Industrial Disputes Act, 1947: This is a defining moment for industry

The definition and interpretation of ‘industry’ in Section 2(j) of the Industrial Disputes Act, 1947, has been a contentious issue for over four decades. Considering its “serious and wide-ranging implications,” a seven-judge Constitution Bench of the Supreme Court has referred the issue to a nine-judge bench.
As serious doubts were raised about the correctness of the view taken in the Bangalore Water Supply’s case, a five-judge bench in May 2005, had referred the matter to a larger bench which was supposed to give a meaning and effect to the definition clause in the present context and also keeping in view the amended definition of ‘industry’ which has been kept dormant for many years since amendment in 1982.

“Pressing demands of the competing sectors of employers and employees and the helplessness of legislature and executive in bringing into force the Amendment Act compel us to make this reference,” the five-judge bench had said in its 2005 reference order. This was after a three-judge bench found an “apparent conflict” between its two decisions of 1996 and 2001 on the issue.
Earlier in 1996, a three-judge bench while relying on a 1978 seven-judge bench verdict had held that the social forestry department was covered by the definition of ‘industry’. Later in 2001, a two-judge bench took a contrary view on the issue. The definition of industry as provided in Section 2(j), which came into effect immediately after independence, says that “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.”
In the landmark judgement, Bangalore Water Supply and Sewerage Board versus A Rajappa, the seven-judge SC bench in 1978, extended the definition from manufacturing units to other government establishments, irrespective of the functions performed by them. It decided that Bangalore Water Supply was an industry by a majority vote of 5:2, a stand opposed by the board itself.
A set of three criteria was developed by Justice Krishna Iyer in the case to determine conclusively what activity and establishment should constitute an industry. It was stated that where there is a (i) systematic activity, (ii) organised by co-operation between employer and employee, (iii) for the production and/or distribution of goods and services calculated to satisfy human wants and wishes, prima facie, there is an ‘industry’ in that enterprise.
With the 1978 judgement, professions such as attorneys, activities like clubs, educational institutions, co-operatives, research institutes, and philanthropic enterprises were also covered in the definition of industry. The top court also held that the absence of profit motive or gainful objective or whether the venture is public/joint or private or other sector is irrelevant while deciding whether an enterprise is an industry. It also ruled that welfare economic activities undertaken by the government or statutory bodies not being sovereign functions are also covered by the definition.

Aggrieved by the widened definition, the government amended the Industrial Disputes Act in 1982. Although the new provision is yet to come into force.

With this as the background, the apex court in 2005 in the case of State of UP vs Jai Bir Singh sought a reconsideration of the 38-year-old verdict by a larger bench as the verdict carried an “over-emphasis on the rights of the workers.”
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While the objective in 1947 was to provide for effective machinery for investigation and settlement of industrial disputes, legal experts feel that the definition of industry certainly require reconsideration in the present business scenario. In order to survive, industry needs to be competitive in both domestic and international markets.

Advocate DL Chidananda feels that “Indian manufacturers have to keep pace with developed and growing economies. To have a competitive advantage, the state of infrastructure, legal framework and better government policies are required. Of course, welfare of the workforce and compliance with Indian employment laws have to be kept in mind.”

Experts, however, feel that taking the judicial route on the issue is a long drawn process. Senior advocate Arvind Dattar says that “rather than waiting for the nine-judge bench, the faster solution would be if Parliament steps in and takes a call… Now that the line between manufacturing and services sector is getting blurred with GST coming into picture, the legislature can work out an expansive definition.” The definition is yet to attain finality and it is likely to take much time if judicial route is taken