# MANAGEMENT OF THE FEDERATION OF INDIAN CHAMRERS OF COMMERCE AND INDUSTRY v. THEIR WORKMAN, SURI R. K. MITTAL

- **Citation:** [1972] 2 S.C.R. 353
- **Court:** Supreme Court of India
- **Decided:** 1971-11-15
- **Case number:** Civil Appeal No. 244 of 1967
- **Bench:** C. A. Vaidialingam, P. Jaganmohan Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/management-of-the-federation-of-indian-chamrers-of-commerce-and-industry-v-5659
- **Pages:** 28

## Headnote

Industrial Disputes Act, 1947, s. 2(j)-'Jndustry' what is-Federation
of Indian Chc.n1ber.\· of Commerce attd Industry whether an 'industry',
Do111estic Inquiry-Finding as to 1nisconduct of e111ployee arrived at
1vithout evidence-Labour Court is justified in going into evidence' and
deter1nining question for itself.
The respondent was an employee of the appellant Federation. His
services were lent to the Indian National Committee of International Chamber of Commerce on the occasion of the 20th Congress of the International
Chamber of Commerce held in Delhi in February 1965. He claimed overtime payment for 40 days whereas he
was
paid only for 7 days., He
thereupon sent lawyers' notices to the Appellant Federation, to the Indian
National Committee aforesaid as well as to the International Chamber of
Commerce. This was held t~ be misconduct
by
>n
Enquiry Officer
appointed by the.appellant. The consequent industrial dispute was reforred
to the Labour Court. A preliminary issue was raised that the Federation
\\'J.S not an industrv and therefore the Labour Court haJ. no jurisdiction
to adiudicate oil thC reference.
1·his preliminary objection was overruled
aud it was held on the evidence that the charge held proved in the domestic inquiry was illegal and unjustified; that the Secretary had no authority
to terminate the services; that the Ma_nagement did not like the trade union
activities of the .respondent. that the actioo of tern1ination of services of
the respondent amounted to victimisation and that even if it was not an
act of victimisation in anv event the punis.hment was ~evere and therefore
it amounted to victimisation.
The Federation appealed to
this
Court.
After a re,iew of the cases relating to the definition of 'industry' in s. 2(j)
of the Industrial Disputes Act, 1947,
HELD :
(i) The !inch-pin of the definition of industrv is to ascertain
the systematic activitv which
the
organisation
is
discharging
namely
\.\-hether it partakes the nature of a business or trade, or is an undertaking
or manufacture. or calling of employers. If it is that and there is a co·
operation of the employer and the employee resulting in the production
of material services. it is an industry notwithstandin2 that its objects are
charitable or that it does not make profit or even where profits are made.
they are not distributed among the members. [376 G]
In the Safdarj11ng Hospital case and the connected cas"' of the Tuber·
culosis Hospital and the Kurji Holi Family Hospital it was found that none
of them carried on an economic activity analogous to trade or
business.
The criteria that in the two latter hospitals the object wos charitable does
~ot ap!'°ar to ha~e been the sole test Jor concluding that they were not
md!"stnes.
In _on~ case the dominant activity was research and training
wh!c~ n~cessa:1Iy involved t:e~tment also.
In the other case though the
activity 11 earned on was tra1~r~g. research and treatment, the distribution
o! .'urplus as profit was proh1b1ted. The cumulative effect of these acti·
\lties and the nature of such activities determined the question whether
354
SUPREME ,COURT REPORTS
[1972] 2 S.C.R.
these institutions were an industry or not, not that because their respective objects were charitable, that alone was considered to be the criteria
for not considering it as an industry. [372 A-C]
The cases under the Income-tax Act are of Iitlle assistance in detern1inipg whether an orgariisation, association or undertaking is an industry
no!Withstanding the fact that its main object is charitable. The object of
an o_rganisation may be charitable but, nevertheless, Its activity may
be
cornmcrcial so as to satisfy the definition of an 'industry' as explained and
elucidated by this Court particularly in the Safdarjung Hospital case.
We
could the1efore envisage an institution having its aims and-objects charjtable. and yei its activities coulcl bring it within the definiti9n of industry
in s. 2(j). [374 F-H]
The fact that in s, 32(5) of

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353
MANAGEMENT OF THE FEDERATION OF INDIAN
CHAMRERS OF COMMERCE AND INDUSTRY
v.
THEIR WORKMAN, SURI R. K. MITTAL
November 15, 1971
[C. A. VAIDIALINGAM AND P. JAGANMOHAN REDDY, JJ.]
Industrial Disputes Act, 1947, s. 2(j)-'Jndustry' what is-Federation
of Indian Chc.n1ber.\· of Commerce attd Industry whether an 'industry',
Do111estic Inquiry-Finding as to 1nisconduct of e111ployee arrived at
1vithout evidence-Labour Court is justified in going into evidence' and
deter1nining question for itself.
