1. Dispute regarding wages and allowances — Challenge to the competence of reference under the Industrial Disputes Act, 1947 — Determination of whether the entity constitutes an industry. (Para 1 )
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1960 Supreme(SC) 284
SUPREME COURT OF INDIA
A.K.Sarkar : K.N.Wanchoo : P.B.Gajendragadkar
Ahmedabad Textile Industrys Research Association
Versus
State Of Bombay
Case No. : 22 of 1959
Date of Decision : 11/17/60
Advocates Appeared: Dhebar R.H. : Hathi K.L. : Mahajan V.D. : Mehta J.B. : Setalvad M.C. : Shah N.C. : Shroff I.M. : Shroff I.N.
Advocates:
I.M.SHROFF, J.B.MEHTA, K.L.Hathi, M.C.SETALVAD, N.C.SHAH, R.H.Dhebar, V.D.Mahajan
I.M.SHROFF, J.B.MEHTA, K.L.Hathi, M.C.SETALVAD, N.C.SHAH, R.H.Dhebar, V.D.Mahajan
An activity is an "industry" under Section 2(j) of the Industrial Disputes Act, 1947, if it is systematically undertaken to render material services to the community or a part thereof using employees and is organized like a trade or business, regardless of profit motive or capital investment.
Headnote:(A) Industrial Disputes Act, 1947 - Section 2(j) - Definition of ‘industry’ - Meaning of ‘undertaking’ - Whether an activity must involve profit motive or investment of capital to be an industry - Absence of profit motive or capital investment does not necessarily exclude an undertaking from the definition of ‘industry’ - Sovereign activities of the government are excluded, but welfare policies are not. (Paras 2, 3)
(B) Test for ‘undertaking’ - An activity systematically or habitually undertaken 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 with the help of employees, provided it is carried on in an organised manner like trade or business, constitutes an ‘industry’. (Para 4)
(C) Research Association - Research directed towards improving production, efficiency, and reducing costs for member units of a specific industry, organized with employees and business-like structures, is an ‘industry’ and cannot be assimilated to a purely educational institution. (Para 6)
Facts of the case:
An association was founded to carry out research and scientific work to improve manufacture, efficiency, and reduce costs for member units of a specific industry. It employed technical personnel and operated laboratories. A dispute regarding wage scales and allowances was referred for adjudication. The association contended that it was not an ‘industry’ under the Act and thus the reference was not competent.
Findings of Court:
The association's activities are systematically undertaken to render material services to a part of the community, utilizing employees, and organized in a manner similar to a trade or business. The primary object is to benefit member units by discovering ways to increase profits. Such an organization is not a purely educational institution.
Issues: Whether a research association established to provide material services to a specific industry, organized in a business-like manner, falls within the definition of ‘industry’ under Section 2(j) of the Industrial Disputes Act, 1947.
Ratio Decidendi: An activity constitutes an ‘industry’ if it is systematically undertaken for the rendering of material services to the community or a part thereof with the help of employees and is carried on in an organized manner like trade or business, regardless of the absence of a profit motive or capital investment.
Result: The appeal fails and is hereby dismissed.
Legal Category Hierarchy
Table of Contents
2. Whether a research association providing technical services to a specific trade constitutes an industry under Section 2(j) or is a purely educational activity. (Para 1 , 5 )
3. An activity systematically organized to render material services to a community with employees, analogous to trade or business, constitutes an industry regardless of profit motive. (Para 2 , 3 , 4 , 6 )
4. An entity is an industry under Section 2(j) if it is a systematically organized undertaking rendering material services to the community through employees. (Para 4 , 6 )
5. Appeal dismissed; the entity held to be an industry, making the reference for adjudication valid. (Para 7 )
6. What constitutes an undertaking or industry under Section 2(j) of the Industrial Disputes Act?
An activity systematically or habitually undertaken for the production or distribution of goods or for the rendering of material services to the community or a part thereof, carried on in an organized manner like trade or business with the help of employees, is an undertaking within the meaning of the Act. (Para 2 , 4 )
7. Is a profit motive or capital investment essential for an activity to be classified as an industry?
No. An activity can be regarded as an industry even if the profit motive is absent, and the absence of capital investment does not necessarily mean that an undertaking is excluded from the definition of industry. (Para 2 )
8. Which government activities are excluded from the definition of industry?
Sovereign activities, defined as the primary and inalienable functions of a constitutional government which no private citizen could undertake, are excluded. However, activities undertaken by the government in pursuit of welfare policies are not considered sovereign and may fall within the definition. (Para 3 )
9. Does a research association providing technical services to a specific trade qualify as an industry?
Yes, if the research is systematically organized to render material services—such as improving efficiency and reducing costs—to a part of the community using employees, it is an undertaking analogous to trade or business and constitutes an industry. (Para 6 )
K.N.WANCHOO, J.
(1) THIS is an appeal by special leave against the award of the Industrial tribunal, Bombay. There was a dispute between the appellant and its workmen, which was referred by the government of Bombay for adjudication. It related to the wagescale and dearness allowance of certain employees of the appellant and also to the payment of houserent allowance. The main contention of the appellant before the tribunal was that the reference was not competent under the Industrial Disputes Act, No. XIV of 1947 (hereinafter called the Act), as the appellant was not an industry within the meaning of the Act. The tribunal rejected this contention and held that the reference was valid. It then went into the merits of the dispute, with which we are however not concerned in the present appeal. The only point urged before us on behalf of the appellant is that the tribunal was wrong in holding that the appellant was included within the definition of the word `industry` and therefore the reference was competent.
(2) `INDUSTRY` is defined in s. 2(j) of the Act as meaning any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen. The main question canvassed before the tribunal was whether the appellant was an undertaking within the meaning of s. 2(j). The question as to what is an undertaking for the purpose of s. 2(j) has come up for consideration before this court in a number of cases, the last of which is The State of Bombay v. The Hospital Mazdoor Sabha(1), where a question arose whether a hospital run by government was an undertaking within the meaning of s. 2(j). It was pointed out in that case that though s. 2(j) used 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 therein were given their widest meaning, all services and all callings would come within the purview of the definition including those services rendered by a servant purely in a personal or domestic matter and even in a casual way. It had therefore to be considered where the line should be drawn and what limitations should be reasonably implied in interpreting the wide words used in s. 2(j). Further, the contention that the word `undertaking` used in s. 2(j) should be treated as analogous to trade or business and therefore the undertaking in question must involve an economic activity in which capital is invested and which is carried on for profit or for the production or sale of goods by the employment of labour was not accepted in full and it was pointed out that an activity could and must be regarded as an industry even though in its carrying on profit motive might be absent. Further it was held that absence of investment of any capital would not necessarily mean that an undertaking was not included within s. 2(j).
(3) THAT case then proceeded to consider what kinds of activities could be excluded from the meaning of `undertaking` for purposes of s. 2(j). It was pointed out that activities of government which could be properly described as sovereign activities were outside the scope of s. 2(j), as they were functions which a constitutional government could and must undertake for governance and which no private citizen could undertake. These sovereign activities were defined in the words of Lord Watson as `the primary and inalienable functions of a constitutional government` but would not necessarily include an activity undertaken by government in pursuit of its welfare policies. It was also pointed that though in the absence of profit motive an activity might be regarded as an undertaking, the presence of such motive would be a relevant circumstance in considering whether the undertaking was an industry within the meaning of s. 2(j).
(4) THE case then went on to consider the attributes the presence of w
