Banglore water supply & sewage board Vs. A. Rajappa (Air 1978 sc 548)
This case is a landmark judgement under Industrial Disputes Act, 1947, which provides clarity on what the term “industry” encompasses within its scope. The judgement established the triple test and the dominant nature test for the scope of the definition of “industry”, defined under Section 2 (j) of the Act.
In the Solicitor’s case Justice Gajendragadkar withdrew liberal professions from the purview of “industry” by propounding a distinctive test of ‘direct and indirect nexus’. However, this new doctrine was again rejected in Bangalore Water Supply as was held that every employee in a professional office makes for the success of the office.
In the Gymkhana case, the question was whether the Madras Gymkhana Club was an industry or not. Justice Hidayatullah gave reasons for withdrawing clubs from the scope of “industry”. However the same was criticized and overruled by Justice Krishna Iyer on the ground that it is the employees who work for wages and produce the goods and services, not the club members. When all the services are rendered by hired employees, how can the nature of the activity be described as self-service.
In the Delhi University case, a college closed down the amenity of running buses as they were incurring losses. The drivers of the buses were retrenched raising a dispute claiming retrenchment compensation. The question was whether the University of Delhi was an “industry”.
Universities were held to be excluded from the ambit of “industry” since the predominant activity of the University is teaching and teachers are not “workers” as defined in the Act. This case was also criticized in Bangalore Water Supply by saying that education is a service to the community and hence, university is an industry. The teaching staff of the University was not held to be “workmen” but the non-teaching staff would come within the scope of the said term so that they are able to take the benefits under the Act.
The SC court in Bangalore Water Supply, held that industry is one where there is (a) systematic activity organised by (b) co-operation between employer and employee for (c) production and distribution of goods and services calculated to satisfy human wants and wishes – the Triple Test.
The consequences of applying the aforesaid triple test is: (i) professions (ii) clubs (iii) educational institutions, cooperatives, (v) research institutes (vi) charitable projects and (vii) other kindered adventures, if they fulfil the triple test [(a), (b) and (c)] enumerated here above, cannot be exempted from the definition of “Industry”.
The ruling also established a dominant nature test:
Where a complex of activities, some of which qualify for exemption, others not, involves employees on the total undertaking, some of whom are not ‘workmen’ as in the University of Delhi Case or some departments are not productive of goods and services if isolated,even then, the predominant nature of the services and the integrated nature of the departments as explained in the Corporation of Nagpur, will be the true test. The whole undertaking will be ‘industry’. Even in sovereign functions, if there are units which are industries and they are severable, can be considered to come within section 2(j).
THE MINORITY VIEW
The Triple Test for Scope of the definition of “Industry”
(a) systematic activity
(b) co-operation between employer and employee
(c) production and distribution of goods and services calculated to satisfy human wants and wishes