The respondent was an employee of the appellant Federation. His
services were lent to the Indian National Committee of International Chamber of Commerce on the occasion of the 20th Congress of the International
Chamber of Commerce held in Delhi in February 1965. He claimed overtime payment for 40 days whereas he
was
paid only for 7 days., He
thereupon sent lawyers' notices to the Appellant Federation, to the Indian
National Committee aforesaid as well as to the International Chamber of
Commerce. This was held t~ be misconduct
by
>n
Enquiry Officer
appointed by the.appellant. The consequent industrial dispute was reforred
to the Labour Court. A preliminary issue was raised that the Federation
\\'J.S not an industrv and therefore the Labour Court haJ. no jurisdiction
to adiudicate oil thC reference.
1·his preliminary objection was overruled
aud it was held on the evidence that the charge held proved in the domestic inquiry was illegal and unjustified; that the Secretary had no authority
to terminate the services; that the Ma_nagement did not like the trade union
activities of the .respondent. that the actioo of tern1ination of services of
the respondent amounted to victimisation and that even if it was not an
act of victimisation in anv event the punis.hment was ~evere and therefore
it amounted to victimisation.
The Federation appealed to
this
Court.
After a re,iew of the cases relating to the definition of 'industry' in s. 2(j)
of the Industrial Disputes Act, 1947,
HELD :
(i) The !inch-pin of the definition of industrv is to ascertain
the systematic activitv which
the
organisation
is
discharging
namely
\.\-hether it partakes the nature of a business or trade, or is an undertaking
or manufacture. or calling of employers. If it is that and there is a co·
operation of the employer and the employee resulting in the production
of material services. it is an industry notwithstandin2 that its objects are
charitable or that it does not make profit or even where profits are made.
they are not distributed among the members. [376 G]
In the Safdarj11ng Hospital case and the connected cas"' of the Tuber·
culosis Hospital and the Kurji Holi Family Hospital it was found that none
of them carried on an economic activity analogous to trade or
business.
The criteria that in the two latter hospitals the object wos charitable does
~ot ap!'°ar to ha~e been the sole test Jor concluding that they were not
md!"stnes.
In _on~ case the dominant activity was research and training
wh!c~ n~cessa:1Iy involved t:e~tment also.
In the other case though the
activity 11 earned on was tra1~r~g. research and treatment, the distribution
o! .'urplus as profit was proh1b1ted. The cumulative effect of these acti·
\lties and the nature of such activities determined the question whether
354
SUPREME ,COURT REPORTS
[1972] 2 S.C.R.
these institutions were an industry or not, not that because their respective objects were charitable, that alone was considered to be the criteria
for not considering it as an industry. [372 A-C]
The cases under the Income-tax Act are of Iitlle assistance in detern1inipg whether an orgariisation, association or undertaking is an industry
no!Withstanding the fact that its main object is charitable. The object of
an o_rganisation may be charitable but, nevertheless, Its activity may
be
cornmcrcial so as to satisfy the definition of an 'industry' as explained and
elucidated by this Court particularly in the Safdarjung Hospital case.
We
could the1efore envisage an institution having its aims and-objects charjtable. and yei its activities coulcl bring it within the definiti9n of industry
in s. 2(j). [374 F-H]
The fact that in s, 32(5) of the Payment of Bonus Act Chambers of
Commerce and certain other organisations \Vith charitable purpose '"''ere
excluded did not go to show that thev were not industries.
No such inference would arise nor can this provision be of heip in the construction
of s. 2(j) of the Act. [376 DJ
-
Secretary, Madras Gynikhana Club Eniployees Union v. Manage1nent
bf Gymkha11a Club, [1968]1 S.C.R. 742, State of Bombay & Ors.
v.
Hospital Mazdoor
Sabha, [1960] 2 S.C.R.
866, D. N.
Banerjee v.
P. R. Mukherjee, [1953] S.C.R. 302, Baroda Boroilgh Municipality
v.
Jts Workmen, [!~60] 2 S.C.R. 942, Corporation of the City of Nagpur v.
Employees, [1960] 2 S. C. R, 942. Unirersity of Vethi v.
Ram Nath,
[1964] 2 S. C.R. 703. A hmedabad Textile Industry"s Research Assn. v.
State of Bomhay, [1961] 2 S.C.R. 480, National Umu11 of Commercial
Employees v. M. P. Melwr,
: 1962] Supp. 3 S.C.R.
157,
Harinagar
Cane Farm & Ors. v. State of Bihar, [1964] 2 S.C.R. 458, Cricket Club
of India Ltd. v. Bombay Labour Union, [1969] I S.C,R. 600, Managemem of Safdarjung Hospital, New Delhi v. Ku/dip Singh Sethi, [1971] 1
S.C.R. 177, Commissioner for Special Purposes of Income-tax v. Pemsc/,
[1891] A.C. 531, C.I.T .. Madras v. Andhra Chamber of Con,,nerce,
(1965] I S.C.R. 565. Hyderabad
Stock Exchange Ltd, v.
