earlier precedents and crystallisation of criteria for designating industries. After stating that trade and business have a wide connotation. Hidayatullah, C. J., took the view that professions must be excluded from the ambit of industry.
"A profession ordinarily is an occupation requiring intellectual skill, often coupled with manual skill. Thus a teacher uses purely intellectual skill, while a painter uses both. In any event, they are not engaged in an occupation in which employers and employees co-operate in the production or sale of commodities or arrangement for their production or sale or distribution and their services cannot be described as material service".
155. We are unable to agree with this rationale. It is difficult to understand why a school or a painting institute or a studio which uses the services of employees and renders the service to the community cannot be regarded as an industry. What is more baffling is the subsequent string of reasons presented by the learned Judge:
"What is meant by 'material services' needs some explanation too. Material services are not services which depend wholly or largely upon the contribution of professional knowledge, skill or dexterity for the production of a result. Such services being given individually and by individuals are servi
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