# WORKMEN OF INDIAN STANDARDS INSXITUTION v. MANAGEMENT OF INDIAN STANDARDS INSTITUTION

- **Citation:** [1976] 2 S.C.R. 138
- **Court:** Supreme Court of India
- **Decided:** 1975-10-06
- **Case number:** Civil Appeal No. 1297 of 1970
- **Bench:** A. Alagiriswami, P. N. Bhagwati, P. K. Goswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/workmen-of-indian-standards-insxitution-v-management-of-indian-standards-6701
- **Pages:** 26

## Headnote

Industrial
Disputes
Act,
1947-Sections 2(k), 2(g), 2(i) and 2(s)-
"lndustrial Dispute"'-Concept of 'Industry'-Meaning of-Tests to be satisfied
for treating an "activity" as an "Industry" within the meaning of Section 2(i).
Words and Phrases-Term "undertaking" used in the definition in Section
2 (g) of the Industrial Disputes Act, 1947-Meaning and scope of.
lndian Standards Jnstitutfon is an undertaking analo!iOlls to trade of busi•
ness and is an "Industry" within the meaning of Section 2(j).
The workmen of the Indian Standards Institution, a registered society, under
the Societies Registration Act, 1860 made certain demands which were not
accepted by the management and the dispute arising therefrom was taken in
conciliation. Unable to settle it, the Conciliation Officer made a "failure report"
to the Lt. Governor, who referred the dispute for adjudication to the Industrial
Tribunal u/ss. lO(l){d) and 12(5) of the Act.
Opposing the claim of the
workmen on merits, the management raised before the Tribunal, a preliminary
objection that the Institution was not an "Industry" within the meaning of
Section 2 (j) of the Act and, therefore, the dispute between the ma.nagement
and its workmen was not an "Industrial dispute" as defined in s. 2 (k) and
the Lt. Governor had no jurisdiction to refer it for adjudication under the
provisions of the Act.
The Tribunal applying the five tests laid down by the Supreme Court in
"Gymkhana C.lub's case" and "The Cricket Club's case" found that though
capital was employed in the Imtitution, it was not run with a profit motive
and so the fifth test was not satisfied.
So viewing, the Tribunal held that (a)
the Institution was not an "industry", (b) that the reference was outside the
power of the Lt. Governor and (c) that its jurisdiction to entertain the reference
and adjudicate upon it was ousted.
Allowing the appeal by special leave against the order of the Industrial
Tribunal.
(Alagiriswami, J. dissenting), the Court
HELD; (Per Bhagwati and P. K. Goswami, JJ.)
(i) The definition of an "industrial dispute" in s. 2(k) does not in so
many words refer to "industry". Ihlt on the grammar of the expression itself,
an "industrial dispute" must necessarily be a dispute in an industry and moreover
the expressions "employer" and "workman" used in the definition of "industrial
dispute" .carry the requirement of iudu·stry iu that definition by virtue of their
own definitions in sections 2(g) and 2(s).
[143A-B]
(ii) According to the dictionary meaning an "undertaking" means· "anything
undertaken; any business or work or project which one engages in or attempts;
an enterprise". It is a term of very wide connotation. But an "undertaking"
to be within the definition in s. 2(j) of the Act must be read subject to a
limitation viz., that it must be analogous to trade or business. In order that
an undertaking should be analogous to trade or business, profit motive and
capital investment are not essential requisites.
There can be such an undertaking without the presence of both or either of these attributes or features.
No rigid and doctrinaire approach can be adopted in considering the question
\
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WORKMEN I.S.I, v. MANAGEMENT l.S.l.
139
as to what are .the attributes or features which make an unde,rtaking analogous
to trade or busmess.
Such an approach would fail to measure up to the needs
of the growing welfare State which is constantly engaged in undertaking new
and varied activities as part of its social welfare policy. The concept of industry,
which is intended to be a convenient and effective tool in the hands of industrial
adjud\cation for. bringing about industrial peace and harmony, would lose its
capacity for ad1ustment and change. It would be petrified and robbed of its
dynamic content.
[145-B, D, 146A, C, DJ
(iii) An activity can be regarded as an "industry" within the meaning of
s. 2 (j) only if there is relationship of employer and employees and the forme~
is engaged in "business, trade, undertaking, man

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138
WORKMEN OF INDIAN STANDARDS INSXITUTION
v.
MANAGEMENT OF INDIAN STANDARDS INSTITUTION
October 6, 1975
[A. ALAGIRISWAMI, P. N. BHAGWATI AND P. K. GOSWAMI, JJ.]
Industrial
Disputes
Act,
1947-Sections 2(k), 2(g), 2(i) and 2(s)-
"lndustrial Dispute"'-Concept of 'Industry'-Meaning of-Tests to be satisfied
for treating an "activity" as an "Industry" within the meaning of Section 2(i).