C./.T.,
[1967] J.T.R. 195, C./.T. West
Bengal v.
Bengal
Home
hiclustries
Assn. [1963] 48 J.T.R. 181. Commissioner of Inland Revenue v. City of
G/as11ow Police Atheletical Assn. [1963] 34 T.C. 76, Bombay, Pan;rapole v.
Workmen. C. A. No. 133 I /66 dt. 16-8-71. La/it Hari Ayurvadic College
Plrarmac)' v. Its Workmen Union, A.l.R. 1960 S.C. 1261 and Workmen
employed in the Madras Pinlrapo/e v. Madras Pinjrapo/e, [1962] 2 L.L.J.
472, considered.
(ii) The above being the position in Jaw the mere fact that the appellant Federation had charitable aims and objects would not take it out of
the definition of industry.
An examination of the activities of the Fede·
ration showed that the Federation carried on sy.,tematic activities to assist
Its n1embers and other business men and industrialists .ind even to nonmembers as for instance in giving them the right to
;ubscribe to
their
bulletin; in taking up their cases and solving their difficulties and in
obtainin~ concessi.ons and facilities for them fron1 the __ Government.
Thesl.!
activities were business activities and material
~ervices p:nde1 ed to husinessn1en traders and industrialists who are members of the c?nstifl1ent~ of
the Federation.
There could be no doubt that the Federation was
an
industry within the meaning of s. 2(j) of the Act [379 A-Cl
(iii) The Enquiry Officer in tlvo domestic enquiry held that having .regard to the emphatic assertion of t_he ~espondent that ht had no intention
to bring disrepute to the Federation 1n any way and that he was only
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MANAGEMENT F.J.C.C.I. V. WORKMAN
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(Jaganmohan Reddy, J.)
trying to get his legitimate dues "it is not necessary to analyse the exact
intention, l)ut the effect has been to convey to the Jnternatconal Chamber
of Commerce a low impression about the Federation and ti1~reby to 11ring
down the prestige of the Federation in the eyes
of
th~ International
Chamber of Commerce". In spite of this finding the Enquiry Officer found
that the respondent's action was clearly subversive of <lisc.:iplinc and i·n his
opinion deserved to be so treated.
In view of the fact thaL the don1estic
tr.ibunat acted on no evidence at all because it was found that the intention
with which the respondent had issued the
notices
ro
the
International
Chamber of Commerce and I ndustrv could not be asccrtain(:d, the: Tri bu·
nal was justified in allowing evidence to be led and on that cviden•oc to
come to the conclusion that the termination of service v.·as \vrong. [379
E-G; 380 F]
W. M. Agnani v. Badri Dass, [1963] I L.L.J. 684 and
Hind Construction,& Engineering Co. Ltd. v. Theil' Workmen. [1965] 2 S.C.R. 85.
referred to.
CIVIL APPELLATE JURISDICTION :
Civil Appeal No.
244
of 1967.
Appeal by special leave from the Award dated November 22.
1966 of the Labour Court, Delhi in I.D. No. 33 of 1966.
G. B. Pai, P. N. Tiwari, and 0. C. Mathur, for the appellant.
M. K. Ramam11rthi, J. Ramamurthi and Madan Mohan, for
the respondem.
The Judgment of the Court was delivered by
P. Jaganmohan Reddy, J.
In this Appeal the Award of the
Labour Court directing reinstatement of the Respondent R. K.
Mittal, an employee of the Appellant (hereinafter referred to as
'the Federation') with full back wages and continuity of service
is challenged.
In February, 1965, the 20th Congress of International Chamber of Commerce was held in Delhi for which purpose a Committee known as the Indian National Committee oi
International Chamber of Commerce was brought into existence
and the services of the Respondent alon·g with other workmen were
loaned to it by the Federation. The Respondent worked for about
40 days but was only paid overtime for about 7 days and consequently he claimed overtime for the remainder of the days as
according to him other workmen had also been paid similarly.
This claim was not admitted by the Federation with the result
that the Respondent caused a Lawyer's notice to be issued to the
Federation, to the Indian Nati6nal Committee of International
Chambers of Commerce and to the International Chamber of
C.ommerce with .its Head Office at Paris. demanding payment of
his dues amounting to about Rs. 600/-. When no replies were
received, he caused another notice to be served threatenine: to file
a suit whereupon the International Chamber of Commerce sent
a telegram to the Federation enquiring whether it should deal
356
SUPREME COURT REPORTS
[ 1972] 2 S.C.R.
with the matter or whether they would deal with it. To this the
Federation replied that it will deal with it, but it appears that the
claim of the Respondent was not settled.
The Respondent then
filed a suit for the payment of the arrears. The Federation felt
that this action of the Respondent in causing legal notices to be
served on the International Chamber of Commerce was. taken
. with a view to bringing the Federation into disrepute, and it was
capable of so bringing it in the eyes of the International Chamber
of Commerce which Act being inconsistent with his
dut~~s and
obligations as an employee constituted misconduct.
