Definition of 'Industry': Supreme Court reserves judgment on reference against 1978 BWSSB verdict

A nine-judge Bench of the Supreme Court on Thursday reserved its judgment on a reference questioning 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 its 1978 verdict, the top court had ruled that the term ‘industry’ used in the Industrial Disputes Act, 1947 (ID Act) has to be given a wide interpretation. However, it came under challenge in subsequent cases.

The nine-judge 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 heard extensive arguments on the same for three days before reserving its verdict today.

Background

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 on March 17 (Tuesday) when the Central government argued that that excessive expansion of the definition of “industry” has serious consequences as it can burden employers and deter private players from entering the market.

On Wednesday, the Court had rejected the arguments against maintainability of the reference and made it clear that it will look into the 1978 verdict.

Arguments Today

Senior Advocate CU Singh, representing a federation of unions, said governments have the power to exempt industries from the provisions of ID Act but they want to do it through a court order in order to avoid any blame.

The Centre and States government have argued against the expansive definition of 'industry'.

"If some States feel that some class of industries are protected and they don't need protection under the Industrial Disputes Act, they have all the power. They can issue Section 36B notification. But they are doing it (by) shooting from the shoulders of the Supreme Court and then (they) will tell the workers that 'no, no, not us but the Supreme Court has let you down'. You cannot cry after 48 years," Singh said.

Senior Advocate Gopal Sankaranarayanan, representing All India Trade Union Congress, said that in the 1978 judgment, Justice VR Krishna Iyer had carved out an exception on the limited aspect of clubs and Justice YV Chandrachud had agreed with it.

"Justice Krishna Iyer draws a distinction between clubs like the Madras Gymkhana and similar institutions, and small community clubs formed by individuals for their own recreation. He indicates that only such self-serving, community-based clubs would fall outside the scope," Sankaranarayanan said.

Sankaranarayanan also made the following suggestion,

"The approach that would be commended, keeping in mind the broader context of industrial harmony and the balance between Article 19(1)(g) and Article 21 rights of both employers and employees, is as follows: First, to examine only the activity. The new provision uses the word “activity.” One must see whether it falls within the wide expressions “undertaking,” “calling,” or “avocation.” Second, to ignore who is carrying out the activity, since that is not germane to the purpose of industrial regulation. Third, to ignore the motive behind the activity, so long as it is lawful. A charitable activity cannot be be permitted to be unregulated."

Advocate Shivam Singh, who also supported the Bangalore Water Supply decision, said Industrial Disputes Act reflected a clear legislative intent that it will operate as a standalone code in its domain.

"The legislature did not seek to subsume or align other enactments such as the various State Shops and Establishments Acts within this framework. Those statutes were enacted subsequently by different States at different points of time and serve distinct purposes. Second, the Industrial Disputes Act should not be viewed as overlapping with other statutes, but rather as supplementing the overall framework of labour regulation," Singh said.

Thus, he said that the argument that workers should not invoke the Industrial Disputes Act but should instead pursue remedies under other statutes such as the Shops and Establishments Acts or through writ proceedings, should be rejected.

During the hearing, Justice Bagchi remarked that the settlement is at the core of the Industrial Disputes Act. It is neither pro-workmen nor pro-employer but it is pro-peace, the judge added.

“So, if we do not take an expansionist definition of ‘industry’, we leave out various human activities where an employer-employee interface exists, from the scope of this ameliorative law aimed at industrial peace,” the judge further said.

Senior Counsel JP Cama and PS Sengupta also addressed the Court.

On a query regarding the forums dealing with industrial disputes, Cama said where the law is intended to provide a forum, it has done so but absence of a remedy cannot be a ground to alter the statutory scheme.

"There is an attempt to bring everyone within the fold in the name of social welfare. But in doing so, one must be careful not to disturb the legislative balance. Unless the activity is relatable to business, it would fall outside the expression 'industry'. That is the core principle. Take the example of workers engaged through contractors. When they work through a contractor, they are not employees of the principal employer. When the contractor leaves, the workers go with him. If, however, they are absorbed into the establishment, then from that point onward their status changes. These distinctions must be maintained within the framework of the statute," he said.

At the end of the hearing, Attorney General R Venkataramani said that Court should not go beyond the text of the law even if it is for social welfare legislation.

"I have consulted the government. Government is not anti-labour. Labour welfare has to be taken care of. We are moving towards a globalised economy and we need to take a call on how to manage the affairs," he added.

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