Words and Phrases-Term "undertaking" used in the definition in Section
2 (g) of the Industrial Disputes Act, 1947-Meaning and scope of.
lndian Standards Jnstitutfon is an undertaking analo!iOlls to trade of busi•
ness and is an "Industry" within the meaning of Section 2(j).
The workmen of the Indian Standards Institution, a registered society, under
the Societies Registration Act, 1860 made certain demands which were not
accepted by the management and the dispute arising therefrom was taken in
conciliation. Unable to settle it, the Conciliation Officer made a "failure report"
to the Lt. Governor, who referred the dispute for adjudication to the Industrial
Tribunal u/ss. lO(l){d) and 12(5) of the Act.
Opposing the claim of the
workmen on merits, the management raised before the Tribunal, a preliminary
objection that the Institution was not an "Industry" within the meaning of
Section 2 (j) of the Act and, therefore, the dispute between the ma.nagement
and its workmen was not an "Industrial dispute" as defined in s. 2 (k) and
the Lt. Governor had no jurisdiction to refer it for adjudication under the
provisions of the Act.
The Tribunal applying the five tests laid down by the Supreme Court in
"Gymkhana C.lub's case" and "The Cricket Club's case" found that though
capital was employed in the Imtitution, it was not run with a profit motive
and so the fifth test was not satisfied.
So viewing, the Tribunal held that (a)
the Institution was not an "industry", (b) that the reference was outside the
power of the Lt. Governor and (c) that its jurisdiction to entertain the reference
and adjudicate upon it was ousted.
Allowing the appeal by special leave against the order of the Industrial
Tribunal.
(Alagiriswami, J. dissenting), the Court
HELD; (Per Bhagwati and P. K. Goswami, JJ.)
(i) The definition of an "industrial dispute" in s. 2(k) does not in so
many words refer to "industry". Ihlt on the grammar of the expression itself,
an "industrial dispute" must necessarily be a dispute in an industry and moreover
the expressions "employer" and "workman" used in the definition of "industrial
dispute" .carry the requirement of iudu·stry iu that definition by virtue of their
own definitions in sections 2(g) and 2(s).
[143A-B]
(ii) According to the dictionary meaning an "undertaking" means· "anything
undertaken; any business or work or project which one engages in or attempts;
an enterprise". It is a term of very wide connotation. But an "undertaking"
to be within the definition in s. 2(j) of the Act must be read subject to a
limitation viz., that it must be analogous to trade or business. In order that
an undertaking should be analogous to trade or business, profit motive and
capital investment are not essential requisites.
There can be such an undertaking without the presence of both or either of these attributes or features.
No rigid and doctrinaire approach can be adopted in considering the question
\
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WORKMEN I.S.I, v. MANAGEMENT l.S.l.
139
as to what are .the attributes or features which make an unde,rtaking analogous
to trade or busmess.
Such an approach would fail to measure up to the needs
of the growing welfare State which is constantly engaged in undertaking new
and varied activities as part of its social welfare policy. The concept of industry,
which is intended to be a convenient and effective tool in the hands of industrial
adjud\cation for. bringing about industrial peace and harmony, would lose its
capacity for ad1ustment and change. It would be petrified and robbed of its
dynamic content.
[145-B, D, 146A, C, DJ
(iii) An activity can be regarded as an "industry" within the meaning of
s. 2 (j) only if there is relationship of employer and employees and the forme~
is engaged in "business, trade, undertaking, manufacture or c~lling of ef?ploye~s'·
and the latter "in any calling, service employment, handicraft or md_ustnal
occupation or avocation". Though "undertaking" is a wor1 of. large import
and it means anything undertaken or any pro1ect or enterprise, m the context
in which it occurs it must be read as meaning an undertaking analogous. to
trade or business. 'In order. that an aciivity may be regarded as an. undertakmg
analogous to trade or business, it must be "organised or arranged m a manner
in which trade or business is generally organised or arranged". It must not
be casual, nor must it be for oneself nor for plewsure.
And it mus~ rest on
co-operation with a view to production, sale or distribution of material goods
or material services. It is entirely irrelevant whether or not there is profit
motive or investment of capital in such activity. Even without these two features, an activity can be an undertaking analogous to trade or business. It
is also immaterial "that its objects are charitable or it does not make profits
or even where profits are made, they are not distributed amongst its members",
or that its activity is subsidised by the Government. Again it is not necessary
that "the employer must always be a private individual. .......... , The Act,
in terms, contemplates cases of industrial disputes, where
the Government
or a local authority or a
public utility service may be the
employer.
