The Bangalore Water Supply Judgment: Legal Evolution or Judicial Overreach?

Introduction

All labor that uplifts humanity has dignity and importance and should be taken with painstaking excellence[i]

  • Martin Luther King Jr.

The realm of labour law in India is eagerly anticipating the implementation of the four labour codes by the legislature. The recent Economic Survey published in January 2023 says that the four labour codes that were passed in 2019 and 2020 by the Parliament by consolidating the 29 central labour laws are “in tune with the changing labour market trends”.[ii] Nonetheless, the government’s planned labour reforms to support economic reforms and the welfare of workers in the unorganised sector are being impeded because the issue of labour falls under the jurisdiction of both the Centre and the state.[iii] While the Centre has shared draft rules on the four codes, the states are still on their way to publishing the draft rules.[iv] Therefore, it is uncertain how and when each state will implement them.

The history of labour law in India goes down more than 125 years. Beginning with the Apprentices Act, 1850,[v] it was followed by the Factories Act, 1881, the Trade Unions Act, 1926,[vi] Trade Disputes Act, 1929,[vii] and, ultimately, the Industrial Disputes Act, 1947,[viii] (hereinafter “ID Act”), that became the primary mechanism for governmental intervention in labour-related conflicts. It is important to note that labour and commercial law are related as either of them regulate different aspects of the relationship between businesses and their employees, and both are important for businesses to understand and comply with in order to operate successfully. Therefore, a sound labour law can immensely affect the sturdy domain of commercial law and the overall industrial and business landscape of the nation.

For effectively running the wheels of labour law machinery, the foremost element would be to decide on the definition of ‘industry.’ Legislative changes and judicial authorities have greatly broadened and changed the definition of ‘industry’ over time. There have been many inconsistencies and misunderstandings regarding the scope of the statutory definition due to the vagueness appearing in the ID Act and the related conflicting judicial authorities.

Accordingly, this piece tries to inquire into the consequences of the definition of ‘industry’ and the related prevalent legal uncertainties. It sheds light upon the landmark judgment of Bangalore Water Supply and Sewerage Board v. A Rajappa (hereinafter BWS),[ix] in which the Apex Court propounded an ‘artificially’ broader definition of industry. Thereafter, it breaks down the after-effects of the BWS judgment, in which the courts in India found themselves unclear on the position of law settled by the BWS. Furthermore, this piece also examines how the definition expounded in BWS contained major fallacies and relied on an excessive and superfluous degree of worker-oriented approach. There is also a discussion regarding the changes brought through the Industrial Disputes (Amendment) Act 1982 (hereinafter “Amendment Act, 1982”)[x] for effectuating the definition expounded in the BWS, although it still awaits its enforcement. Towards the end, it is highlighted that there exists a grave level of obscurity in BWS, and how an unnecessarily broad definition of ‘industry’ can do more harm than good to the industrial and commercial fabric of the country. It is also mentioned how the yet-to-be-implemented Industrial Relations Code, 2020,[xi] (hereinafter “IR Code”) has failed to eradicate the underlined uncertainties.

The Bangalore Water Supply Judgment: A Sweeping Interpretation with Judicial Overreach

The Supreme Court on various occasions prior to BWS, gave Section 2(j) of the ID Act, which contains the definition of ‘industry’, the application of the doctrine of noscitur a sociis, wherein the meaning of a doubtful word was ascertained by reference to the meaning of the words associated with it. To illustrate, in Secy., Madras Gymkhana Club Employees’ Union v. Gymkhana Club,[xii] which was also reaffirmed by Safdarjung Hospital v. Kuldip Singh Sethi[xiii] and University of Delhi case,[xiv] the definition of ‘industry’ has been interpreted by the Court in two parts. The first part refers to any business, trade, undertaking, manufacture or calling of employers, which determines an industry by the occupation of employers in certain activities. The second part includes any calling, service, employment, handicraft or industrial occupation or avocation of workmen, giving the extended connotation. The word ‘undertaking’ is defined as any business, work or project engaged in as an enterprise analogous to business or trade. Hence, all the aforesaid cases were against the expansion of the definition. However, in BWS, the seven-judge constitutional bench overruled the earlier judgments, and by utilising its interpretative conscience, expounded a new definition of ‘industry.’

