EVER since the enactment of Industrial Disputes Act, 1947, the definition of `industry' has been surrounded by controversy. However, after a clarification by a seven-judge bench of the Supreme Court the question to be asked is not what is an industry but what is not an industry? In a recent judgment, the Court has set aside an award of the Labour Court of Gujarat holding that the Physical Research Laboratory, Ahmedabad, was an industry within the meaning of section 2(j) of the Industrial Disputes Act.

The term industry as defined by section 2(j) of the Industrial Disputes Act 1947, reads as under: ``industry means any business, trade, undertaking, manufacture or calling of employees and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen.'' The first part of the definition gives the statutory meaning and the second part deliberately refers to several other items of industry and includes them in the definition. The first part defines it from the point of view of the employers and the other from the stand point of the employees.If an activity falls under either part of the definition, it will be an industry.

Though the definition has not undergone any amendment, it has undergone diverse judicial interpretations by the Supreme Court and different High Courts. The Supreme Court sought to put at rest the confusion by declaring that (a) where (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 (not spiritual or religious but inclusive of material things or services geared to celestial bliss e.g. making, on a large-scale prasad or food), prima facie there is an industry in that enterprise. It made it clear that absence of profit motive or gainful objective is irrelevant, be the venture in the public, joint, private or other sector.

The true focus is functional and the decisive test is the nature of the activity with special emphasis on employer-employee relations. If the organisation is a trade or business it does not cease to be one because of philanthropy animating the undertaking.

This ruling was given in the Bangalore Water Supply and Sewerage Board v A Rajappa (supra). But even after this, the question to be asked is not what is industry but what is not. Despite their efforts to find a working formula for determining as to what activity is an industry and what not, practically all judges have cried in frustration for legislative relief.

It is obvious that even after Bangalore Water Supply and Sewerage decision, the judges themselves are not satisfied with respect to the interpretation of the definition of industry. The need for legislative reform has been stressed by all the judges. It may be relevant to point out here that a very sensible and pragmatic definition was attempted in the Industrial Relations Bill of 1978 (Bill No. 137 of 1978), under Section 2(17). But with the dissolution of Parliament in August, 1979, the Bill had lapsed. This definition with some additions and alterations was, however, enacted by Parliament in the Industrial Disputes (Amendment) Act, 1982, (Act 46 of 1982). The definition of industry in section 2(j) had been substituted with the new definition by the Industrial Disputes (Amendment) Act, 1982 (Act 46 of 1982). Though the Act has been substantially brought into force effective 21.8.1984, this definition has not been brought into force.

After the aforesaid judgment, labour courts/industrial tribunals, High Courts and the Supreme Court stopped entertaining any objection of the employer that a particular organisation/establishment or institute was not an industry under the Industrial Disputes Act, 1947.

However, a breakthrough came in one case wherein the Supreme Court while rejecting the contention that as sovereignty vested in the people the concept of sovereign functions would include all welfare activities -- on the ground that taking of such a view would erode the ratio in Bangalore Water Supply case — observed that ``the dichotomy of sovereign and non-sovereign functions did not really exist — it would all depend on the nature of the power and manner of its exercise''. After referring to the three traditional sovereign functions, legislative power, the administration of laws and the exercise of the judicial power and also the decision of the Gujarat High Court — wherein famine and drought relief works undertaken by the State Government were held not to be an industry, the Supreme Court observed that ``what really follows from this judgment is that apart from the aforesaid three functions, there may be some other functions also regarding which a view could be taken that the same too is a sovereign function''.

In another case, the Supreme Court had to consider whether the establishment of Sub-Divisional Inspector of Post at Vaikam was an `industry'. Therein the Supreme Court observed, ``India as a sovereign, socialist, secular, democratic republic has to establish an egalitarian social order under rule of law. The welfare measures partake the character of sovereign functions and the traditional duty to maintain law and order is no longer the concept of the State. The Directive Principles of State Policy enjoin on the State diverse duties under Part IV of the Constitution and the performance of the duties are constitutional functions. One of the duties of the State is to provide telecommunication service to the general public as an amenity and so is an essential part of the sovereign functions of the State as a welfare State. It is not, therefore, an industry''.

The Supreme Court in its judgment on April 8, has set aside an award of a labour court of Gujarat, holding that the Physical Research Laboratory (PRL), Ahmedabad, an institute under the Department of Space, was not an industry within the meaning of section 2(i) of the Industrial Disputes Act. In its appeal, the appellant challenged the award of the labour court as the Gujarat High Court had already taken the view that PRL was an industry and different high courts and industrial tribunals expressed conflicting views on this issue.

PRL was not engaged in a commercial or industrial activity and it could not be described as an economic venture or a commercial enterprise. It was not an industry even though it was carrying on the activity of research in a systematic manner with the help of its employees, as it lacked that element which would make it an organisation carrying on an activity which could be said to be analogous to the carrying on of a trade or business, because it was not producing and distributing services which were intended or meant for satisfying needs of consumers.

The appellant contended before the Court that PRL was a public trust registered under the Bombay Public Trusts Act, 1950 and it was financed mainly by the Central Government. Furthermore, PRL was not directly or indirectly carrying on any trade or business and its activities did not result in production or distribution of goods or services calculated to satisfy human wants and wishes. The knowledge acquired as a result of the research carried on by it was not sold but was utilised for the benefit of the Government and therefore, it could not be termed as an industry as defined by section 2(j) of the Industrial Disputes Act.

It is pertinent to mention here that the Madras High Court has also held that the States Farms Corporation of India having a predominant activity to produce high breed quality of seeds to be supplied to state governments and local farms would not attract the definition of `industry' under the Industrial Disputes Act.

The above ruling has cleared certain cobwebs and will go a long way in the field of industrial jurisprudence. Also, it has become imperative on the part of government to implement the definition of industry as amended by Amendment Act (46 of 1982).

The author practises in the Supreme Court of India.

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