By:- Tejas Patel

CITATION:1978 AIR 548, 1978 SCR (3) 207
DATE OPF THE CASE:21 February, 1978
STATUTES/ CONSTITUTION INVOLVED:Section 2 in The Industrial Disputes Act, 1947 The Industrial Disputes Act, 1947, Section 2(g) in The Industrial Disputes Act, 1947 AND Section 33C in The Industrial Disputes Act, 1947


India’s labour rules are stumbling blocks to doing business, as seen by its world ranking of 102. The major goal of this study is to better comprehend the connection between a corporate employer and its workers, or workers, as the word is used in the Industrial Disputes Act of 1947. A deeper review of the country’s industrial legislation and current jurisprudence reveals that the legislation is not only restrictive from the employer’s perspective, but it also fails to provide employees/workmen with the rights necessary to play a meaningful part in the organization.

Even the courts have been hesitant to embrace a larger role for employees in a business. A comparative assessment of other jurisdictions, such as Japan and the United States, is also included in the book. Based on the American experience, an attempt has also been made to lay out a roadmap for the necessary remedial measures.


The Supreme Court of India’s historic decision in this case examined the meaning of “industry” as defined under section 2(j) of the Industrial Dispute Act, 1947. The Supreme Court of India conducted a thorough examination of the term. The Apex Court’s dictum nullified the consensual flow of presumptions established with reference to the concept of “industry.”

It becomes uncertain when defining the definition that assumes enormous relevance as a method for settlement and compensation in connection to industrial disputes, which can only be settled in a proposition when industry-related variations exist. With the stated principles in the ruling, it overturned several previous Supreme Court decisions while also easing the legislative burden by putting the concerns in the proper context. In any setup business, the two functional bodies of “employer” and “employee” are the nucleus, and any minute dispute between them might shatter the industry’s basis. The Supreme Court put several aphorisms to the test to see what should be included and excluded in the defining area.


  • The Appellant Board penalized the respondent workers for misbehavior, and different sums were collected from them. As a result, they filed Claims Application No. 5/72 under Section 33C (2) of the Industrial Disputes Act, stating that the punishment had been imposed in breach of natural justice principles.
  • The appellant Board filed a preliminary objection with the Labour Court, claiming that the Board, as a statutory body performing what is essentially a regal function by providing basic amenities to citizens, is not an industry within the meaning of section 2(j) of the Industrial Disputes Act, and thus the employees were not workers and the Labour Court lacked jurisdiction.
  • The appellant Board filed two Writ ‘Petitions before the Karnataka High Court in Bangalore after this objection was overruled. The petitions were rejected by the Division Bench of the High Court, which concluded that the appellant Board is “industry” within the sense of section 2(i) of the Industrial Disputes Act, 1947.
  • The appeals by Special Leave were sent to a larger Bench for consideration, citing “the possibility of confusion from the crop of cases in an area where the common man has to understand and apply the law and the desirability of a comprehensive, clear, and conclusive declaration as to what is an industry under the Industrial Disputes Act as it stands.”


  • Whether Bangalore Waterworks and Sewerage Board comes in the parameter of section 2(j) of the Industrial Dispute Act, 1947?
  • Whether the following activities/services are Industry?
    • Sovereign functions
    • Charitable institutions
    • Professional Firms
    • Hospitals
    • Municipalities


  • Section 2 (j) in The Industrial Disputes Act, 1947

(j) ” industry” means any systematic activity carried on by co- operation between an employer and his workmen (whether such workmen are employed by such employer directly or by or through any agency, including a contractor) for the production, supply or distribution of goods or services with a view to satisfy human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature), whether or not –

  1. any capital has been invested for the purpose of carrying on such activity, or
  2. such activity is carried on with a motive to make any gain or profit and includes–
    1. any activity of the Dock Labour Board established under section 5A of the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948).
    2. any activity relating to the promotion of sales or business or both carried on by an establishment. but does not include:
      1. any agricultural operation except where such agricultural operation is carried on in an integrated manner with any other activity (being any such activity as is referred to in the foregoing provisions of this clause) and such other activity is the predominant one. Explanation – For the purposes of this sub-clause,” agricultural operation” does not include any activity carried on in a plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951); or
      2. hospitals or dispensaries; or
      3. educational, scientific, research or training institutions; or
      4. institutions owned or managed by organizations wholly or substantially engaged in any charitable, social, or philanthropic service; or
      5. khadi or village industries; or
      6. any activity of the Government relatable to the sovereign functions of the Government including all the activities carried on by the departments of the Central Government dealing with defence research, atomic energy, and space; or
      7. any domestic service; or
      8. any activity, being a profession practised by an individual or body or individuals if the number of persons employed by the individual or body of individuals in relation to such profession is less than ten; or
      9. any activity, being an activity carried on by a co-operative society or a club or any other like a body of individuals, if the number of persons employed by the co-operative society, club or other like a body of individuals in relation to such activity is less than ten;
  • Section 33C in The Industrial Disputes Act, 1947

Where any workman is entitled to receive from the employer any money or any benefit which is capable of being computed in terms of money and if any question arises as to the amount of money due or as to the amount at which such benefit should be computed, then the question may, subject to any rules that may be made under this Act, be decided by such Labour Court as may be specified in this behalf by the appropriate Government; 1 within a period not exceeding three months.