[Image Sources: Shutterstock]

Bangalore Water Supply Judgment

Primarily, the Court elucidated the Triple Test for determining whether an activity is covered by the definition of ‘industry’. The test said that firstly, there must be a systematic activity. Secondly, this systematic activity must be coordinated by employer-employee cooperation, and thirdly, the intent of that activity must be to produce or distribute goods and services that would ultimately satisfy human needs and desires. These human needs and desires need not be spiritual or religious in nature but can be inclusive of material things geared to celestial bliss, such as the production of prasad on a large scale.

Secondarily, the Court expounded the Dominant Nature test. This test would come to use where an entity is involved in a complex set of activities, wherein some of those activities qualify for exemption to the definition of ‘industry’, others not. This test said that when deciding whether the entity in question is an industry, the predominant nature of the services and the integrated nature of the departments will be taken to be the true test. Both tests act harmoniously.

The Court, while disregarding the prior precedents, held that the definition of ‘industry’ was deemed to include all professions, clubs, educational institutions, cooperatives, research institutions, charitable projects, and any other organised activity that involved an employer-employee relationship and the production of goods or provision of services. The exemptions given from this broad definition were very limited.

The Aftermath of BWS – A Continued Road to Uncertainty

Subsequent to BWS, the Supreme Court in Sub-Divisional Inspector of Post v. Theyyam Joseph,[xv] Bombay Telephone Canteen Employees Assn case,[xvi] and G.M., Telecom v. S. Srinivasa Rao case,[xvii] was fairly uncertain in applying the ratio of BWS and gave conflicting judgments. Moreover, an evident discord in the cases of Chief Conservator of Forests v. Jagannath Maruti Kondhare,[xviii] and State of Gujarat v. Pratamsingh Narsinh Parmar,[xix] was noted, wherein the question was whether the ‘Social Forestry Department’ of the State, which is a welfare scheme undertaken for the improvement of the environment, would be put under the definition of ‘industry’.

As the conflict between the two decisions was based on the BWS judgment, the matter was again put up before the Constitutional Bench in Jai Bir Singh v. State of UP (hereinafter JBS).[xx] In JBS, it was held that there existed more than one compelling reason before the Supreme Court to refer to the interpretation of the definition of ‘industry’ in the ID Act, to a larger Bench and for reconsideration by it, if required, of the decision delivered in BWS.

Author: Kaustubh Kumar, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

REFERENCES

[i] https://observerid.com/all-labor-that-uplifts-humanity-has-dignity-and-importance-and-should-be-undertaken-with-painstaking-excellence-martin-luther-king-jr/

[ii] https://www.indiabudget.gov.in/economicsurvey/doc/echapter.pdf

[iii] https://theprint.in/economy/economic-survey-says-govts-labour-codes-in-tune-with-market-trends-but-theyve-not-kicked-in-yet/1345735/

[iv] https://www.cnbctv18.com/economy/economic-survey-2023-pm-modi-nirmala-sitharaman-pre-publish-draft-rules-on-labour-codes-budget-2023-15808231.htm

[v] https://www.indiacode.nic.in/repealed-act/repealed_act_documents/A1850-19.pdf

[vi] https://labour.gov.in/sites/default/files/TheTradeUnionsAct1926.pdf

[vii] https://www.indiacode.nic.in/repealed-act/repealed_act_documents/A1929-7.pdf

[viii] https://labour.gov.in/sites/default/files/THEINDUSTRIALDISPUTES_ACT1947_0.pdf

[ix] https://main.sci.gov.in/jonew/judis/5125.pdf

[x] https://lawsisto.com/Read-Central-Act/1150/INDUSTRIAL-DISPUTES-AMENDMENT-ACT-1982

[xi] https://egazette.nic.in/WriteReadData/2020/222118.pdf

[xii] https://main.sci.gov.in/jonew/judis/2266.pdf

[xiii] https://main.sci.gov.in/jonew/judis/1441.pdf

[xiv] https://main.sci.gov.in/jonew/judis/3556.pdf

[xv] https://main.sci.gov.in/jonew/judis/16080.pdf

[xvi] https://www.casemine.com/judgement/in/5609ad1ee4b01497114109cd

[xvii] https://main.sci.gov.in/jonew/judis/13678.pdf

[xviii] https://main.sci.gov.in/jonew/judis/10219.pdf

[xix] https://www.casemine.com/judgement/in/5609adace4b0149711411eee

[xx] https://main.sci.gov.in/jonew/judis/29407.pdf

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