2026 INSC 897Page 1 of 154 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 897 / 2002 State of Uttar Pradesh …Appellant(s) Versus Jai Bir Singh …Respondent(s) with Civil Appeal No. 4646 / 2007 Civil Appeal No. 3647 / 2007 Special Leave Petition (Civil) No. 1112 / 2009 Civil Appeal No. 3920 / 2010 Civil Appeal No. 3119 / 2011 Civil Appeal No. 6114 / 2001 Page 2 of 154 Civil Appeal No. 6108 / 2002 Civil Appeal No. 1276 / 2001 Civil Appeal No. 1279 / 2001 Civil Appeal No. 1278 / 2001 Civil Appeal No. 6471 / 2002 Civil Appeal No. 2506 / 2002 Civil Appeal No. 8597 / 2001 Civil Appeal No. 4569 / 2002 Civil Appeal No. 5101 / 2002 Civil Appeal No. 2409 / 2002 Special Leave Petition (Civil) No. 20982 / 2002 Civil Appeal Nos. 355-358 / 2003 Special Leave Petition (Civil) No. 14085 / 2004 Special Leave Petition (Civil) No. 11291 / 2004 Special Leave Petition (Civil) No. 14127 / 2004 Civil Appeal No. 7994 / 2004 Special Leave Petition (Civil) No. 4139 / 2005 Civil Appeal No. 1274 / 2007 Civil Appeal No. 1273 / 2007 Page 3 of 154 Civil Appeal Nos. 1311-1312 / 2008 Special Leave Petition (Civil) No. 16301 / 2007 Special Leave Petition (Civil) No. 3107 / 2008 Special Leave Petition (Civil) No. 4327 / 2008 Special Leave Petition (Civil) No. 4329 / 2008 Special Leave Petition (Civil) No. 4328 / 2008 Civil Appeal No. 296 / 2008 Special Leave Petition (Civil) No. 16276 / 2008 Special Leave Petition (Civil) No. 17224 / 2008 Civil Appeal No. 5519 / 2012 Civil Appeal No. 5681 / 2010 Special Leave Petition (Civil)………CC No. 7990 / 2009 Civil Appeal No. 7757 / 2011 Civil Appeal No. 1131 / 2012 Civil Appeal Nos. 8149-8151 / 2012 Civil Appeal Nos. 4505-4506 / 2013 Civil Appeal Nos. 4507-4508 / 2013 Special Leave Petition (Civil) Nos. 12679-12682 / 2014 Special Leave Petition (Civil) No. 1857 / 2016 Special Leave Petition (Civil) No. 14156 / 2021 Page 4 of 154 TABLE OF CONTENTS A.
Overture ..................................................................................... 7 B. Interpretational History of the ‘industry’ definition ..................... 10 B.1. Bangalore Water Supply (supra): A truly watershed moment .. 11 B.1.1. Reasons prompting reference to a larger Bench................ 14 B.1.2. Laying down the Triple Test ............................................. 15 B.1.3 Reading down ‘Undertaking’ ............................................. 17 B.1.4.
The creation of the Dominant Nature Test ....................... 21 B.1.5. The Sovereign Functions Exception ................................. 21 B.2. The Pre-Bangalore Water Supply (supra) Jurisprudence ........ 23 B.2.1. Casting the Net Wide: The Early Expansion of the term ‘Industry’ .................................................................................. 23 B.2.2. The Turning of the Tide: The retrenchment of the expansive approach .................................................................................. 27 B.3.
The Post-Bangalore Water Supply (supra) jurisprudence ........ 31 B.3.1. The Initial Legislative Response ....................................... 32 B.3.2. The discord regarding the Sovereign Function Exception .. 33 B.3.3. The treatment and status of Research Institutions ........... 36 B.3.4 The calls for reconsideration of the decision in Bangalore Water Supply (supra) .............................................................. 37 Page 5 of 154 C.
The Prefatory Question of Maintainability .................................. 42 C.1. Correctness of the manner in which Reference was made ...... 44 C.1.1. The framework governing Larger Bench References .......... 44 C.1.2. Testing the Reference on the anvil of Dawoodi Bohra (supra) ................................................................................................. 48 C.1.3. The Res Judicata conundrum? ........................................ 57 C.1.4.