It
also makes no difference that the material services rendered by the undertaking
are in public interest. The concept of public interest in a modern welfare
State, where new social values are fast emerging and old dying out, i~ indeed
so wide and so broad and comprehensive-is its spectrum and range that many
activities which admittedly fall within the category of "industry" are clearly
designed to subserve public interest In fact, whenever any industry is carried
on by the Government, it would be in public interest, for the Government. can
act only in public interest. Whether an l!ctivity is carried on in public interest
or not, can, therefore, never be a criterion for determining its character as
an industry. [149D-H, 150A-B]
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State of Bombay v. Hospital Mazdoor Sabha, [1960] 2 S.C.R. 866; Management of Saifdarjung Hospitcl v. K. S. Sethi [1971] 1 S.C.R. 177, followed.
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Federated Municipal and Shire Council Employees of Australia v. Melbourne
Corporation 26 C.L.R. 508;
Secretary, Madras Gymkhana Club Employees
Union v. The Management of the Madras Gymkhana Club [1968] 1 S.C.R. 742;
National Union of Commercial Employees v. M. R. Meher [1962J Supp. 3 S.C.R.
157; University of Delhi & Anr. v. Ramnath, [f964] 2 S.C.R. 703; Cricket Clull
of India Ltd.
v.
The Bomibay Labour Union & Anr. [1969] 1 S.C.R. 600,
discussed.
HELD (Per Alagiriswami, !. contra) :
Even when a trade, business, undertaking, manufacture or calling of
employers results in production of material goods or rendering of material
services, such an undertaking engaged in trade, business, manufacture or calling
of employers will not be an "industry, if it is run on charitable principles or
is run by Government or local body as pa·rt of its duty. In other words,
whenever an undertaking is engaged in activity which is not done with a view
to exploit it in a trading or commercial sense, but for public interest and
without any profit motive or in the form of social service or in the form of
activity intended to benefit the general public, it will not be an industry.
£161 G-H, 162A]
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SUPREME COURT"REPORTS
[1976] 2 S.C.R.
HELD FURTHER (Per Bhagwati and Goswami, JJ.)
(iv) The activities of the Indian Standards Institution fall within the category
of undertaking analogous to trade or business and ,constitute an "industry" within
the meaning of s. 2(j) of the Industrial Disputes Act, 1947.
[157-E]
Ah;nadabad Textile Industry Research Association v. The State of Bombay
a111/ 01hers, [1961] 2 S.c.R. 480; Management of Safdarjung Hospital v. K. S.
Sethi, [1971] 1 S.C.R. 177; Management of FJ.C.C.l. v. Its Workmen, [19721'
S.C.R. 353. followed.
Per contra ( Alagiriswami, J.)
The Institution has no capital, it does not distribute profits and even when
it is wound up, the assets would not go to any priva.'.e individual. It is not
run with a profit motive.
It is thus not an enterprise analogous to business
or trade.
In fact, its activity is only a manifestation of Government activity.
Instead of itself performing thego duties, which the Government itself has to
do in the service of the general public.
What the Institution does is to render
material services. The material service whi:h the Institution renders is really
a. subsidised service and it is rendered in public interest. It is an imtitution
interested and engaged in service to the public. Its activities do not go to
swell the coffers of any body.
Applyingi the tests evol\'._ed and applied in the·
Gymkhana Club's case and the Safdarjung's case, it is obvious that the institution
is not engaged in any industry. The activities of the Indi-an Standards Institution
are not intended to benefit any class of businessmen or to enable them to
increase their in:ome.
It is a public service institution and, therefore, is not
an industry.
[162D-F, 163-A]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1297 of 1970.
Appeal by special leave from the Award dated the 10th Oct@ber
1969 of the Additional I111dustrial Tribubal, Delhi in I.D. No.174 of
1968.
M. K. Ramamurthi, K. R. Nagaraja, S. K. Mehta, A. K . .lain and·
C, K. Srivastava, for the Appellant.
A. K, Sen, M. C. Bhandare. Dr. Anand Prakash, P. P. Rao, P. H.
Parekh and Mrs. Sunanda Bhandare, for Respondent No. 1.
The Judgment of P. N. Bhagwati and P. K. Goswami, JJ. was delivered by Bhagwati, J. A. Alagiriswami, J. gave a dissenting Opinion.
~
BIIAGWATI, J. Here, in this case, once again arises the question as
to what is an 'industry' within the meaning of the Industrial Disputes Act
1947.
This question has continua!ly·baffied and perplexed the Coarts
in our country. There have bee/a various judicial ventures in this rather·
volatile area of the law. The Ac! gives a definition of 'industry' in section 2 (j) but this definition is not very vocal and it has defined analysis,
so that judici>al effort has been ultimately reduced merely to evolving
tests by reference to characteristics regarded as essential for constituting
an activity as an 'industry'.
The decided cases show that these tests
have not been uniform; th~y have been guided more by an empirical'
rather than a strictly analytical approach. Sometimes these tests have
been liberally conceived, sometimes narrowly.