A charges~eet. was ~erved on the Respondent and a domestic enquiry was
held m which he was held to be guilty of misconduct. This finding
was forwarded to the Secretary who instead of dismissing him took
a lenient view and terminated his services. Thereafter it is alleged
that he filed a suit against the Federation and subsequently raised
an industrial dispute which was referred to the Labour Court
for determination of the following issues namely whether the terminatio~ of the services ~f Shri R. K. Mittal is illegal and unjustified
an.d 1f . so wha! d1Tecuons are necessary in this respect.
After
tlm rcterence It Is stated that the suit filed by him have been
withdrawn.
It \\as alleged that the wcirkmen"s grie~an~e. wa~ unjustified
and in spite of his being informed that no d1scnmmat1on has been
practised he with a view 10 ~arass the management and .compcll
it bv unfair means to pay hun more than what was leg1umately
due· 10 him started making complaints simultaneously to the
Federation ~nd International Chamber of Commerce which ~id
not employ him and with the fulJ knowledge that whatever gnevance he ]coitimately had. had to be resolved only by a reference
to the Fede~ation which was his employer. It was avered that the
enquiry conducted was fully in accordan~e with the p~inciples of
natural justice and requirements of law, that the findmgs of the
Enquiry Officer were fair. reasonable and ful.ly support~ by the
records of the Enquiry and that these defimtely estabhshed the
guilt of the Respondent.
In any case th.e Federation was not an
industrv.
On behalf of the Respondent tt was contended that the
Federaiion alone was not the host but it was the Indian National
Committee of the International Chamber of Commerce constituted
of some officials of the Federation and the International Chamber
of Commerce which conducted the 20th Congress and it was this
Committee that emofoved the Respondent and oaid him and the
other workmen their remunerations. The attendance of the workmen was marked in a s~oarate attendance register maintained for
all such workmen who were engaged to work for the Congress
irrc~oective of the fact whether those were the employ!'Cs of the
Federation or otherwise. that in spite of the representations wllen
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(Jaganmohan Reddy, J.)
the management did not reply, the Respondent consulted two
Lawyers and instructed them to serve necessary legal notices wh0>
advised him that as the work related to the 20th Congress was
managed by an independent Committee his claim for the remuneration against the Federation alone would not lie and that he
would have to make a claim on all the three bodies namely theFederation, the Indian National Committee of International
Chamber of Commerce and the International Chamber of Commerce, Paris, who constituted and managed the affairs of ihe
Congress. He denied that there was any ma/a ftde on his part nor
did he ever intend to defame the Federation by serving a notice
in accordance with the legal advise given to him. He, however,
expressed his sincere regrets to the management and submitted his
appeal to the Secretary General of the Federation and requested
him to consider the matter, but it was not even acknowldged.
In any case the punishment of discharge in such a small- matter is
too severe and compktely out of proportion and smacks of victimisation. The assertion that the Federation was not an industry was
denied.
Before the Tribunal a preliminary issue was raised that the
Federation was not an industry and therefore, the Labour Court
had no jurisdiction to adjudicate on the reference.
This preliminary objection was overruled and it was held on the evidence,
that the charge held proved against the Respondent in the domestic enquiry was illegal and unjustified; that the Secretary had no
authority to terminate the services; that the Management did not
like 'the trade union activities, th;rt the action of termination of
services of the Respondent amounted to victimisation ·and that
even if it was no.t an act of victimisation in any event the punishment is severe and therefore, it amounted to victimisation .
. Even IJ.efore us similar arguments as were urged before the
Tribunafhave been again agitated with further amplification. It
is contended that the Federation is not an industry in that, neither
its activity is industrial nor its objects commercial but on
the·
other hand they are of a non-business character and are charitable.
The Appellant contends that the Federation· was not constituted for any one employer or group of emplo~ers but was to su~
serve th·~ good of the business of the commumty as a whole. This
object of the Federation is achieved in various ways. The Fe.deration is always nominated by. the Goyernment' as a me~ber m an
Advisory Committee on vanous nalional and Internalional Committees which make economic policies.
It organises exhibitions
with the active financial support and cooperation of the Government. In order to promote Indian business, it undertakes publications and arbitration which are ancilliary to its main activi.ties
namely the promotion of business for the community as a whole·
358
SUPREME COURT REPORTS
[1972] 2 S.C.R.
which is an object of general public utility. It is also contended
that the Memorandum and article of the
Association
of
the
Federation and the evidence on record show that the Federation
does not follow any trade, business, manufact'ure or undertakin~
or calling of employers in the production of material goods or
material services nor does it have a profit motive.
On the basis
of these activities and· objects of the Federation, the following
material services nor does it have a profit motive. On the basis
of these activities and objects of the Federation,
the followina
thr'ee propositions were submitted on behalf of the Appellant :~
(I) This Court has uniformly held that unless the
test that the activities carried on by the employer is
trade, commerce. industry o~ manufacture or of rendering material service is satisfied, it will not be an industry
under the Act.