Stare Decisis and the doctrine of overruling ..................... 63 C.2. Treading the razor’s edge between technicality and quietus ... 66 D. Contentions of the Parties ......................................................... 67 D.1. Contentions on behalf of the Appellants ................................ 67 D.2. Contentions on behalf of the Respondents ............................. 71 D.3. Contentions on behalf of the Amicus Curiae .......................... 75 E.
Issues for consideration ............................................................ 78 F. At the Heart of the Matter: What Constitutes an ‘Industry’? ....... 79 F.1. The meaning of ‘Industry’ as encapsulated in the ID Act ........ 82 F.2. The judicial interpretation accorded to ‘Industry’ ................... 90 F.3. The Ripple Effects of Bangalore Water Supply (supra) .......... 108 F.4. Manner in which the term ‘industry’ under Section 2(j) ought to be interpreted ............................................................................ 111 F.4.1.
The Noscitur a Sociis Principle ........................................ 112 Page 6 of 154 F.4.2. A fresh look at the interpretative approach ..................... 117 F.4.3. Calibrating the Triple Test ............................................. 128 F.4.4. Reconsidering Institutional Categorisation ..................... 134 G. Legal impact of the Industrial Disputes (Amendment) Act, 1982 and the IR Code, 2020 .................................................................. 146 H.
Conclusion .............................................................................. 148 Page 7 of 154 JUDGEMENT SURYA KANT, CJI. (on behalf of himself, Satish Chandra Sharma J., Alok Aradhe J. and Vipul M. Pancholi J.) A. OVERTURE 1. The issue concerning the instant batch of appeals can be consolidated into a singular judicial inquiry, namely, whether the Social Forestry Department of the Appellant State, having been created as a welfare-oriented initiative aimed at environmental amelioration, falls within the ambit of the term ‘industry’ as defined under Section 2(j) of the Industrial Disputes Act, 1947 (ID Act, 1947).
2.
More pointedly, the legal issue, particularly the interpretive scope of the abovementioned term ‘industry’, constitutes a question that has persistently engaged the attention of this Court over an extended temporal period. Indeed, it would not be inapt to characterise this conundrum as a proverbial albatross fastened to the Court’s metaphorical neck, continuing to demand judicial clarification.
3. The question may appear at first blush disarmingly straightforward; yet, upon closer scrutiny, it discloses a far more intricate and layered inquiry.
For decades, the manner of its Page 8 of 154 definition has, in tangible and determinative terms, governed which entities fall within the statutory fold and, correspondingly, who may legitimately invoke the rights and protections it confers.
4. It becomes necessary at this juncture to acknowledge that subsequent legislative developments have altered the statutory landscape. The provision whose interpretation has, for years on end, engaged sustained judicial attention is no longer in force, and this, in itself, presents an additional question warranting adjudication.
However, the present batch of petitions, having been instituted prior to these legislative changes, does not fall within the ambit of the regime now governing the field, namely the Industrial Relations Code, 2020 (IR Code).
5. These developments, it must be noted, transpired after the reference of the present matters to a Bench of Nine Judges, at a time when the interpretive contours of Section 2(j) of the ID Act continued to carry determinative significance.
Yet, the considerable passage of time, coupled with the intervening statutory transformation, has resulted in a state of doctrinal and procedural liminality. These appeals stand in a precarious interstice, being neither governed by the new legislative framework nor conclusively resolved under the erstwhile definition of ‘industry’ contained in Section 2(j). Page 9 of 154 6. As the Court of last resort, we remain acutely conscious that the interpretive exercise now being undertaken may not, in the contemporary statutory context, yield consequences of far-reaching practical application.
Nonetheless, the discharge of this function is neither optional nor contingent upon its immediate utility. It is a responsibility that inheres in the judicial office, particularly where a reference has been authoritatively made. The principle, long embedded in our jurisprudential tradition, that justice must not only be done but must manifestly be seen to be done, acquires particular salience in such circumstances.
7.
When a reference has been entrusted to this Court by learned Judges, acting in view of the exigencies and uncertainties prevailing at the relevant time, it would be neither institutionally appropriate nor jurisprudentially sound to permit the matter to remain in abeyance. To do so would, metaphorically speaking, be akin to burying the body before conducting the post-mortem, leaving the very cause of the controversy forever unexplored.