The latest expositionis to be found in the judgment of a Bench of six Judges of this Court"
I
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WORKMEN r.s.1. v. MANAGEMENT 1.s.1. (Bhagwati, J.)
141
in Sajdarjung Hospital v. K. S. Sethi.( 1) But while applying the tests
indicated in this decision, it is necessary to remember that the Industrial Disputes Act, 194 7 is a legislation intended to bring about peace
and harmony between management and labour in an 'industry' so that
production does not suffer and at the same time, labour is not exploited
and discontented and, therefore, the tests must be so applied as to give
the widest possible connotation to the term 'industry'.
Whenever a
question arises whether a particular concern is· an 'industry', the approach must be broad and riberal and not rigid or doctrinairn.
We
cannot forget that it is a social welfare legislation we are i'.1terpreting
and we must place such an interpretation as would advance the object
and purpose of the legislation and give full meaning •and effect to it in
the achievement of its avowed social objective. With these prefatory
observations., we proceed to state the facts giving rise to the appeal.
The Indian Standards
Institution
(hereinafter referred
to
as
'the Institution') is a Society registered under the Societies Registration
Act, 1860. The workmen of the Institution represented by the Indian
Standards Institution Employees' Union (hereinafter referred to as 'the
Union') made certain demands which were not accepted by the management and a dispute accordingly arose between the management and the
workmen. The dispute w•as taken in conciliation but the Conciliation
Officer was unable to bring about settlement a:nd he made, what is commonly known as "failure report" to the Lt. Governor of Delhi. The Lt.
Governor thereupon, by an order dated 28-9-1968, referred the dispute
for adjudication to the Industrial Tribunal under sections 10(1) (d) and
12(5) of the Act. The order of the Lt. Governor set out the demands
which were to form the subject-matter of adjudication by the Industrial Tribunal. The Union representing the workmen filed a statement of claim in support of these demands. The management opposed
the demands on merits but in addition to the defence on merits, they
raised a preliminary objection which, if well founded, would strike at
the very root of the jurisdiction of the Industrial Tribunal to entertain
the reference.
The preliminary objection was that the Institution was
not an industry within the meaning of s. 2(j) of the Act and, therefore,
the dispute between the management of the Institution and its workmen was not an 'industrial dispute' as defined in sec. 2(k) and the Lt. -
Govern.or had no jurisdiction to refer it for adjudication under the
provisions of the Act.
Issue No. 1 arising out of this preliminary
objection was in the following terms : "Is Indian Standards Institute
an industry or not", and this issue was directed to be tried as a preliminary issue.
The Industrial Tribunal
proceedeo to examine the legal
position for the purpose of determining when a particular activity can be regarded as an industry within the meani~1g of s. 2(j) of the Act. It observed that there were five tests laid down by the decisions of this Court
in Madras Gymkhana Club Employees Union v. The Management of the
Madras Gymkhana Club( 2 ) and Cricket Club of India Ltd. v. The
-----~---
(!) [!971] 1 S. C. R. 177.
(2) [1968] 1. S. C.R. 742.
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SUPREME COURT REPORTS
[1976] 2 S.C.R.
Bombay Labour Union & Anr.(1') which were required to be satisfied
before an activity could be held to be an "industry" and they were as
follows :
"1. When the operation undertaken rests upon cooperation
between employers and employees with a view to production and distribution of material goods or material
services;
2. It must bear the definite character of trade or business
or manufacture or calling or must be capable of being
described as an Undertaking analogous to business or
trade resulting in material goods or material services;
3. The activity to be considered as an 'industry' must not
be casual but must be distinctly systematic;
4. The work for which labour of workmen is required, must
be productive and workmen must be following an employment calling, or industrial avocation; and
5. Whea private individuals are the employers, the industry is run with capital and with a view to profits. (These
two circumstances may not exist when Government or
Local Authority enters upon business, trade, manufac-.
tu re or an undertaking analogous to trade)."
On an application of these tests, the Industrial Tribunal found that the
Institution satisfied the first four tests and this indeed was not disputed,
but so far as the fifth test was concerned, it was not satisfied since
capital was undoubtedly employed in the institution but the Institution
was not run with a view to profit.
The profit motive was ruled out
by thtci objectives of the Institution and as the profit motive was lacking,
the Institution could not be held to be an 'industry'.
The Industrial
Tribunal accordingly, by an order dated 10th October, 1969, held that
the reference of the dispute between the management of the lostitution
dnd its. workmen was outside the power of the Lt. Governor and the
Industrial Tribunal had no jurisdiction to entertain the reference or to
adjudicate upon it. The workmen were obviously aggrieved by this order
made by the Industrial Tribunal since it closed the doors of industrial
adjudication and left the workmen without any remedy to redress their
grievances and hence they preferred the present appeal against the order
of the Industrial Tribunal with special leave obtained from this Court.
