The definitions of terms “industry” and “industrial establishment” is central to the understanding of the Industrial Relations Code, as provisions of the code are applicable to industrial establishments.  The scope of definition of “industry” under the Code has been expanded in comparison to its definition under Industrial Disputes Act, 1947.

INDUSTRY

Industry has been defined under Section 2 (p) as under :

(p) “Industry”  means any systemic activity carried on by co-operation between an employer and worker (whether such worker is employed by such employer directly or by or through any agency, including a contractor) for the production, supply or distribution of goods or services with a view to satisfy human wants of wishes (not being want or wishes which are merely spiritual or religious in nature) whether or not –

(i) any capital has been invested for the purpose of carrying on such activity; or

(ii) such activity is carried on with a motive to make any gain or profit.

But does not include –

Institutions owned or managed by organisations wholly and substantially engaged in any charitable, social or philanthropic service; or

Any activity of the appropriate government relatable to the sovereign functions of the appropriate government including all the activities carried on by the department of the central government dealing with defense research, atomic energy and space; or

Any domestic service; or

Any other activity as may be notified by the Central Government

The definition of industry has to be understood  in context of  its historical evolution as it has evolved through judicial interpretation during course of time. The industry has been defined under the Industrial Disputes Act, 1947  as under:

(j) “industry” means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen.

The Supreme Court in  D.N. Bannerjee Vs. P. R. Mukherjee (1953 SCR 302), State of Bombay Vs. Hospital Majdoor Sabha AIR 1960 SC 610  and Corporation of City of Nagpur Vs. Employees 1960 SCR (2) 942 has interpreted “industry” widely  and all such activities which were treated as analogous to trade or business was included under the definition of  “industry”. In  D. N. Bannerjee Municipality was held to have been involved in function analogous to trade or business and was held to be industry. The supreme Court  also in this case that investment of capital or profit making motive is not sine qua non for being covered under definition of industry.  In Hospital Majdoor Sabha, hospital was held to be industry. It was reiterated that investment of capital or profit making is not essential element of definition of industry. A line was drawn between sovereign functions and welfare activities and it was held that sovereign function will be excluded from “industry” but welfare activities undertaken by government will be covered under definition of “industry”. The Supreme Court interpreted industry as 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 is an undertaking.

Subsequently, the Supreme Court took restricted view of “industry”  in University of Delhi Vs. Ramnath  (1964) SCR (2) 703, Secretary, Madras Gymkhana Club Employees’ Union  Vs. Management of Gymkhana Club  1968 SCR (1) 742,  Management of Safdarjung Hospital Vs Kuldip Singh Sethi (1970)1SCC735. In Delhi University, Delhi University was not held to be covered under definition of “industry”. The Supreme Court observed that work of university is carried out with the cooperation of teachers who are not covered under definition of workers. Subordinate staff plays such a minor, subsidiary and insignificant and  it would be unreasonable to allow this work to lend its industrial color to the principal activity of the University which is imparting education. In Madras Gymkhana Club,  the Supreme Court observed that in case of club, the services are to the members themselves for their own pleasure and amusement and material goods are for their consumption. Club exists for its members as such is not covered under definition of “industry”.  The Supreme Court in Safdarjung Hospital  observed that 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 Supreme Court was of view extreme view has been taken in Hospital Majdoor Sabha.

All these cases were reconsidered by Constitution Bench in its landmark judgment  Bangalore Water Supply and Sewerage Board Vs. A. Rajapppa (1978)2SCC213. The Supreme Court overruled Safdarjung Hospital, University of Delhi, Madras Gymkhana Club wherein restrictive interpretation of the term “industry” has been taken.  The Supreme Court propounded triple test and dominant nature test. The Supreme Cour  defined industry as under:

 (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 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.

Bangalore Water Supply was referred to larger Bench in State of UP vs Jai Veer Singh. Now in light of passing of Industrial Relations Code, 2020 that reference seems to have become irrelevant.  

The definition of “industry” seems to be in line with interpretation of industry in Bangalore Water Supply judgment. All the systemic activity carried on by co-operation between an employer and worker (whether such worker is employed by such employer directly or by or through any agency, including a contractor) for the production, supply or distribution of goods or services with a view to satisfy human wants of wishes have been incorporated under definition of industry. Investment of capital and profit motive have been explicitly made irrelevant for determination of  and establishment as an industry. Exceptions are few i.e. organizations engaged in any charitable, social or philanthropic service or sovereign functions of appropriate government including all activities carried on by department of central government dealing with defense research, atomic energy and space and domestic service.

INDUSTRIAL ESTABLISHMENT OR UNDERTAKING

“Industrial Establishment or Undertaking”  has been defined under Section 2 (r) of the Code as under :

(r) “Industrial Establishment or Undertaking” means an establishment or undertaking in which any industry is carried on :

PROVIDED that where several activities are carried on in an establishment or undertaking and only one or some of such activities is or are an industry or industries, then

(i) If any unit of such establishment or undertaking carrying on any activity, being an industry, is severable from the other unit or units of such establishment or undertaking which is not carrying on or aiding the carrying on of any such activity, such unit shall be deemed to be a separate industrial establishment or undertaking.

(ii)If the predominant activity or each of the predominant activities carried on in such establishment or undertaking or any unit thereof is an industry and the other activity or each of the other activities carried on in such establishment or undertaking or unit thereof is not severable from and is, for the purpose of carrying on, or aiding the carrying on of such predominant activity or activities, the entire establishment or undertaking or, as the case may be, unit thereof shall be deemed to be an industrial establishment or undertaking.

“Industrial Establishment or Undertaking”  has been defined as an establishment or undertaking in which any industry is carried on. For identification of industry, predominant activity test has been evolved by judicial interpretation and has been crystallized by the Supreme Court in Bangalore Water Supply case. The same test has been recognized by Parliament for identification of industrial establishment.

If several activities are carried on in an establishment or undertaking and only some of activities are covered under industry and can severed from other unit or units, such unit can be deemed to be separate industrial establishment or undertaking. For example, in a municipality, there can be department which can be discharging sovereign functions and there can be department which may be discharging non-sovereign functions falling under definition of “industry”. In such circumstances, a department of the municipality, which are discharging non-sovereign functions may be treated as industry. But if predominant activities carried on in any establishment or undertaking or any of its units are covered under industry and non-industrial activities cannot be separated then in such cases, whole of the establishment, undertaking or its units will be treated as industry.

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