To defer or deny its resolution any further would be to countenance a state of avoidable indeterminacy. It is, therefore, incumbent upon us to finally adjudicate the issue and bring the matter to a reasoned and authoritative quietus. Page 10 of 154 8. We have, therefore, endeavoured to discharge our constitutional obligation by addressing the question referred to the Nine-Judge Bench. The exercise of this jurisdiction is not discretionary in character; it is anchored in the imperatives of the Constitution and the foundational precepts of the Rule of Law.
The Court cannot resile from the performance of its duty merely because, in the subjective estimation of the adjudicator, the issue may appear to admit of gradations of importance.
9. The constitutional function entrusted to this Court admits of no such artificial hierarchies. Once a question is validly referred, it commands authoritative determination, and it would be contrary to settled principle for the Court to decline adjudication on the basis of perceived relative significance.
B. INTERPRETATIONAL HISTORY OF THE ‘INDUSTRY’ DEFINITION 10. In that view of the matter, before embarking upon an analysis of the issues that presently fall for our consideration, it is imperative to trace the trajectory traversed by this Court over time, and to examine the manner in which the definition in question has evolved through successive judicial pronouncements. A careful engagement with this evolutionary process will furnish the necessary analytical foundation and illuminate the interpretive Page 11 of 154 choices that now confront us, thereby enabling a more coherent and methodical resolution of the questions at hand.
11.
It is apposite at the outset to advert to the language employed in Section 2(j) of the ID Act, according to which, “‘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.” 12. Section 2(j) defines ‘industry’ in a bifurcated manner, employing two distinct yet complementary limbs.
The first proceeds from the standpoint of the employer and extends to “any business, trade, undertaking, manufacture or calling of employers.” The second is cast from the perspective of the workman and encompasses “any calling, service, employment, handicraft, or industrial occupation or avocation of workmen.” The phraseology employed is of the widest amplitude, having been drawn in substantial measure from Section 4 of the Commonwealth Conciliation and Arbitration Act of Australia, and has, in consequence, invited sustained judicial engagement in the course of its interpretation.
B.1. Bangalore Water Supply (supra): A truly watershed moment 13. There can, of course, be no gainsaying that any meaningful consideration of the definition of the term ‘industry’ must Page 12 of 154 necessarily entail an examination of the formulation articulated by a Seven Judge Bench in Bangalore Water Supply and Sewerage Board v. A. Rajappa.1 14. The controversy therein originally arose when certain employees of the Bangalore Water Supply and Sewerage Board (Board) were subjected to penalties in the form of fines for alleged misconduct.
Aggrieved thereby, they instituted proceedings before the Labour Court under Section 33C (2) of the ID Act. In response, the Board therein raised a preliminary objection to the maintainability of the proceedings, contending that it was engaged in the discharge of essentially ‘regal’ or governmental functions by providing basic civic amenities to the public and, consequently, could not be regarded as an ‘industry’ within the meaning of Section 2(j).
It was argued that, if the Board itself fell outside the ambit of the Act, the employees could not claim the status of ‘workmen’ thereunder and, correspondingly, the Labour Court would lack jurisdiction to entertain or adjudicate their claims.
15. The dispute thereafter traversed first before the Karnataka High Court and subsequently before this Court. By that stage, the question concerning the meaning and scope of ‘industry’ under Section 2(j) had already become the subject of substantial judicial 1 (1978) 2 SCC 213.
Page 13 of 154 debate, with divergent strands of authority emerging from different decisions of this Court. In light of this interpretative discordance and the significance of the issues involved, the matter ultimately came to be placed before a larger Bench for an authoritative determination of the law.
16. It was in these circumstances that the judgment now universally recognised as Bangalore Water Supply (supra) came to be rendered, a decision that would sagaciously influence the course of industrial jurisprudence in India and remain the focal point of reference in debates concerning the meaning of the term ‘industry’ for decades thereafter.
17.
To state briefly, in that decision, a majority of Five Judges, speaking through the seminal exposition authored by Krishna Iyer, J. and comprising himself, P.N. Bhagwati, J. and D.A. Desai, J., adopted an expansive construction of the term by propounding what has since come to be recognised as the ‘Triple Test’.
