Issue in the industrial jurisprudence

The definition of industry has always been a very contentious issue in the industrial jurisprudence and there have been an array of cases which have tried to settle the dispute and give the adequate definition as and when raised. However, it was realized that these definitions have created more and confusion. To settle the dust in the matter and the definition of industry under section 2(j) of the IDA was considered by the Supreme Court in the land mark judgment of Bangalore Water Supply and Sewerage Board Vs A.Rajjapa and Ors. [1] Here the courts interpreted the term industry very broadly. However, the minority opinion was against giving such a wide definition to the term industry. Bangalore Water Supply judgment was important because it was for the first time that a comparatively clear definition of the term was given. Majority judgment was delivered by justice Krishna Iyer. In the will look into various tools and reason of interpretation used by justice Krishna Iyer to reach his conclusions.

Before dealing with the tools of interpretation used by the SC it is essential to understand in brief the judgment delivered by the court in BWSS. In BWSS the matter before the court was interpretation of the definition of 2(j) [2] in IDA. The court looked into the various decisions given in previous judgments. The court in response to the questions raised before it devised a working principle, or the triple test to satisfy the definition of the industry after referring to the various decisions. The working principle as devised by the court states that an activity will be industry when:

Systematic Activity

Organised by co-operation between the employer and employee

For the production and distribution of goods and services calculated to satisfy the human needs.

The effect was that a large number of activities which did not fall under the definition of industry came under the purview of the definition of industry. The court overruled all the earlier of the court in Safdarjung [3] , Solicitors case [4] , Delhi University [5] etc given by the court which brought out from the purview of the definition of industry these activities. The result of such a change was that the activities such as professions, clubs, educational institutions, co-operatives, research institutes, charitable projects and other kindred projects if they fulfill the above-mentioned triple test cannot be exempted from the scope of section 2(j). The Bangalore water supply case was in certain matters a reaffirmation and amalgamation of the Hospital Mazdoor Sabha [6] and City Corporation of Nagpur [7] . Hence, following the earlier ratios of these two cases the court it was stated by justice Krishna Iyer that sovereign functions would be out of the purview of the definition of the term industry. However, the sovereign functions only include the inalienable functions of the state not the welfare functions. As a caution it was also mentioned that the departments of governments which can be severed from the sovereign functions will fall under the scope of scope of section 2(j).

The court while dealing with this case followed a very workers oriented attitude. It was stated by the court that the objective of the Act was to ameliorate the condition of the workmen. Justice Krishna Iyer stated: [8] 

“The functional focus of this industrial legislation and the social perspective of Part IV of the Paramount Law drive us to hold that the dual goals of the Act are contentment of workers and peace in the industry and judicial interpretation should be geared to their fulfillment, not their frustration. A worker-oriented statute must receive a construction where conceptually, the keynote thought must be the worker and the community, as the Constitution has shown concern for them, inter-alia, in Articles 38, 39 and 43"

While dealing with the Act the court was of the view that this legislation is a beneficial legislation and hence must be construed liberally. This was presumed to be a legislation that furthers the goals of social justice by bridging the gap between the haves and the have nots. In the words of Justice Krishna Iyer. [9] 

“To sum up, the personality of the whole statute is it remembered, has a welfare basis, it being a beneficial legislation which protects labour, promotes their contentment and regulates situations of crisis and tension where production may be imperiled by untenable strikes and blackmail lock-outs. The mechanism of the Act is geared to conferment of regulated benefits to workmen and resolution, according to a sympathetic rule of law, of the conflicts, actual or potential, between managements and workmen. Its goal is amelioration of the conditions of workers, tempered by a practical sense of peaceful co-existence, to the benefit of both-not a neutral position but restraints on laissez faire and concern for the welfare of the weaker lot. Empathy with the statute is necessary to understand not merely its spirit, but also its sense. One of the vital concepts on which the whole statute is built, is 'industry' and when we approach the definition in Section 2(j), we must be informed by these values."