(2). The promotion of trade and commerce, which
is the main activity of the employer in this case, is not·
an actiyjty in the nature of or analogous to the activities
under the first proposition.
( 3) As a corollary it follows that the Federation
which is really carrying on an activity considered to be
an object of general public utility and
subserves
a
charitable purpose cannot be held to be an industry.
The promotion of trade and commerce, it is submitted is a
(;haritable object which is the dominant object of 1he Federation
.and hence it is not an industry as held in some of the recent cases
by this Court. What has to be seen is whether the promotion of
trade, commerce or industry which is considered to be a charitable object can be termed as a business or trade resulting in the
production of material services wthin the meaning of an industry
under- Section 2 (j) of the Act.
In brief it was argued that if both
·the ends and means are charitable, the ends being the activity and
the means the object, the undertaking cannot come within the
-definition of industry: In support of this, several decisions rendered under the Indian Income-tax Act have been pressed into service
and relied upon.
The Respondent's contention on the other hand is that the main
objects of the Federation are given by it in Clauses 3(a) to(k)
of its pamphlet "Federation of Indian Chamber of Commerce and
Industry-Organisation-Functions"; that the Federation undertakes national and Intern.ational Exhibition having held
such
exhibitions in 1961 and 1965 earning huge profits of Rs.
-lO
lakhs and Rs. 22 lnkhs respectively; that the Appellant federation
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(Jaganmohan Reddy, I.)
carries 011 the activities of publication of Books and Magazines
and publishes fortnightly .~eview, tha~ it e~deavours to take-up
with the concerned authont1es the specific difficulues expressed by
its members. in their day .to day business; that it arranges commercial arbitrations between co-members
and
between
nonmembers; that it has set up a tribunal of
Arbi
1tratio~
f~r the
determination, settlement and adjustment of commercial disputes
· relating to business, trade and manufacture_ arisin~ between parties
in India or a party in India and a party m foreign country who
agree or have agreed in writing to submit such . disputes. and
differences for arbitration under the rules of the Tribunal and
earns huge amounts as service charges from the parties who submit
their disputes to the Tribunal set up by the Federation; that it is
constructing a museum to advertise and publicise the products of
the Indian manufacturers and that it renders liaison service to
members as well as non-members in the matter of procuring
licences, capital issue, Company Law problems, tax problems etc.
All these activities the Respondept contends show that the Federation is carrying on activities and perfonning all such functions as
would benefit .the business communiity and the industrialists for
securing concessions in taxation and foreign
exchange
which
activities have benefited several industries in a great measure and
would clearly establish that it is an industry.
On the legal aspect it is submitted that the provisions of the
Income-tax Act or the Trust Act are inapplicable in that they are
not concerned with the activities but with the object which an
undertaking pursues, particularly in respect of the Income-tax Act
where an institution is exempted from tax liability if it has a
charitable object.
Even assuming that the undertaking has an
object of general public utility within th.e meaning of the exemption, it does not ipso facto determine its activity nor does it snow
that it is not an industrial activity.
Under the Act the learned
Advocate contends it is the nature of the activity that is the, test
and though an organisation may have a charitable object it may
nonetheless carry on an activity which comes within the term
industry, nor does the distribution of profits or otherwise is a
crucial element in determining whether its activities are industrial
and the undertakii:ig an industry within the meaning of Sec. 2(j).
lt is further sublllltted that what has been concentrated in all the
cases cited by the learned Advocate for the Appellant under the
Income-tax Act is what was the dominant object of the assessee
and not what it does, because in those cases the Courts were not
concerned in determining what was the nature of the activities
but were only concerned in ascertaining what was the dominant
objec!.
Whether ~ese decisions are relevant for deciding the
question whether a dispute referred to is an industrial dispute under
the Act will be dealt wiith presently.
860
SUPREME COURT REPORTS
(1972] 2 S.C.R.
Before we examine the nature of the activities of the Federation it will be useful to deduce the principles which are applicable
for determining whether the activities of an undertaking are such
as would justify it being treated as an industry for the purposes
of an industrial dispute under the Industrial Disputes Act 194 7
(hereinafter called 'the Act'). The Act it may be stated makes
provision for the investigation and settlement of industrial disputes and for certain other purposes. The meaning to be given to
the words Industrial Dispute in Section 2 (k), Industry in Sec.
2(i), Employer in Sec. 2(g) and Workmen in Sec. 2(s) are relevant for ascertaining whether an undertaking is an industry or
otherwise.
These definitions are as follows :-
Section 2:
(g) "employer" means-
(i) in relation to an industry carried on by or
under the authority of any department of
the Central Government or a State Government, the authority prescribed in this behalf, or where no authority is prescribed,
the head of the department;
(ii) in relation to an industry carried on by or
on behalf of a legal authority, the chief
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executive officer Of that authority;
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(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;
-
(k) "industrial dispute" means any dispute or difference between employers
ang employers
or
between employers and workmen, or between
workmen and workmen, which is connected with
the employment or non-employment
or the
terms of employment or with the conditions of
labour, of any person;
(s) "workman" means any person (including an
apprentice) employed in any industry to do any
skilled or unskilled manual, supervisory, technical or clerical work for hire or reward, whether
the terms of employment be express or implied.
and for the purposes of any proceeding under
this Act in relation to an industrial dispute, includes any such person who has been dismissed.