The Industrial Disputes Act, 1947, as its long title and preamble
show, has been enacted to make provision for investigation and settreimeat of industrial disputes.
It is only an 'industrial dispute' which
can be referred for adjudication under ss. 10(1) (d) and 12(5) of the
Act.
What is a 'industrial dispute' is to be found ins. 2(k) which defines an industrial dispute to mean "any dispute or difference between
employers and 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
(1)
[1969] 1 S. C.R. 600.
•
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•
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WORKMEN r.s.r. v. MANAGEMENT r.s.r. (Bhagwati, !. )
143
<>f labour, of any person."
This definition, of course, does not in so
many terms, refer to 'industry'. But, on the grammar of the expression
itself, an industrial dispute must necessarily be a dispute in an industry
and moreover the expressions 'employer' •and 'workman' used in the definition of 'industrial dispute' carry the requirement of 'industry' in that
definition by virtue of their own definitions in ss. 2(g) a'ad 2(s). It is,
therefore, necessary to examine what is the concept of an 'industry'
within the meaning of the Act.
.
Now, the word 'industr1y' is defined in s. 2(j) and
that section
reads :
" 'industry' means any business, trade, undertaking, manuA
B
facture or calling of employers, and includes any calling, serC
vice, employment, handicraft, or industrial occupatida or
avocation of workmen_;"
This definition is in two parts.
The first part says that it means any
business, trade, undertaking, manufacture or ca~lil'.g of employers ~nd
then it goes on to say in the second part that 1t mcl:ides any call1~g,
service, employment handicraft, or industrial oc~upat10? or a"'.o.cah~n
of workmen.
This Court had occasion to consider this defimt10n m
the case of State of Bombay v. The Hospital Mazdoor Sabha( 1) where
this Court sought to expand the concept of 'industry' by a process of
judicial interpretation to meet the changing requirements of modern
currents of socio-economic thought.
It was pointed out bty this Court
that "section 2 Ci) does not define 'industry' in the usual manner by
prescribing what it means : the first clause of the definition gives the
statutory meaning of 'industry' and the second clause deliberately
refers to several other items of industry and brings them in the definition in an inclusive way."
But this interpretation of the definition was
disapproved by a larger bench of this Court in Management of Safdarjung Hospital v. K. S. Sethi (supra).
We shall immediately proceed
to examine that decision, as that is the decision which presently holds
the field and must ultimately govern the determination of the present
case.
But before we do so, we must refer to another decision of this
Court which came a little before Safdarjung Hospital case (supra).
That is the decision in Secretary, Madras Gymkhana Club Employees
Union v. Management of the Gymkhana (supra).
While dealing with
the definition of 'industry' in this case, it was pointed out b'y this Court
that "denotation of the term 'industry' is to be found in the first part
relating to employers and the full connotation of the term is intended
to include the second part relating to workmen" and it was concluded :
"If the activity can be described as an industry with reference to the
occupation of the employers, the ambit of the industry, under the force
of the second part, takes in the different kinds of activity of the employees mentioned in the second part. But the second part standing
alone cannot define 'industry' ... By the inclusive part of the definition
the labour force employed in an industry is made an integral part of
~he industry for purpose of industrial disputes although industry is
{I) [1960] 2 S. C. R. 866.
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SUPREME COURT REPORTS
[1976] 2 S.C.R.
ordinarily something which emploiyers create or undertake."
We may
point out that the concept underlying the observation that "industry is
ordinarily something which employers create or undertake" is gradually
yielding place to the modern concept which regards industry as a joint
venture undertaken by employers and workmen-an enterprise which
belongs equally to both.
But we need not dwell on this any longer,
as it is not of immediate concern to us in this case.
It is sufficient to
point out that the interpretation of the definition of 'industry' given
in Madras Gymkhana case (supra) struck a slightly different note from
what it was understood to mean in the State of Bombay v. Hospital
Mazdoor Sabha cas·~ (supra).
But again in Safdarjung Hospital case
(supra) this Court found it neccssany to qualify what it had said in the
Madras Gymkhana case (supra) in regard to the meaning of 'industry'
and after referring to the definition of industry in s. 4 of the Commonwealth Conciliation and Arbitration Act,
1909-1970 this Court
observed :
"Although the two definitions are worded differently the
purport of both is the same. It is not necessary to view our
definition in two
parts.
The definition read as a whole
denotes a collective enterprise in which employers and employees are associated.
It does not exist either by employers
alone or by employees alone.
It exists only
when there
is a relationship between employers and employees, the former
engaged in business, trade, undertaking, manufacture or
calling of employers and the latter engaged in any calling,
service, emplo1yment, handicraft or industrial occupation or
,... avocation.