18. The leading judgment was accompanied by a concurring opinion authored by M. H. Beg, C.J., together with a brief order delivered by Y.
V. Chandrachud, J. (as he then was), on behalf of himself, Jaswant Singh, J. and V. D. Tulzapurkar, J., which was delivered on 21.02.1978, clarifying that their detailed reasoning would follow. Vide the main judgment, the learned concurring Judges Page 14 of 154 recorded their respectful agreement with the principal opinion authored by Krishna Iyer, J., agreeing with the ultimate conclusion that the matter ought to be dismissed, while observing that reasons would be furnished subsequently to delineate the areas of concurrence and divergence, if any, on the questions in controversy addressed in the leading judgment.
19.
Thereafter, on 07.04.1978, Y. V. Chandrachud J. (as he then was), delivered his detailed reasons, while Jaswant Singh J., speaking for himself and V. D. Tulzapurkar J., rendered a partly dissenting opinion, thereby crystallising the effective majority of the judgment at 5:2. B.1.1. Reasons prompting reference to a larger Bench 20. The reference to a Bench of Seven Judges was itself occasioned, as explained by Krishna Iyer, J., by “the urgent need for an authoritative resolution of this confused position which has survived indeed, has been accentuated by-the judgment of this six-member bench in Safdarjung, if we may say so with deep respect, has led to a reference to a larger bench of this diehard dispute as to what an ‘industry’ under Section 2(j) means.” 21.
The respected Judge, speaking with his characteristic candour, noted that the prevailing uncertainty had necessitated what had Page 15 of 154 become a persistent and intractable dispute as to the meaning of industry under Section 2(j) of the ID Act.
22. There thus appears to have been no divergence of opinion among the learned Judges on this aspect, namely, that the persistent deviation in judicial interpretation ought to be clarified immediately.
It was also broadly acknowledged that, in an ideal course, legislative intervention by Parliament, through an appropriate amendment, would have been desirable to bring clarity and resolution to the prevailing state of ambiguity. B.1.2. Laying down the Triple Test 23. The majority, in the leading judgment, having undertaken an exhaustive survey of the preceding authorities that had shaped the interpretation of the expression ‘industry’, proceeded to articulate the Triple Test as the governing standard for determining whether a particular body or entity would fall within its ambit.
24.
The Triple Test postulates the existence of:
(i) a systematic and organised activity;
(ii) cooperation between employer and employee in the conduct of such activity; and (iii) the production or distribution of goods and services directed towards the satisfaction of human wants and wishes. The formulation was consciously designed to avoid an unduly restrictive construction and to capture Page 16 of 154 within its ambit a wide spectrum of organised economic and quasi- economic undertakings.
25.
It is of particular significance that, in explicating the element of cooperation between employer and employee, the Court rejected the necessity of establishing any direct or proximate nexus of a rigid character, regarding such a requirement as illusory and normatively untenable. Further, the phrase “goods and services calculated to satisfy human wants and wishes” was construed in a manner that excluded activities of a purely spiritual or religious character, while encompassing material goods and services intended to confer tangible, temporal benefit.
Illustratively, activities such as the large-scale preparation and distribution of food, including prasad, were held to fall within the inclusive sweep of the definition of industry.
26. The absence of a profit motive or any gainful objective was held to be immaterial, and it was clarified that an enterprise could fall within the ambit of ‘industry’ irrespective of whether it operated in the public, joint, private, or any other sector.
The emphasis, therefore, was placed squarely on the functional character of the activity, with the decisive inquiry centring on its nature, particularly as manifested through the relationship of cooperation between employer and employee. Page 17 of 154 27. The Triple Test appears to have secured broad acceptance among all seven learned Judges, with the divergence being confined not to its formulation, but to the manner and extent of its application.
Thus, while the foundational elements of the test were not in serious dispute, differences arose as to the manner in which particular factual settings ought to be treated. For instance, Chandrachud J. (as he then was), agreed with the activity test but highlighted that the determinative inquiry ought to instead be based on “whether the activity, considered objectively, is organised or arranged in a manner in which trade or business is normally organised or arranged.” 28.