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discharged or retrenched in. connection with, ~r
as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that
dispute, bin does not include any such person-
(i) Who is subject to the Anny Act, 1950. or
the Air Force Act, 1950, or the
Navy
(Discipline) Act, 1934; or
(ii) Who is employed in the Police service or :is
an officer or other employee of a prison: vr
(iii) Who is employed mainly in a managerial
or administrative capacity; or
(iv) Who, being employed in
a
superviso~y
capacity,
drawn wages
exceeding five
hundred rupees per mensem or exercise5,
either by the nature of the duties attached
to the office or by reason of the powers
wsted in him, functions mainly of a managerial na'ture.
A cursory examination of the definition of industry in Se~.
2(j) without the assistance of the case law would show that 1.t
has been divided into 2 parts; the first is, as meaning any business, trade, undertaking, manufacture or calling of employers and
the second is, as including any
calling.
service, employment,
handicraft, or industrial occupation or avocation oJ' workmen.
The first part defines it in relation to the activities of the undertaking i.e., the employer while the second. in
relation
to
the
nature of the work done by the employees· and gives an extended
connotation though this part standing· alone cannot define what
an industry is. In either case the activ~iy--whether of the undertaking or the employees of that undertaking are to be determined
in relation to its being a business, trade. undertaking, manufacture
or calling of employers. In several cases decided by this Court.
these definitions have been understood differently in their application to the facts and circumstances of each case which prompted
Hidayatullah, J., as he then was in the Secretarv, Madras Gnnkhana Club Emp/o);ees Union v. Management of the Grmkiwna
Club,(') after pointing out that the definitions in the· .-\ct are
borr~~ed fro~ other statutes particularly the latter part of the
definition of mdustry· was taken from Sec. 4 of the
Commonwealth Conciliation and Arbitration Act, which had caused some
trouble, to say "Decisions rendered on these definition (and some
others very similar)" have naturally influenced opinion makina in
this Court.
The Australian cases in
particut.ir
"have
l:i~en
~11brose all the time" (p. 754).
(I) [1968] I S.C.R. 742.
SUPREME COURT REPORTS
[1972] 2 S.C.R.
For the first time in the State of Bombay & Ors. v. The
Hospital Mazdoor Sabha & Ors.( 1) a Hospital was held to be an
industry within the meaning of Sec. 2(j) of the Act. That .was a
case in which the Hospital was run by the Go~er1!ment. A d1stmction was sought to be made between the actlv1Ues of. t~~ Gov~m
ment in its Regal or sovereign sphere and other activ1ties wluch
were undertaken in the socio economic progress of the country
as beneficial measures. The former were held not to come withln
the ambit of Sec. 2 (j) while it was said that it would be incongruous and contradictory to suggest that the latter activities should
be exempted from the operation of the Act which in substance is
a very important benefiCial measure in itself. This latter conclusion was sought to be. supported by a reference to the definition
of employer ins. 2(g)(i) as meaning "in relation to an industry
carried on by or under the authority of any Department of the
Central Government or State Government authority prescribed in
this behalf, or where no authority is prescribed the Head of the
Department".
This definition Gajendragadkar, J., as he chen
was said "clearly indicates that the legislature intended th~ applicution of the Act "to activities of the Governme1<1 which fall within
.. Sec. 2(j). ·In considering the question as to whether the group
of hospitals run ........ undoubtedly for the "purpose of giving
medical relief to the citizens and "for helping to impa1t medical
education are an undertal<ing "or not, rt would be pertinent to
enquire whether an "activity of a like nature would be an undertaking if it is carried on by a private citizen or a group of "private
citizens.
There is no doubt that if a "Hospital is run by private
citizens for profit it "would be an undertaking very much lib the
trade or "business in their conventional sense.
We have already
''stated that the presence of profit motive is not "essentiai for
bringing an undertaking within Sec. 2(j)". Even where no profits
are earned or even where it is run without charging fees it was
considered to be an undertaking because it is lhe character of the
a.ctivities involved in running the Hosoital which b:ings lht institution of the H?spital within the meaning of Sec. 2(j). The several
~tti:bute~ which are necessary to constitute the activity into an
unaertakmg analogous to trade or business have been stated
though the difficulty of setting out all the possible attributes defi-
~itely t,; exhaustively was recognised, and as working principle
1t was stated that (a) an ~ctivity !s .~yst~matically or habitually
undert~ken for the ~roduct~on or d1stnbu!ion of goods or for the
rendenng of matenal services to the community at lar"e or a
part of such community with the help of emplovees is an° undertaking; (b) such an activity generally involws ·the cooperation
of the employer and the employees with the obj(ct of satisfying
0) [1960] 2 S.C.R. 866.