There must, therefore, be an enterprise in which
the employers follow their avocations as detailed in the definition and employ workmen.
The definition no doubt seeks
to define 'industry' with reference to employers' occupation
but include the employees, for without the two there can be
no industry.
An industry is only to be found when there
are employers and employees, the former relying upon the
services of the latter to fulfil their own occupations."
This Court then proceeded to add that "every case of employment is
not necessarily productive of an industry.
Domestic employment,
administrative services of public officials, service in aid of occupations
of professional men, also disclose relationship of employers and employees but they c,annot be regarded as in the course of industry".
A
workman can be regarded as one employed in an industry only "if he
is following one of the vocations mentioned in conjunction with his
employers engaged in the vocations mentioned in relation
to the
employers".
Thus, a basic requirement of 'industry' is that the employers must be "carrying on any business, trade, undertaking, manufacture
or calling of employers. If the1y are not, there is no industry as such."
Now, what these expressions mean has been discussed in a large number of cases decided by this Court.
These cases have all been reviewed in the Madras Gymkhana case.
We are, however, not directly
concerned with any of these expressions except 'undertaking', for the
case of the workmen is not that the management of the Institution is
/
•
WORKMEN 1.s.r. v. MANAGEMENT 1.s.1. (Bhagwati, J.)
145
carrying on any business, trade, manufacture or calling but it r~sts. on
a very limited ground, namely, that the management of the Institution
is canying on an undertaking.
It, therefore, becomes neces~ar~ to
inquire what is the meaning and scope of the term 'undertakmg as
used in the definition in s. 2 (j).
Now, according to its dictionary meaning as given by Webster,
"undertaking" means "anything undertaken; any business, work or
project which one engages in or attempts; an enterprise". It is a term
of very wide denotation.
But all decisions of this Court are agreed
that an undertaking to be within the definition in s. 2 (j) must be read
subject to a limitation, name~y, that it must be analogous to trade or
business.
That was the view expressed in the Hospital Mazdoor Sabha
case (supral-vide page 879 of th0 Report-and the same view was
reiterated in the Safdarju11g Hospital case (supra)-vide page 187 of
the Report.
But the question is : when can an undertaking be said
to be analogous to trade or business : what are the attributes or characteristics which it must possess in common with trade or business in
order to be regarded as analogous to trade or business ? That is a
question which is not very easy to decide, but there are decisions of
this Court which afford guidance in dealing with this question.
This Court pointed out in the Hospital Mazdoor Sabha case (supra)
that in order that an undertaking should be analogous to trade or
business, it is not necessary that it should possess the two essential
features associated with the conventional notion of trade or business,
namely, profit motive and investment of capital.
Gajendragadkar, J.,
(as he then was), speaking on behalf of the Court observed : "It is
not disputed that under s. 2(j) an activity can and must be regarde9
as an industry even though in carrying it out profit motive may be
absent.
It is also common ground that the absence of investment of
any capital would not make a material difference to the applicability
of s. 2(j). Thus, two of the important attributes conventionally associated with trade or business are not necessarily predicated in interpreting s. 2 (j) ".
This view was neither overruled nor departed from
!n the Sajdarjung Hospital case (supra).
On the contrary, the decision
m Safdar jung Hospital case reaffirmed this view and gave it the seal of
approval of a bench of six judges of this Court. This Court speaking
through Hidayatullah, C.J., pointed out in that case :
"It is not
necessary that there must be a profit motive, but the enterprise must
be analogous to trade or business in a commercial sense-It is an
erroneous assumption that an economic activit1y must h~ related to
capital and profit making alone.
An economic activity can exist without the _presen7e of both". · The learned Chief Justice, afll'r referring
to the obsei:_vat10ns of Isaacs and Rich, JJ., in Federated /vfuniciμal a:1d
Shire Council Employees· of Australia v. Melbourne Corporation(!)
stated that these observations "indicate that in those activiti~s in which
Government takes to ~ndu~trial ventures, the notion of profit making
and the absence of capital m the true sense of the word are irrelevant"
It is, therefore, clear that, according to the decisions of this Court ___:_
and on_~his P()i~!~e-~ecision in Safdarjung Hospital case (supra) does
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not make any departure from that in the Hospital Mazdoor Sabha case
(supra)-profit motive and capital investment are not essential requi·
sites for an undertaking within the meaning of the definition in s. 2(j).
There can be such an undertaking without the presence of both or
either of those attributes or features.
What then are the attributes or features which make an under·
taking analogous to trade or business so as to attract the applicability of
s. 2(j). It is difficult to enumerate these possible attributes or features
definitely or exhaustively.
Indeed, it would not be prudent to do so.
