'Industry' definition: Supreme Court rejects maintainability argument, says will decide correctness of BWSSB verdict

The Supreme Court on Wednesday said that it will answer the 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.

The top court had then ruled that the term ‘industry’ has to be given a wide interpretation.

The case revolving around the definition of 'industry' under the Industrial Disputes Act, 1947 at present is being heard by a 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.

Today, the question relating to the maintainability of the reference arose in view of the repeal of Industrial Disputes Act, 1947, which has been replaced by Industrial Relations Code, 2020.

"Your argument is too preemptory in nature to say that we should not comment on 2025-2020 Act because you are planning to challenge. What will happen if we close the matter by saying that only limited pipeline matters are left and therefore nothing is required to be done? Tomorrow Bangalore Water Supply will be followed in interpreting that very provision. Therefore, whatever reference is there, it is has to be answered on merits," CJI Kant said.

Senior Advocate Indira Jaising, who argued in support of Bangalore Water Supply decision, earlier said that any judgment on the reference will affect both sides involved in industrial disputes.

"You will have complaints coming from the workers or you will have complaints coming from employers," Jaising said.

Jaising submitted the 1978 verdict does not require reconsideration and that the reference should be rejected.

"The reference is based on incorrect information as to whether there is a conflict between judgments of the Court. It first went to a Bench of three judges before it went to a Bench of five judges. The three-judge Bench took the view that there is a conflict between (judgments in) Conservator of Forests and Parmar on the issue of sovereign functions. On the assumption that there is such a conflict, the papers were referred to the Chief Justice, who then placed it before a Bench of five judges. My first submission is that there is no conflict between the judgments in Conservator and Parmar," Jaising said.

However, the CJI Kant said that the Court will not go into the correctness of the reference itself but will instead decide the matter on merits with regard to the correctness of the 1978 verdict.

"Straight, we will go into the issues involved. We are not going to hold that the reference was defective because then we will go deeper into it that how even sixth-bench could have been doubted at that time," CJI said.

Jaising said that she will be arguing in the alternative too, on the assumption that the reference has been properly made.

CJI Kant said it will confine to the interpretation of what the definition was there at the time of Bangalore Water Supply decision. Justice Bagchi said the ratio in Bangalore Water Supply was given anticipating parliamentary action to fill in the legislative gap.

"Because of that, Justice Krishna Iyer says this is a stopgap exposition awaiting legislative response. Now, the legislative response has come after 50-odd years. But that does not, in our understanding of interpreting Bangalore Water Supply in the light of today’s perspective, give any colour to the legislative exercise so as to touch upon its constitutionality. We are only examining whether the ratio in Bangalore Water Supply was correctly decided in the perspective of the definition under the 1947 Act, and not the 2025 Act definition," the judge said.

Justice Bagchi also said that the Court can add a clarification to its decision.

"The Court is capable of adding a caveat that our interpretation is with reference to the repealed law and not with reference to the 2025 Code," he said.

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 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.

Arguments Today

During the hearing today, Justice Datta today observed that one cannot read industry without understanding what an industrial dispute is.

"Unfortunately, yesterday none of the senior counsel referred us to any provision of the Act. We are interpreting the Act. You have to first understand what is an industrial dispute. You are reading industry, workmen, but without understanding what is the scope of industrial dispute," the judge said.

Senior Advocate Sanjay Hegde, appearing for the State of Karnataka, submitted that life and commerce have changed in these years.

He highlighted the difference between the decisions in Management of Safdarjung Hospital, New Delhi vs. Kuldip Singh Sethi and Bangalore Water Works cases.

"So is it safer to go back to the line which was drawn in Safdarjung where the balance was if it is analogous to commerce, if you run in business lines, then resolving it in an industrial manner is also incumbent upon that enterprise. That was line drawn in Safdarjung and what Bangalore Water Works did was essentially to say 'look this is a very wide definition. If parliament has chosen wide definition, we will not attempt to limit it any manner.' There the respectful submission is that in any statute, or in life, words have to have a meaning beyond which they cannot be extended. An idea cannot be infinite. So therefore, what does the Industrial Disputes Act really do? In my most respectful submission, the Industrial Disputes Act addresses how enterprises are to be run in conjunction between employer and employee, and if a dispute arises, how it is to be resolved," he said.