So the courts intended to give a broad interpretation to the definition of the term industry in 2(j) and give a liberal construction. It is the common rule of interpretation that when the language of the statute is clear it should be given effect to. “The rule of liberal interpretation comes into picture if due to faulty drafting the true intention of legislature is not being conveyed. In liberal construction the meaning of the statute can be extended to matters which come within the spirit or reason of the law or within the law seeks to suppress or correct." [10] 

To give a liberal interpretation the courts need to look into the intention of the legislature and if the intention of the legislature is not being fulfilled then the courts should come into picture and give a liberal interpretation which furthers the intention of the legislature. To find the intention of the legislature has two aspects:

What the word means?

What is the purpose and object of the reason and spirit?

The intention of the legislature has to be found in the words used by the legislature in the language of the statute/ the courts should not set up the task of finding the supposed intention of the statute. In the case of RBI v Peerless finance in the word of Justice Chinappa Reddy: [11] 

“Interpretation must depend on the text and the context. They are the basis of interpretation. One may well say that if text is the texture, it is the context what gives colour. Neither can be ignored. Both are important that interpretation is best which makes the textual interpretation match the contextual."

While deciding the Bangalore water supply case the court looked into the history of the enactment and the purpose it wishes to achieve. The court was of the view that the act as a whole was developed to ameliorate the condition of the labour in India. It aimed at the amicable settlement of industrial dispute and maintenance of industrial peace and harmony. The act was seen as an important piece of social justice legislation. Hence, the court waned to give it a liberal interpretation. In the words of Krishna Iyer justice [12] 

“We would only add that a developing country is anxious to preserve the smooth flow of goods and services, and interdict undue exploitation and, towards those ends labour legislation is enacted and must receive liberal construction to fulfill its role."

The court in BWSS was of the view that the Act a whole is to further the interest of the labours and hence it is beneficial in nature. To a proper interpretation it is essential to read the entire statute as a whole to bring out its beneficial character. To figure out the true intention of the legislature it is essential to view the statue as a whole. Hence, it was correct on the part of the court to look into the historical background, relevant constitutional entry, preamble of the act, the social goal which it aimed to achieve.

The court looked into the preamble of the Act which talks about the investigation and settlement of industrial dispute.

“When the question arises as to the meaning of a certain provision in a statute, it is not only legitimate but proper to read that provision in its context. The context here means the statute as a whole, the previous state of the law, other statues in pari material, the general scope of the statute and mischief that it was intended remedy." [13] 

The Act being a beneficial act it was important to read the enactment as a whole to bring out its true nature and intent of the legislature. The view of the court to give wider interpretation to section 2(j) of IDA was accepted in many later judgments. Thus, this is a settled rule of interpretation now that if there are two interpretations possible, the one which furthers the policy and object of the enactment and which is more beneficial is to be preferred.

Justice Krishna Iyer while delivering the judgment of the court referred to the Heydon’s rule of interpretation to bring out the true purpose of the act and to give the act a purposive interpretation. The Heydon’s rule states that before construing the words of a statute whether, penal, beneficial, restrictive of enlarging following have to be taken into consideration. [14] 

What was the common law before the making of the act?

What was the mischief or the defect for which the common law did not provide?

What is the remedy the act has provided?

What is the reason of the remedy?

The attempt here was to bring out the true purpose of the enactment which was found by the court to be the industrial development, by maintaining the peaceful and harmonious relation between the employer and the employee. Thus this act was given wider ambit to bring within its purview as many undertakings as possible.

Thus, the object of the enactment was to bring within its ambit all those industry which full the triple test criteria laid down by the court. A bare few exceptions were made by the court. The decision in BWSS did hold the ground for a very long time and still is the rule for deciding the cases relating to ‘Industry". However, with the passage of time the wide ambit which was given by BWSS to the term “industry" was seen to causing trouble in many ways. Different bench several of the HCs and SC again started giving different opinions.

In the case of Coir Board Ernakulum v Indira Devi [15] the question was whether the coir board would be an industry or not. Following the ratio of BWSS strictly, the coir board would be an industry. However, looking at the nature of work of the coir board the division bench was of the view that it should be outside the ambit of industry. Hence, the matter was referred to the larger bench, which stuck to the ratio of BWSS.

Nonetheless, the controversy surrounding the definition did not rest there. The cleavage of opinion in judiciary about the ratio of BWSS was very apparent. Hence, a five judge bench was formed to look into the matter in the case of State of UP v Jai Bir Singh [16] .