Even in the dissenting opinion of Jaswant Singh J., for himself and Tulzapurkar J., substantially accepted the three constituent elements of the Triple Test, but proceeded to superimpose an additional requirement. According to the learned Judges, the activity in question must further be carried on “on commercial lines by private entrepreneurs.” B.1.3 Reading down ‘Undertaking’ 29. An important facet of the decision in Bangalore Water Supply (supra) lies in the illumination it provides on the scope and ambit of the term ‘undertaking’.
The leading opinion made it clear that the construction of Section 2(j) of the ID Act could not be extended Page 18 of 154 to the point that it ‘skids into a domain too rarified to be realistic’. Put in more lucid terms, while the provision was to be accorded a broad and purposive interpretation, it was not to be so unbounded as to assume an all-encompassing character that would indiscriminately draw every conceivable activity within its sweep.
30.
This ultimately resulted in the recognition of the second guideline that: “Undertaking must suffer a contextual and associational shrinkage as explained in Banerji and in this judgment; so also, service, calling and the like. This yields the inference that all organized activity possessing the triple elements in I, although not trade or business, may still be ‘industry’ provided the nature of the activity, viz. the employer-employee basis, bears resemblance to what we find in trade or business. … All features, other than the methodology of carrying on the activity viz. in organizing the co-operation between employer and employee, may be dissimilar.
It does not matter, if on the employment terms there is analogy.” 31. The logical corollary of this guideline was thus that any organised activity satisfying the constituent elements of the Triple Test, though not strictly amounting to trade or business, may nevertheless qualify as an ‘industry’, provided that the essential character of the activity, particularly the employer–employee relationship, bears a discernible resemblance to that which ordinarily obtains in trade or business.
The consideration thus lies Page 19 of 154 in the manner in which the activity is organised, specifically the structured cooperation between employer and employee.
32. The majority decision further emphasized that the application of these guiding principles must not be curtailed by subjective considerations, whether arising from ideological predilections, institutional character, or perceived incongruity between the nature of the activity and its economic consequences.
The interpretive exercise must remain faithful to the statutory purpose, namely, the promotion of industrial peace and the orderly regulation and resolution of disputes between employers and workmen.
33. On this basis, it was made clear that a wide range of organised activities, including professions, clubs, educational institutions, cooperatives, research bodies, charitable undertakings, and other analogous ventures, cannot be excluded from the ambit of Section 2(j) merely by reason of their form or avowed purpose, so long as they satisfy the requirements of the Triple Test.
34.
At the same time, a limited category of such institutions may stand outside the definition where, applying the dominant nature test, the activity is essentially carried on without the employment of a substantive workforce, and only minimal or marginal engagement of labour is involved. In such cases, the absence of a structured Page 20 of 154 employer–employee relationship of any real significance would preclude their characterisation as an ‘industry’.
35.
Thus, as a manner of illustration, the decision put forth that institutions founded upon a fundamentally altruistic or eleemosynary basis may fall outside the ambit of ‘industry’ in narrowly circumscribed circumstances. Where the activity is carried on predominantly by individuals who associate themselves with the endeavour out of a sense of service, commitment to a cause, or spiritual or ideological motivation, and who render their services either gratuitously or for nominal honoraria, the essential metric of an employer–employee relationship may be absent.
36.
This would also encompass situations such as voluntary legal aid initiatives, free medical services rendered by professionals in their spare time, or institutions sustained by individuals working in furtherance of a shared spiritual or charitable purpose. In such cases, where services are provided free of charge or at nominal cost, and those engaged are not employed on terms indicative of a master–servant relationship, the organisation would not qualify as an ‘industry’, notwithstanding the engagement of a limited number of ancillary or technical staff.
37.
This exemption, however, was confined to such genuinely charitable or eleemosynary undertakings. It does not extend to Page 21 of 154 activities merely because they are animated by generosity, compassion, or developmental objectives, where the organisational structure otherwise satisfies the criteria of the statutory definition or the Triple Test. B.1.4. The creation of the Dominant Nature Test 38. Krishna Iyer J., in his lead judgment, further articulated what has come to be recognised as the ‘dominant nature test’ in order to address situations involving a composite or multifaceted undertaking.
39.
