Case Name: Bangalore Water Supply & Sewerage Board v. A. Rajappa (Bangalore Water Supply Case)
Equivalent citations: 1978 AIR 548, 1978 SCR (3) 207
Author: M H Beg
Bench: Beg, M. Hameedullah (Cj), Chandrachud, Y.V., Bhagwati, P.N., Krishnaiyer, V.R. & Tulzapurkar, V.D., Desai, D.A. & Singh, Jaswant
Facts of Bangalore Water Supply Case
The Appellant Board in Bangalore Water Supply Case imposed fines on the respondent employees for instances of misconduct and successfully recovered various sums as penalties. In response, the employees initiated Claims Application No. 5/72 under Section 33C(2) of the Industrial Disputes Act, asserting that the disciplinary actions taken against them had transgressed the principles of natural justice.
The Appellant Board raised a preliminary objection before the Labour Court, contending that the Board, being a statutory body responsible for providing essential amenities to citizens, essentially fulfils a sovereign function and therefore does not qualify as an “industry” as defined under section 2(j) of the Industrial Disputes Act. Consequently, it was argued that the employees were not classified as “workmen,” thus challenging the jurisdiction of the Labour Court to adjudicate upon the employees’ claim.
Despite the Board’s objection, the Labour Court ruled in favour of the employees. Subsequently, the Appellant Board submitted two Writ Petitions, specifically, Nos. 868 and 2439 of 1973, before the Karnataka High Court in Bangalore. The Division Bench of the High Court dismissed these petitions, asserting that the Appellant Board indeed falls under the definition of an “industry” as stated in section 2(i) of the Industrial Disputes Act, 1947.
The central issue, in Bangalore Water Supply Case, was whether a statutory body engaged in activities essential for providing basic amenities to citizens, which were considered as regal (sovereign) functions, could be classified as an “industry” under the definition provided in Section 2(j) of the Industrial Disputes Act, 1947. The case revolved around determining whether such activities could be subject to the legal provisions governing industrial disputes.
Provisions of Law in Question
The term “industry” as defined in Section 2(j) of the Industrial Disputes Act, 1947, is subject to evaluation through the “triple test” and “dominant nature test.” This pertains to whether activities performed by a statutory body, essentially fulfilling sovereign functions by offering essential amenities to citizens, fall within or outside the definition of “industry.”
The matters relates with Labour Law in India.
Judgement in Bangalore Water Supply Case
In Bangalore Water Supply Case, a seven-judge panel of the Supreme Court conducted a comprehensive examination of the scope of “industry.” The majority decision, endorsed by five judges, with two judges dissenting, overruled previous judgments such as Safdarjung Solicitors’ case, Gymkhana, Delhi University, Dhanrajgiri Hospital and Cricket Club of India.
It upheld the principles established in the Hospital Mazdoor Shabha and Indian Standards Institution cases. The court followed the precedents set by the Banerji and Corporation of City of Nagpur cases.
The Bench in Bangalore Water Supply Case comprised seven esteemed judges: Beg M. Hameedullah (CJ), Chandrachud Y.V., Bhagwati P.N., Krishna Iyer V.R., Tulzapurkar V.D., Desai D.A. and Singh Jaswant. Its purpose was to delineate the extent of “industry.” The concept of the “triple test” emerged from this case, serving as a benchmark for assessing the legality of various establishments.
The Triple Test laid in Bangalore Water Supply Case entails the following criteria:
- Systematic Activity
- Cooperation between Employer and Employee
- Activity Pertaining to Goods and Services Production to Fulfill Human Needs
It’s important to note that religious services or other activities rooted in spiritual fulfilment are not encompassed within the definition of “industry.” The motive for profit is irrelevant in this context. The triple test directs attention to the functional aspects, specifically focusing on the relationship between employer and employee.
Philanthropic activities do not disqualify an establishment from being classified as an “industry.” Consequently, if an undertaking satisfies all the aforementioned criteria, it can be labelled as an “industry” under section 2(j) of the Industrial Disputes Act, 1947.
Key points to consider:
- The absence of a profit motive in Bangalore Water Supply & Sewerage Board vs A. Rajappa does not negate the nature of an undertaking, regardless of whether it is in the public, joint, private, or another sector.
- The emphasis is on functionality and the crucial criterion is the nature of the activity, particularly the relationship between employer and employee.
- The philanthropic nature of an endeavour does not alter its classification as a trade or business.
- Organised activities possessing the triple elements described earlier may qualify as “industry” even if they are not strictly trade or business. The presence of employer-employee dynamics resembling those in trade or business is pivotal, even if other features differ.
These guidelines, as laid in Bangalore Water Supply Case, should not be restricted by invoking creeds, cults, or inner senses of incongruity or outer motivations in economic operations. The statute’s essence revolves around resolving industrial disputes between employers and workers and the definition’s reach must align with this intent.
The Supreme Court in Bangalore Water Supply Case determined that professions, clubs, educational institutions, cooperatives, research institutes, charitable projects and similar ventures if they meet the triple test criteria, fall within the scope of Section 2(j). In essence, organised activities fulfilling the triple elements, even if they do not strictly align with trade or business, can be considered “industry” if the employer-employee relationship resembles that of trade or business.
Dominant Nature Test
In the Bangalore Water Supply case, the Supreme Court provided guidelines for determining the dominant nature of an undertaking:
In cases where a combination of activities involves both exempt and non-exempt elements and engages employees across the entire undertaking, the nature of the predominant department determines whether the whole undertaking qualifies as an “industry.” The status of employees who do not meet the “workmen” definition may not be affected.
Sovereign functions, strictly interpreted, qualify for the exemption. Welfare activities or economic endeavours undertaken by government or statutory bodies do not qualify for the exemption.
Even within departments engaged in sovereign functions, if there are units that operate as industries and are largely separable, they may fall within the scope of Section 2(j).
Bangalore Water Supply Summary
The Bangalore Water Supply case involved a seven-judge Supreme Court panel that defined “industry.” It introduced the “triple test,” focusing on systematic activity, employer-employee cooperation and goods/services production for human needs. Philanthropic activities or lack of profit motive were irrelevant.
The ruling encompassed organised activities meeting these criteria as “industry,” irrespective of trade/business and extended to professions, clubs, educational institutions, etc. The “dominant nature test” determined an undertaking’s nature based on the most significant department. Sovereign functions were exempted and separable industry units within sovereign departments fell within Section 2(j) of the Industrial Disputes Act.
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