In Jai Bir Singh the court looked into the pre and post BWSS cases. The court was of the view that there should a middle way between liberal and literal rule of interpretation. It didn’t favour the expansive definition given to the term industry bordering to absurdum in certain cases. The court was also critical of the way in which the judgment of the BWSS was delivered with different judges giving their opinion in a half-hazard way. The court referred to Hospital Mazdoor Sabha [17] and was of the view that a line needs to be drawn to bring out certain undertakings out of the ambit of industry. We have already discussed the Heydon’s rule of interpretation and purposive construction and how it was applied in BWSS. It is interesting that the judges in BWSS also looked into the legislation as one of the beneficial legislation which needs to be interpreted liberally. However, they were not in agreement with the BWSS, that IDA was a worker oriented statute and hence the only focus should be the worker. The judges were of the view that this being a beneficial statute, it has to benefit the society as a whole. Any interpretation given to this statute should take into account both, employers and the employees. The objective of the enactment is to further industrial peace and harmony ultimate objective being the industrial development of the nation. Justice Dhramadhikari, speaking for the court in the case stated the even in BWSS it has been pointed out that a line is necessary. The dissenting opinion of the BWSS also pointed out that only such activities systematically and habitually carried on commercial lines for production of goods or for rendering material services to the community shall fall within the ambit of industry.

After the decision of BWSS, the law has been amended and the amended section 2(j) brings out from the purview of the definition of industry certain undertakings, however it has not been notified yet. The employees contended that the Bangalore water supply still holds the field and notification of amended section has not been done because there is no alternative provided to the employees who will be brought out of the purview of industry. The court while dealing with the sovereign functions held that the way in which the sovereign function has been dealt in BWSS, takes into account only the constitutional function of the state. However, the concept of sovereignty is much larger. The government welfare activities fall with the concept of sovereignty and shall be brought out of the purview of industry. If need be another legislation can be brought to protect the interest of such excluded class. The court agreed to the ratio of Safdarjung [18] case that “although 'profit motive' is irrelevant, in order to encompass the activity within the word 'industry', the activity must be 'analogous to trade or business in a commercial sense". Hence, the court was against giving such a wide definition and wanted to restrict the interpretation of the term ‘industry’.


If we look at both the cases and the method of interpretation used by the court in both the cases, it is very apparent that both the benches have used the same tools and rules of interpretation, used same case laws as precedents, to arrive at two different conclusions. Justice Krishna Iyer used the purposive rule of interpretation and reached a conclusion that the act was beneficial in nature and was aimed at maintaining industrial peace and harmony and hence its ambit should be as broad as possible to give benefit to all categories of employees possible. Justice Dhramadhikari while delivering his judgment was also of similar view. In Jai Bir Singh the court agreed that IDA was a beneficial legislation and is has to benefit society as a whole not a section of society. For that it was proposed that both the sides of the balance have to be equal, an interpretation should not overburden the employers or the employees. The ultimate aim being, industrial peace and harmony, and hence, development of the nation. In Jai Bir singh the court viewed that definition of industry should be restricted so that the overall benefit of the enactment can reach to greater number of people.

After going through both the cases I am of the view that Jai Bir Singh should be correct position of law. Having a look at the Coir Board of Ernakulam [19] would clearly show that a board meant for the promotion for coir and the farmers involved was not practically an industry but technically speaking it came within purview of industry. Similarly, many hospitals and charity whose sole object I to help the society would come within the purview of industry. A line certainly needs to be drawn some where. It’s nobody’s case that employees of such excluded sectors do not need protection of course they do. It’s just that IDA is not the enactment to look for.

Just to substantiate my argument of favoring the Jai Bir singh over Bangalore water supply, I would like to state the report of the second National Labour Commission [20] . The national labour commission has talked of the reform of the labour laws, which as of now are favoring employees over the employers. The commission in its report has mentioned that such an attitude has not only affected the employers’ interest but also the consumers’ interest. At the same time it talks about protecting the workers interest by ensuring better social security scheme. This view of labour commission is in tune with the judgment of Jai Bir Singh.



Singh. Justice .G.P., PINCIPLES OF STATUTORY INTERPRETATION, 12th edn., Lexis Nexis Butterworths Wadhwa, Nagpur, 2010.