So infinitely varied and many·sided is human activity and with the
incredible growth and progress in all branches of knowledge and ever
widening areas of experience at all levels, it is becoming so diversified
and expanding in so many directions hitherto unthought of, ,IJat no
rigid and doctrinaire approach can be adopted in considering this
question.
Such an approach would fail to measure up to the needs
of the growing welfare state which is constantly engaged in undertaking
new and varied activities as part of its social welfare policy.
The
concept of industry, which is intended to be a convenient and effective
tool in the hands of industrial adjudication for bringing about industrial
peace and harmony, would lose its capacity for adjustment and change.
It would be petrified and robbed of its dynamic content. The Court
should, therefore, as far as possible avoid formulating or adopting
generalisations and hesitate to cast the concept of industry in a narrow
rigid mould which would not permit of expansion as and whl'.n necessity
arises..
Only some working principles may be evolved which would
furnish guidance in determining what are the attributes or characteristics
which would ordinarily indicate that an undertaking is analogous to
trade or business.
What can fairly be regarded as a sufficiently elastic or
flexible
working principle for this purpose has been discussed in a number of
decisions of this Court, of which we may refer only to three, namely,
the Hospital Mazdoor Sabha case (supra),
The Madras Gymkhana
case (supra) and the Safdarjung Hospital case (supra).
Though the
language used in these decisions to state the working principle is not
uniform and there are minor variations in the formulation according
as one aspect is more emphasised than the other, the working principle
laid down is basically the same. Gajendragadkar, J., (as he then was)
speaking on behalf of the Court in the Hospital Mazdoor Sabha case
(supra) stated the working principle in these terms :
" ... as a working principle it may be stated that an acti·
vity systematically or habitually undertaken f?r the prod~c·
tion or distribution of goods or for the rendenng of matenal
services to the communitty at large or a part of such commu·
nity with the help of employees is an undertaking.
Such an
activity generally involves the co·operatio11 of the employer
and the employees; and its object is the satisfaction of mate·
rial human needs. It must be organised or arranged in a
manner in which trade or business is generally organised or
arranged.
It must not be casual nor must it.be for oneself
nor for pleasure.
Thus the manner in which the activity in
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147
question is organised or arranged, the condition of the cooperation between employer and the emplo_Yee ne~essary for
its success and its object to render material service .to the
community can be regarded as some of the features which are
distinctive of activities to which s. 2(j) applies."
It was the same working principle which was pithly e:rpressed by this
Court through Hidayatullah J. (as he then was) m the
Madras
Gymkhana case (supra) wh~re 'it was stated : "--before the wo_rk
engaged in can be described as an industry, it must bear the defimte
character of 'trade' or 'business' or 'manufacture' or 'calling' or must
be capable of being described as an undertaking resulting in material
goods or material services".
This last proposition. taken from the
judgment in the Madras Gymkhana case (supra) was m so ma?y terms
accepted as valid in the Safdarjung Hospital case (supra) : vide page
189 of the Report.
This Court speaking through Hidayatullah, C.J.,
pointed out in the Safdarjung Hospital case (supra) at pages 186 and
18 7 of ~:ie Report :
"But in the collocation of the terms and their definitions
these terms have a definite economic content of a particular
type and on the authorities of this Court have been uniformly
accepted as excluding professions and are only concerned
with the production-distribution and consumption of wealth
and the
production and availability of material se.rvices.
Industry has thus been accepted to mean only trade and
business, manufacture, or undertaking analogous to trade or
business for the production of material goods or weaith and
material services."
What is meant by 'material' services in this context was explained by
the learned Chief Justice in these words :
"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 service~
being given individually and by individuals are services no
doubt but not material services.
Even an
establishment
where man!Y such operate cannot be said
to convert their
professional services into material services. Material services
involve an activity carried on through cooperation between
employers and employees to provide the community with the
use. of so_mething such as electric power, water, transportation,
mail. del!very, telephones and the like.
In providing these
service~ there may be employment of trained men and even
profess10nal men, but the emphasis is not on what these men
?o but upon the prod~ctivity of a service organised :;is an
mdustr¥ and com1;11erciapy valuable.
Thus the services of
profes~10nal men mvolvmg benefit to individuals according
to their ne~ds, ~u~h a_s doctors, teachers, lawyers, solicitors
etc. are eas!ly d1stmgmshable from an activity such as tran
spo_rt service. . ~e latter is of a commercial character i~
which somethmg 1s brought into existence quite apart from
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the benefit to particular individuals. lt is the production of
this something which is described as the production of material services."
The learned Chief Justice then proceeded to explain why professions
must be held to be outside the ambit of industry.
This is what· he
said :
"A profession ordinarily is an occupat!on requiring intellectual skill, often coupled with manual skill. Thus a teacher
uses pure~y intellectual skill while a painter uses both.
In
any event, they are not engaged in an. occupation in. which
employers and employees co-operate m th~ producti?n or
sale of commodities or arrangement for theJr production or
sale or distribution and their services cannot be described as
material services."