Provided that where the presiding officer of a Labour Court considers it necessary or expedient so to do, he may, for reasons to be recorded in writing, extend such period by such further period as he may think fit.


It was decided that the Bangalore Water Supply and Sewerage Board would be included in the definition of industry, and it justified this decision by providing a more detailed definition of industry.

‘Industry’, as defined in Section 2(j), (a) Where (i) systematic activity, (ii) organized by co-operation between employer and employee, (the direct and substantial element is chimerical) (iii) for the production and/or distribution of goods and services calculated to satisfy human wants and wishes (not spiritual or religious but inclusive of material things or services geared to celestial bliss e.g. making, on a large scale, Prasad or food), prima facie, there is an ‘industry’ in that enterprise:

  • Whether the endeavor is in the public, joint private, or other sector, the absence of a profit motivation or a profitable purpose is immaterial.
  • The actual focus is functional, and the nature of the activity, with a specific emphasis on the employer-employee relationship, is the deciding factor.
  • If the organization is a trade or company, it does not cease to be one due to the presence of philanthropy.

Even though Section 2(j) utilizes terms with the greatest amplitude in its two arms, their meaning cannot be exaggerated to the point of overreach.

As indicated in this judgement, undertaking, as well as service, calling, and the like, must suffer a contextual and associational shrinkage. This leads to the conclusion that any organized activity with the triple characteristics, even if it is not commerce or business, may still be classified as industry (if the nature of the activity, i.e. the employer-employee relationship, is similar to what we see in industry).

This includes ‘industry’ endeavors, callings, and services adventures that are ‘analogous’ to the conduct of commerce or business. Other than the approach for carrying out the task, such as coordinating employer-employee cooperation, all elements may be distinct. It makes no difference if there is a parallel in terms of employment.

By invoking creeds, cults, inner senses of incongruity, or other senses of motivation for or outcome of economic activities, the application of these rules should not stop short of its logical reach. The Act’s philosophy is industrial peace, regulation, and settlement of industrial disputes between employers and employees, and the scope of this legislative philosophy must guide the Act’s reach.


After the Bangalore Water supply case the Supreme Court came up with a working principle called as triple test:

  • There should be systematic Activity
  • Organized by Co-operation between employer and employee,

For the production and/or distribution of goods and services calculated to satisfy human wants and wishes. 

The following points were also emphasized in this case:

  • Industry does not include spiritual or religious services or services geared to celestial bliss
  • Absence of profit motive or gainful objective is irrelevant, be the venture in the public, joint, private, or other sector.
  • The true focus is functional, and the decisive test is the nature of the activity with special emphasis on the employer- employee relationship
  • If the organization is a trade or business, it does not cease to be one because of philanthropy animating the undertaking

As a result of the judgement in this case, professions, clubs, educational institutions, co-operatives, research institutes, charity enterprises, and other similar endeavors cannot be exempted from the scope of section 2(j) of the Act if they meet the triple test described above.


By ruling in the Bangalore Water Supply case, the Supreme Court has restored judicial discipline and thereby avoided an unnecessary court-initiated upheaval in the domain of labour law. The Apex Court had granted a broad meaning of “industry” under the Act, and the judgement has been implemented as law throughout the country ever since. The extensive interpretation granted by the Bangalore Water Supply case was limited by Parliament, which changed the term of “industry” in 1982. Hospitals, dispensaries, educational, scientific, research, or training institutes, as well as charity and social philanthropic institutions, were all excluded from the new definition.

The current law is based on Rajappa’s interpretation of the original Section 2(j). Focusing purely on the merits of the case, it is a landmark decision that considers our country’s social and economic culture. The ruling is clearly pro-labor since it tries to expand the scope of the Industrial Dispute Act of 1947 to include new activities.

In practice, the country’s labour force is in a far better situation now than it would have been if the modified S. 2(j) had been announced. This is because the modified S. 2(j) precludes some types of work, which Rajappa’s case properly falls under.


  • The Industrial Disputes Act, 1947

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