During Hegde's submissions, Justice Bagchi asked whether essential public functions, when performed by local bodies, would become inalienable sovereign function.

"There are the concentric circles of State function - one is an inalienable core sovereign function, then there is the penumbral circle of statutory functions and constitutional duties and finally is the welfare model of the government. To where do we repost the sovereign exception when it comes to the definition of undertaking in industry, even if the other two tests are satisfied? That is the next question which is before us," he added.

Hegde said 'sovereign function', which was approved by the majority in Bangalore Water Works, is too limited.

"The government is much more than that. The government necessarily has to step in, in areas like regulation, planning which nobody else can do. Making a road may be an industry but planning a road, acquiring land for that, all that necessarily the government has to do it," he added.

Senior Advocate Shadan Farasat, representing the State of Punjab, urged the Court to consider restricting the definition of 'industry'.

"Because of the open-textured nature of the text in the Act, we use the text as a beginning point, but at some point we will have to bring in policy implications to contain the text. The text cannot be the guide till the very end," Farasat argued.

He further said that “manufacture” has been defined as work employed in the production of goods involving physical and manual labour.

"Similarly, it envisages services which are of a nature that primarily employ physical and manual labour, not necessarily intellectual service. That is my respectful submission to the Court. So if your lordships cut it out to these two things, the core problems of the over-breath of Bangalore Water Supply potentially can be dealt with by reducing the definition itself," he added.

Farasat further submitted the entire question of industrial dispute arose with the industrial revolution, particularly in the context of large industries in England and the working conditions there.

"The question of expanding it to services just because the word “services” has been used may be slightly out of context, especially, intellectual services and professional services. So I rely on the word “manufacture” to limit the “services” used in the latter part of the definition," he added.

Senior Advocate Jaideep Gupta, representing the Commissioner of Hindu Religious & Charitable Endowments Department of Tamil Nadu, submitted that temples were held as 'industry' by the full bench.

However, Gupta said not every activity that involves production and workmen can be subject matter of Industrial Disputes Act.

"Kindly keep the idea of temple in background, how incongruous the provisions of this Act become if we think in terms of a temple. There can be no question of all these layoff, retrenchment, strikes etc. becoming subject matter. Therefore, we need to shift the paradigm," he added.

Justice Nagarathna pointed out that while temples are essentially for spiritual purpose, they also carry out other activities like publishing books and magazines. Gupta responded that none of the activities are for commercial purposes.

Senior Advocate Abhimanyu Bhandari called for expanding the definition of sovereign functions.

"The argument I am trying to make is this - in order to apply Safdarjung Hospital, which every one of us has argued is the correct law, we have to increase and expand the definition of sovereign functions. And on that, there are two or three judgments in 1997 and 1998, including Thayam, which say that sovereign functions have to include welfare activities. So welfare activities have to be read as part of sovereign functions," Bhandari said.

Senior Advocate Indira Jaising, who argued in support of Bangalore Water Supply decision, said the States, irrespective of who is in power, want the judgment overruled as they have a common interest to protect.

"If we [workmen] are thrown out of the coverage of the Industrial Disputes Act, we go nowhere. I concede that if I am covered by another statute which gives me access to justice, I have no complaint. But here, the question is of throwing us out altogether. You have to look at the triple test from that point of view," she argued.

Jaising further said that there was no ambiguity in the definition of industry in the 1947 Act. She also contended that sufficient data was not available before the Court to decide the case. Thus, she urged the Court to call for data of different type of cases pending under the Industrial Disputes Act.

She also said that Code of 2020 will be challenged to the extent it excludes charities, fails to define sovereign functions,and explain the meaning of social and philanthropic activities.

Senior Advocate CU Singh, representing a federation of unions, said,

"I will break up my arguments into four broad areas and outline them. The first is on a practical level: whether this exercise, which a learned nine-judge Bench is painstakingly undertaking, is likely to yield a fruitful or workable outcome. I will be brief on that practical aspect."

He also questioned the reference order.

"My submission is that the four issues framed by the seven-judge Bench are not issues at all. They do not arise either from the context or from the Bangalore Water Supply order," Singh said.

The arguments will continue on Thursday.

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