A
c
D
E
F
G
H
A
B
c
D
E
F
G
MANAGEMENT F.1.c.c.1. v. WORKMAN
363
(Jaganmohan Reddy, /.)
material human needs; ( c) it must be organised or arranged in a
manner in which trade or business is generally organised
or
arranged; (d) it must not be casual, nor must it be for on~self nor
for pleasure. After setting the aforesaid it was also observed !hat
"the manner in which the activity in question is organised or
arranged, the condition of the cooperation between employer .and
the employee necessary for its success and ils object to render
material servi~e to the community can be regarded. as ;ome of the
features which are distinctive of activities to which Sec. 2(j)
applies". This decision also considered the question whether any
quid pro quo was necessary for bringing an activity under Sec.
2(j) and it was held that no such· element wa~ involved.
Tli.is
case was considered to be on the verge as taking an extreme view
in the Madras Gymkhana Club(') case, to which one r_;f us
Vaidialingam, J., was a party.
The Gymkhana Club case reviewed the previous case law in
D. N. Banerji v. P. R. Mukherjee & Ors.('), Baroda Borough
Municipality v. Its Workman('), The Corporation of the City of
Nagpur v. Its Employees('), University of Delhi & Anr. v. Ram
Nath('), The Ahmedabad Textile Industry's Research Association
v. The State of Bombay & Ors.("), (Association Case).
The
National Union of Commercial Employees & Anr. v. M. P. Meher,
Industrial Tribunal, Bombay & Ors.('), (the
Solicitor
case),
Harinagar Cane Farm & Ors. v. State of Bihar & Ors.('). State
of Bombay & Ors. v. The Hospital Mazdoor Sabha & Ors.("), to
asc<rtain the criterfa for detaining what an
'industrial
dispute'
under Sec. 2(k) and an 'industry' under Sec. 2(j) of the Act, is
for the purpose of a reference of a dispute between employer and
employee under Sec. 10(1) of the Act.
Hidayatullah, J. as he
then was thought that the changes made in tile meaning of the
expression used in the definition of industry in the Act by the
several decisions referred to therein
'disclosed
a
procrustean
approach. to the problem', and that "too much insistence upon
partnership between employers and ·employees is ev;dent in the
Solicitor's case and too little in Association's case" (page 751752). In the Association case which was a Research Association
maintained by the Textile Industry and employing technical and
other staff, the tests for determining whether the activities of the
Assa<;iation could be construed as an industry as laid down in the
Hospital cas~ we~e repeated and applied. It was pointed out that
for the first time Ill that case, namely the Association case "a fresh
test. was added that as the employees had no right> in the results
(I) [1968] I S.C.R. 742.
(6) [1961] (2) S.C.R. 480.
(2) [1953] S.C.R. 302.
(7) [1962] (Suppl.) (3) S.C.R. 157.
(3) [1957] S.C.R. 33.
(8) [1964] (2) S.C.R. 458.
(4) [1960] (2) S.C.R. 942.
(9) [t960] 2 S.C.R. 866.
(5) [1964] (2) S.C.R. 70}.
10-L500SupCl/72
364
SUPREME COURT REPORTS
[1972] 2 S.C.R.
of their labour or in the nature of business and trade, the partn~~ -
ship is only association between the employer and c.mployee .
Further after setting out the various facts of tne relatJonsh1p of
employers and employees and the need to correlate this to a~
industry it was observed at page 752, "st~te.d ~roadly the defimtion of 'industrial dispute' con.tains two hm1tauons.
Fmtly,_ the
adjective 'industrial relates the dispute to an industry as detmed
in the Act and, secondly, the defimt10n expressly states tliat not
disputes and differences of all sorts but only those which bear upon
the relationship of employers and workmen and the term3 of
employment and conditions of labour are contemplat~d''. It was
also pointed out at page 755 that "The principles so far settled
come to this.
Every human activity in which enters the relationship of employers and employees, is not necessarily creative of an
industry.
Personal services rendered by domestic and other serv;;nts, administrative services of public officials, service in aid of
occupations of professional men, such as doctors and bwyers
etc ..... must be excluded becaus_e they do not come within the
denotation of the term 'industry'. Primarily, therefore. ind~strial
disputes occur when the operation undertaken rests upon cooperation between employers _and employees with a view to production
and distribution of material goods, in other words, wealth, but
they may arise also in cases where the cooperation is to produce
material services.
The normal cases are those in which the production or distribution is of material goods or wealth and
they
w!ll fall within the expressions trade, business a11d m;inufacture".