Where an organisation comprises a complex of activities, some of which may, if viewed in isolation, fall outside the definition, while others clearly fall within it, the determinative inquiry must centre on the predominant character of the enterprise as a whole. If the dominant nature of the activity, viewed in its integrated form, satisfies the criteria of an ‘industry’, the entire undertaking would ordinarily be so characterised, notwithstanding that certain components or personnel may not independently meet the statutory definition.
B.1.5. The Sovereign Functions Exception 40. The Court also clarified that the exemption carved out for sovereign functions must be narrowly construed and confined to functions Page 22 of 154 strictly understood as sovereign in character. Welfare activities or economic ventures undertaken by the State or its instrumentalities do not, merely by reason of their governmental provenance, attract such immunity.
41.
Further, even within departments discharging sovereign functions, distinct and severable units which independently satisfy the indicia of an ‘industry’ may fall within the ambit of Section 2(j) of the ID Act. Lastly, it was recognised that the Legislature, acting within its constitutional competence, retains the authority to expressly exclude categories of activities from the operation of the Act, even if they would otherwise fall within its definitional scope.
While this is only a brief synopsis of the ratio in Bangalore Water Supply (supra), the reasoning buttressing its findings has been dealt with in greater detail in the later part of this judgment.
42. That being so, the decision in Bangalore Water Supply (supra) was by no means the first occasion on which this Court undertook an authoritative exposition of the term ‘industry’. The interpretive enterprise predates that pronouncement and is marked by a series of decisions that sought to delineate the contours of the definition in varying factual settings.
In order to bring analytical coherence to this body of precedent, it is both convenient and conceptually sound to classify the trajectory of the case law into two distinct Page 23 of 154 phases: first, the jurisprudence preceding Bangalore Water Supply (supra); and second, the jurisprudence that has developed in its aftermath. B.2. The Pre-Bangalore Water Supply (supra) Jurisprudence 43. Prior to the authoritative pronouncement of Bangalore Water Supply (supra), the construction of the provision ‘industry’ exhibited a marked oscillation between two competing interpretive approaches.
On the one hand, a liberal construction sought to bring within its sweep a broad spectrum of organised activity; on the other, a more restrictive approach endeavoured to confine its application to undertakings of a predominantly commercial character. B.2.1. Casting the Net Wide: The Early Expansion of the term ‘Industry’ 44. One of the earliest decisions in this line of authority is that of D.N. Banerji v.
P.R. Mukherjee,2 wherein a Five-Judge Bench held that a municipal body could fall within the ambit of ‘industry’, and in doing so articulated what has come to be described as the ‘analogous to trade or business’ test. The Court observed that it is sufficient if the activity in question bears a functional resemblance 2 AIR 1953 SC 58. Page 24 of 154 to the carrying on of trade or business and is carried on through cooperation between employers and employees.
45.
This approach marked a deliberate departure from a narrow, profit- centric understanding. It was held that an activity need not be undertaken by a private enterprise, nor must it be strictly commercial in character or profit-generating, in order to attract the statutory definition. In a significant interpretive move, the Court also rejected the contention that the expression ‘undertaking’ must take its colour ejusdem generis from the preceding words ‘business, trade, manufacture or calling’.
Such a construction, it was reasoned, would unduly constrict the scope of the provision and render both the term ‘undertaking’ and the second limb of the definition otiose.
46. The expression ‘undertaking’, within the meaning of Section 2(j), was accordingly construed in expansive terms to denote any business, work, or project that is undertaken as an enterprise, so long as it is analogous in its organisation and operation to trade or business.
47.
Thereafter, the decision in State of Bombay v. Hospital Mazdoor Sabha3 marked a significant stage in the evolution of the 3 AIR 1960 SC 610. Page 25 of 154 jurisprudence. In that case, a Three Judge Bench held that a government-run hospital would fall within the ambit of an ‘industry’, while simultaneously refining the principles earlier enunciated in D.N. Banerji (supra). It articulated a more structured formulation of what would constitute an ‘undertaking’ within the meaning of Section 2(j).