It was for this reason, observed the learned Chief Justice, that the
establishment of a solicitor was held not to be an industry "because
there the services rendered by the employees were in aid of professional
men and not productive of material goods or wealth or
materjal
services". (1)
The learned Chief Justice pointed out that in t'he
University of Delhi & Anr. v. Ramnath( 2 ) the University was also
held to be outside the ambit of industry for the same reason.
The
learned Chief Justice then summarised the working principle-the
broad test or criterion for determining what is an undertaking analogous
to trade or business-in these terms :
"It, therefore, follows that before an industrial dispute
can be raised between employers and their employees or
between employers and employers or between employees
and employees in relation to the emplOlyment or non-employment or the terms of employment or with the conditions of
Jabour of any person, there must be first established a relationship of employers and employees associating together, the
former following a trade, business, manufacture, undertaking
or calling of employers in the production of material goods
and material services al\d the latter following any calling,
service, employment, handicraft, or industrial occupation or
avocation of workmen in aid of the employers' enterprise. It
is not necessary that there must be a profit motive but the
enterprise
must be analogous to trade or business in a
commercial sense.",
and after referring to the observations of Isaacs and Rich, JJ., in
Federated Municipal and Shire Council Employees of Australia
v.
Melbourne Corporation (supra)
pointed out that these observations
showed that "industri~l disputes o~cur in operations in which employers
and employees associate to provide what people want and desire, in
other words, ·where there is production of material goods or material
services."
(emphasis added).
(1) National Union of Commercial Employers v. M. R. Meher, [1962] Supp. 3 S. C. R.
157.
(2) [1964] 2 s. c. R. 703.
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WORKMEN 1.s.r. v. MANAGEMENT r.s.r. (Bhagwati, ]. )
14 9
It would thus be seen that the broad test for deter~1in~ng wh~n
an undertaking can be said to be analogous to trade or ousmes~ laid
down in the Safdarjung Hospital case (supra) was t.he same a~ m the
Hospital Mazdoor Sabha case (supra). The Safd~r1ung Hosp!tal case
did not make any real departure
the
enunciation
of
t~is test.
It is only in the ap~lication of this te~t to the. case of hosp~t,als that
the Safdarjung Hospital case took a different view and obsened that
the judgment in the Hospital Mazd?or Sabha c~se ~su~~a) had taken
"an extreme view of the matter which was not.iustified " There ~as
also one other ground on which the decision in the Safdanung Hospital
case disapproved of the view taken in the Hospital Mazdoor Sabha case
and that ground was that the decision in the Hospital Afazdoor Sabha
case proceeded on an erroneous b;:tsis t~at an activity, in order to be ~n
undertaking analogous to trade or busmess, need not b_e . an econo~ic
activiey asd applied a wrong test, namely, 'can such activity be earned
-0n by private individuals or group of individuals ?'
~t would, therefore,
seem that in view of the decision in Safdarjung Hospital case, this last
test appli~d in the Hospital Mazdoor Sabha case must be rejected as
irrelevant and it must be held that an activity, in order to be recognised
as an undertaking analogous to trade or business, must be an economic
activity in the sense that it is productive of material goods or material
services.
-
To summadze, an activity can be regarded as an 'industry' within
the meaning of s. 2 (j) only if there is relationship of employer and
employees and the former is engaged in 'business, trade, undertaking,
manufacture or calling of employers' and the latter, 'in any calling,
service, employment, handicraft or industrial occupation or avocation'.
Though 'undertaking' is a word of large import and it means anything
undertaken or any project or enterprise, in the context in which it
occurs, it must be read as meaning an undertaking analogous to trade
or business.
In order that an activity ma~ be regarded as an undertaking analogous to trade or business, it must be "organised or arranged
in a manner in which trade or business is generally organised or
arranged". It must not be casual nor must it be for oneself nor for
pleasure.
And it must rest on co-operation between employer and
employees who associate together with a view to production, sale or
distribution of material goods or material services.
It is entirely irrelevant whether or not there is profit motive or investment of capital in
such activity.
Even withoqt these two features an activity can be an
undertaking analogous to trade or business.
It is also immaterial
"that its objects are charitable or that it does not make profits or even
where profits are made, they are not distributed amongst the members",(!) or that its activity is subsidised by the Government.
Again
it is not necessary that "the employer must always be a private individual. . . The Act, in terms, contemplates cases of industrial disputes
where the Government· or a local authority or a public utility service
may be the emph:Jiyer ... "(2 )
It also makes no difference that the
material services rendered by the undertaking are in public interest.
(I) Management of FICCI v. Workmen, [1972] 2 S. C.R. 353 at 376.
(2) Madras Gymkhana case, p. 756 of the Report.
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