Again at page 756, the principle was summed up thus : "it is,
therefore, clear that before the work engaged it (in) can be descril>cd as an industry, it must bear the definite cliaracter of 'trade'
or 'business' or 'manufacture' or 'calling' or must be capable of
beinir described as an undertaking resulting in material gcods or
material services". In this context the meaning .i~ the word 'trade'
was considered to bear the meaning given in the Halshury'.1 Lall's
o_I En~/ and as (a) exchange of goods for goods or goods for
moneys; (b) any business carried on with a view to nrofit whether
manual or mercantile, as distinguished from th~ liberal arts or
leArned professions and from agriculture; and busiress means an
enterprise which is au occupation as distinguished from pleasure.
Manu.facture is a k_ind of productive industry in which the making
of articles ~r matenal (often ?n a large scale) is by physical Jabour
or ~echamcal power.
Callml! denotes the following of a profess10n or trade".
The word 'undertaking' which is the most
elastic was g!ven as 'any business or anv work or project which
one engages m or attempts as an enterprise analo<Tous to lJusiness
or 'trade'. This test was said to have been laid d~wn in Baner;i;s
case(i), and followed in the Baroda Borough Municipality
(I( 1953 S.C.R. 302.
A
ll
c
D
E
F
G
H
B
c
D
E
F
G
H
MANAGEMENT F.1.c.c.1. v. WORKMAN
365
(laganmohan Reddy, /.)
case (1), and it was observed that "Its extension in the Corporation case "was unfortunate and contradicted the earlier cases".
Even where the activity is considered to be an industry the second
question which arises is the nature of the work which the employees
rende~. The work must be productive and workmen must be
following an employment calling or industrial avocation and are
not working in a managerial capacity nor .are they highly paid
supervisors.
It is also not necessary that the workmen should
receive a share though there may be occasions when he may
receive a share of tho~ produce as part of their wages or as bonus
as a benefit.
Applying the aforesaid tests it was held that afcer the first part
of the definition and the essential character of the Club is taken
into consideration, the activity of the Club cannot be described
as a 'trade', 'business', or 'manufacture' and the running of the
club is not a 'calling' of the· Respondent Club or its managing
committee; nor can the Club be said to exist for its members
though occasionally strangers also take benefit from its services.
It was pointed out that even after the admission of guests the
club remains the member's self-servicing institution, an<l while
no doubt the material needs or wants of a section of the community is catered for, this is not enough, but· that must be done
as part of trade or business or as an undertaking analogous to
trade or business, which element was found to be
comrilct~ly
missing in a "member's" club. In the end in answer to the contwtion that the case of the Club is
indistinguishuble
from
the
Hospital case, it was said "That case is one which may be said to
be on the verge.
There are reasons. to think that it took the
extreme view of an industry" and that "the case oi a 'members'
club is beyond even the confines established by that case"
The Gymkhana case(') was referred to in the Cricket Club
of India Ltd. v. The Bombay Labour Union and Anr.I').
In
that case a preliminary objection was taken on behalf of the Club
that it was not an industry and the provisions of the Act were not
applicable to it. so that a reference under Sec. 10 was not competent.
The Tribunal rejected this objectioa r.gainst which the
Club came in appeal before this Court. It may be noticed that the
Appellant was Registered under the Indian Companies Act 1913
with the objects set out in paragraph 3, clauses (a), ( c). Id). ( c),
(J) and ( na) of the Memorandum of Association of the Cl~b.
The Gymkhana Club case was sought to be di;tin!!uished on the
ground that the activities of encouragin!! and oromotin!! the <>ame
of Cricket in India and elsewhere mentioned fo clause (a), flnanCln!! and assisting in financing visits of foreign teams and of
(I) [19571 S.C.R. 33.
(l) [1969] I S.C.R. 600.
(2) [1968] I S.C.R.742.
366
SUPREME COURT REPORTS
(1972] 2 S.C.R.
visits of Indian teams to foreign countries in cl. ( c), organising
and promoting or assisting in the organisation or promotion of
provincial Cricket Associations and Inter-Provincial Tournaments
in cl. ( d) etc., are not activities which should form part of a
sociai or recreational club. This Court found that the Appellant
was a Club of members organised with the primary object of
encouraging sports and games; that the income earned by the
Club from investments of immovable properties could not be held
to be income that accrued· to it with the aid and cooperation of the
employees:
From the evidence it was clear that in·effect
no
employees of the Club were engaged in looking after the buildings
which were let out for use as shops and offices; that the facility
of residential accommodation provided by the Club could not be
said to be in the nature of keeping a Hotel a> this facility was
provided exclusively for members of the Club at much lower
charges than those prevailing in the city with comparable accommodation; that the catering provided in the refreshment room of
the Club was also confined to the members of the Club only. No
outsider is allowed to take advantage of this facility, and the
bye-laws of the Club lay down that even if a guest was introduced
by a Member, the guest is not entitled to pay for any refreshment
served to him; that although large parties were held at the Club
where catering was provided by the Club and
non-Members
attended such parties, these facilities were in fact provided at the
instance of the Members of the Club; nor was there any evidence
that a large number of such parties were held for drawing an
inf~rence that holding such parties was a systematic arrangement
by which the Club was attempting to make p~ofits.