Accordingly, an activity would so qualify where:
(a) it is systematically or habitually undertaken;
(b) directed towards the production or distribution of goods, or the rendering of material services to the community, whether in whole or in part;
(c) carried on with the assistance of employees;
(d) organised in a manner analogous to trade or business; and (e) not of a casual character, nor undertaken for personal consumption or pleasure.
Significantly, the presence of a profit motive or the investment of capital was held to be non-essential to the characterisation.
48. This Court was, however, careful in emphasising that the amplitude of the definition was not without limits. A principled line of demarcation was recognised, excluding from its ambit activities that are purely domestic, personal, or casual in nature.
49. Following closely on the heels of Hospital Mazdoor Sabha (supra) was the judgment rendered in Corporation of the City of Nagpur Page 26 of 154 v.
Its Employees,4 wherein a municipal corporation was construed to be an ‘industry’ with two qualifications justifying such categorisation. The first was a narrow sovereign function exception, confined to the ‘primary and inalienable functions of a constitutional government’, namely, the legislative power, the administration of law, and the exercise of the judicial power; these were held to remain excluded even when statutorily delegated to a corporation.
The second was the predominant function test for composite departments, under which a department discharging both industrial and non-industrial activities takes its character from its predominant nature of function. On the anvil of that test, the Octroi Department was held not to be an industry, whereas the Fire Brigade service of a municipal committee was. Once again, it was observed that neither investment of capital nor a profit motive is a necessary element in the modern conception of industry, and that monetary consideration for service is not an essential characteristic of industry in a modern State.
50.
Soon after, the decision in Ahmedabad Textile Industry’s Research Association v. State of Bombay,5 following the ratio laid down in Hospital Mazdoor Sabha (supra), classified a Research Association set up by the textile mills of Ahmedabad to 4 AIR 1960 SC 675 5 AIR 1961 SC 484. Page 27 of 154 be an ‘industry’. It founded its decision on the basis that:
(i) the activity of the research association had been systematically taken;
(ii) it rendered material services to a part of the community by discovering manufacturing processes to improve efficiency and reduce costs; and (iii) it was carried out with the help of technical personnel.
The Court further imbued that the association’s activities did not have much in common with the activities of what may be construed to be a purely educational institution, thereby leaving the legal status of ordinary educational institutions open. B.2.2. The Turning of the Tide: The retrenchment of the expansive approach 51. In National Union of Commercial Employees v. M.R. Meher,6 this Court held a firm of solicitors not to be an ‘industry’, and thereby inaugurated the restrictive turn, marking a turn in the tide.
The third prong of the working principle in Hospital Mazdoor Sabha (supra) was qualified by the further requirement that the cooperation between employer and employee must have a ‘direct’ nexus with the goods or services produced. To that end, the court reasoned that a solicitor’s output depends on his personal professional equipment, knowledge and efficiency; the clerical work of his staff is incidental and has no direct or essential nexus with 6 AIR 1962 SC 1080.
Page 28 of 154 the advice rendered to the client. On that reasoning, the learned professions more generally were excluded from the definition.
52. In a similar vein, this Court in University of Delhi v. Ram Nath,7 held a university to not be an ‘industry’ within the bounds of Section 2(j) of the ID Act. The work of imparting education was, the Court observed, more of a ‘mission’ and a vocation than a profession or trade or business.
Moreover, it was held that the majority of a university’s employees (the teachers) do not qualify as ‘workmen’ under the Act. The Court stated that its decision was not to be understood as laying down a general proposition, but the effect of the ruling was to take educational institutions as a class out of Section 2(j).
53. Thereafter, in Madras Gymkhana Club Employees’ Union v. Madras Gymkhana Club,8 a Three Judge Bench of this Court held that a self-serving members’ club, albeit organised on a substantial scale and comprising approximately 1,200 members with a fully equipped catering department, would not fall within the ambit of an “industry.” The Court proceeded on the basis that, notwithstanding the provision of material services to a defined 7 AIR 1963 SC 1873. 8 AIR 1968 SC 554.
Page 29 of 154 section of the community, such activities were not undertaken in the course of trade or business, nor were they analogous thereto.
54. In arriving at the aforesaid conclusion, the Court declined to adopt the formulation articulated in Hospital Mazdoor Sabha (supra), particularly insofar as it introduced the criterion of whether the activity in question could, in principle, be carried on by a private individual.
