The Central government told the Supreme Court on Tuesday that excessive expansion of the definition of “industry” has serious consequences as it can burden employers and deter private players from entering the market.

The submission was made by Central government's senior most law officer, Attorney General for India (AG) R Venkataramani, before a 9-judge Constitution Bench which began hearing a case today regarding the scope of definition of 'industry' under the Industrial Disputes Act, 1947.

The Bench of Chief Justice of India (CJI) Surya Kant along with Justices BV Nagarathna, PS Narasimha, Dipankar Datta, Ujjal Bhuyan, Satish Chandra Sharma, Joymalya Bagchi, Alok Aradhe and Vipul M Pancholi is examining the correctness of the Court's seven-judge Bench judgment in Bangalore Water Supply & Sewerage Board (BWSSB) v. R Rajappa & Others which was pronounced in 1978.

In that case, the top court had ruled that the term ‘industry’ has to be given a wide interpretation and every profession regardless of profit motive was included within ‘industry’.

AG Venkataramani today said the Courts should not substitute their own social or economic philosophy for legislative judgment.

"Industrial law must balance both sides, preventing exploitation of workers but also ensuring that employers are not placed in a position where they cannot function, as growth of industry is itself a matter of public good. An over-expansive interpretation can deter private enterprise in a country where employment opportunities are scarce, and even professions based on skill, talent and intellectual attainment risk being unnecessarily brought within the fold of 'industry.' We must be cautious not to fall into expansionism driven by ideology; courts should not substitute their own social or economic philosophy for legislative judgment," the AG said.

Referring to the repeal of the Industrial Disputes Act, Venkataramani said the parliament has already intervened to restructure a rather vague and somewhat amorphous definition under Section 2(j).

"It would be difficult to ignore that legislative intent. The Court itself, from Bangalore Water Supply onwards, has struggled with this clumsy and expansive definition, attempting to give it meaning consistent with the anti-exploitation object of the Industrial Disputes Act, but that exercise has its limits. There is also a recognised need in law to retain a certain degree of openness in definitions, allowing them to evolve over time, but that does not justify unbounded expansion," he said.

Venkataramani further submitted that collective bargaining was very popular during earlier times and the same is now covered by policy and statutes.

"Construction worker welfare legislation was the most progressive one in the 1980s and now we have crossed all those thresholds," the AG said.

Additional Solicitor General (ASG) KM Nataraj, representing the State of Uttar Pradesh, also argued against expansive definition of industry.

"There is a need to balance the competing interests of employer and employee. We cannot give sweeping definition here," Nataraj said.

He also submitted that the subsequent amendment made to the definition has to be taken as an indicator of the legislative intent.

Senior Advocate Shekhar Naphade submitted that the Court had then proceeded on a value-loaded, worker-oriented approach.

"What is required now is to objectify the process of interpretation. The time has come to do so. We must look at the plain meaning of the words 'trade', 'business', and 'manufacture'," he submitted.

He also commented on the teaching sector in context of industry.

"Let us come to teaching. What is the essence of teaching? It is intellectual enlightenment. It cannot be equated with a material service. Education is the foundation of the progress of any country. Article 41 of the Directive Principles requires the State to take steps to provide education. Article 21A now makes education a fundamental right. Even prior to that, this Court had recognised it as part of the right to life. Therefore, what the State performs as a statutory obligation cannot be treated as an industry at all. That is another aspect," he said.

In 1978, a seven-judge bench had held in the Bangalore Water Supply case that the term ‘industry’ has to be given a wide interpretation in light of the broad definition under the Industrial Disputes Act. 

Accordingly, every profession regardless of profit motive was included within ‘industry’. However, there has since been a slew of cases calling for a more restrictive interpretation of industry and limiting it to manufacturing units.

A five-judge Constitution Bench in 2005 referred the decision in Bangalore Water Supply for reconsideration and noted that the majority judgment in the Bangalore Water Supply case was not unanimous. 

In 2017, a seven-judge Bench of the Supreme Court ordered that a nine-judge bench be constituted to hear this 2005 case. The hearing finally began today.

Effect of repeal

Meanwhile, the Union government repealed the Industrial Disputes Act.

In this context, Senior Advocate CU Singh today said the definition being considered by the Court no longer exists. CJI Kant said the issue stands “shortened” now.

“It is now for transitional matters which originated at the time the old Act was there,” Singh said.

Senior Advocate Indira Jaising argued that any judgment rendered by the Court in this case will have an impact on the new law. There will be an unintended overlap, she submitted.

“This may not be fair to us on this side. There is one side asking for reconsideration of Bangalore Water Supply and there is this side saying it need not be reconsidered. We are not called upon here to address you on the question of new law. The danger has to be averted. The danger has to be averted by not transgressing into the constitutional validity of the new law. The issue will be raised in the time to come,” Jaising said.

CJI Kant said this aspect can be clarified and any new challenge will be independently dealt with.

“A word of caution can always be put that this interpretation relates to the law as it used to be then,” the CJI added.

Was the reference valid?

Justice Datta highlighted that the five-judge Bench had not disclosed whay had prompted it to refer the matter to a larger bench.

"Where do we find in the judgment what the pressing demands of competing sectors were and what difficulties were faced by the legislature and the executive to enforce the amended definition of industry which compelled the five-judge to make the reference. Where is that discussion? Para 44 refers to ... that it is because of pressing demands," he asked.

Justice Datta added that it needs to be examined whether the reference was valid.

"The Bench [in reference order] has in paragraph 44 said it [Bangalore Water Supply] is not unanimous opinion. How is it relevant? It has to be considered seven-judge judgment. A five-judge Bench questioning the seven-judges Bench?" he said.

LPG issue pops up before Constitution Bench

Justice Nagarathna said the judgment came in the 1970s and then there were reforms in 1991, focused on liberalization, privatization and globalization of Indian markets.

“Many of the functions which the State was doing are being performed by the private sector. Now what should be the scope of the definition of industry. Should it still be very expansive or should it be restricted or a balance has to be struck; I think that is one of the angles of this case,” she said.

Terming liberalization, privatization and globalization as ‘LPG’, Justice Nagarathna said it is important for women also. At this, AG quipped that there was no shortage of LPG. 

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