This qualification was regarded as conceptually unsound, on the footing that there exist few, if any, activities incapable of being undertaken by private enterprise. The interpretive consequence of this approach was to accord primacy to the first limb of the definition contained in Section 2(j), thereby substantially attenuating the independent significance of the second limb and narrowing the scope of the provision.
55.
A similar view was then taken in Cricket Club of India v. Bombay Labour Union,9 wherein the Cricket Club of India was held not to be an industry.
56. Thereafter came the decision in Safdarjung Hospital v. Kuldip Singh Sethi,10 which can be safely regarded as inscribing the high- water mark of the restrictive approach. In that case, a Six-Judge Bench of this Court expressly overruled the earlier decision in 9 AIR 1969 SC 276. 10 (1970) 1 SCC 735.
Page 30 of 154 Hospital Mazdoor Sabha (supra) and significantly narrowed the scope of the definition of ‘industry’. The Court was concerned with three institutions: the Safdarjung Hospital, which operated as a governmental department; the Tuberculosis Hospital, functioning as a wholly charitable and research-oriented institution; and the Kurji Holy Family Hospital, a charitable establishment expressly precluded from generating profit.
All three were held not to fall within the ambit of an ‘industry’.
57. The central proposition articulated was that, although the presence of a profit motive is not determinative, an activity must nonetheless bear a close analogy to trade or business in a commercial sense in order to qualify as an ‘industry’. It must be directed towards the production of material goods or the provision of material services possessing commercial value.
In this context, ‘material services’ were understood to denote organised activities carried on through the cooperation of employers and employees to provide the community with the use of essential utilities, such as electricity, water, transportation, postal services, and telecommunication. This formulation imposed a distinctly higher threshold, reintroducing, albeit in a nuanced form, a commercial character as a limiting principle, and thereby consolidating the restrictive trajectory in the interpretation of Section 2(j) of the ID Act.
Page 31 of 154 58. The judicial path thus reveals that different Benches of this Court adopted a multiplicity of distinct and, at times, divergent approaches in determining whether particular institutions, such as Hospitals, Clubs, Universities, and Governmental Departments, would satisfy the substantive import of the definition of ‘industry’ under Section 2(j) of the ID Act. B.3. The Post-Bangalore Water Supply (supra) jurisprudence 59.
In the aftermath of the decision in Bangalore Water Supply (supra), the jurisprudence appeared, for a time, to attain a measure of doctrinal stability, if not complete finality. This interlude of relative calm was, however, short-lived. Subsequent developments once again unsettled the field and rekindled debate regarding the correctness, scope, and continuing viability of the interpretation accorded to the term ‘industry’.
60.
These developments may, for analytical clarity, be organised into four broad categories: (i), the initial legislative response; (ii), the contestation surrounding the ambit of the sovereign functions exception; (iii), the treatment and status of research institutions; and (iv), the recurring judicial calls for a reconsideration of the principles laid down in Bangalore Water Supply (supra) itself. Page 32 of 154 B.3.1.
The Initial Legislative Response 61. The Parliament, by way of the Industrial Disputes (Amendment) Act 46 of 1982, amended Section 2(j). The amendment retained the core of the Triple Test enunciated in Bangalore Water Supply (supra), clarified that the employer-and-employee relationship includes workmen employed through a contractor, though it carved out exceptions, such as: (1) agricultural operations (save where integrated with industrial activity); (2) hospitals and dispensaries; (3) educational, scientific, research or training institutions; (4) institutions engaged in charitable, social or philanthropic service; (5) khadi or village industries; (6) activities of the Government relatable to its sovereign functions, including the departments dealing with defence research, atomic energy and space; (7) domestic service; (8) professions practised by an individual or body of individuals employing fewer than ten persons; and (9) cooperative societies, clubs or like bodies employing fewer than ten persons.
62.
Although the above-quoted amendment was passed on 21.08.1984, the amended definition of ‘industry’ was never notified and thus the amended provision did not see the light of day. Page 33 of 154 B.3.2. The discord regarding the Sovereign Function Exception 63. Subsequently, a phase of friction emerged in relation to the exceptions carved out for sovereign functions as articulated in Bangalore Water Supply (supra).
This divergence was occasioned by the