DES RAJ v. STATE OF PUNJAB

A B c DES RAJ, ETC. ETC. _v._ STATE OF PUNJAB & ORS. ETC. APRIL 20, 1988 [RANGANAIB MISRA AND MURARI MOHON DUTT, JJ.) _Industrial Disputes Act, 1947-Whether Irrigation Department of_ _State Government of Punjab or Haryana_ _is_ _an_ _'industry' as_ _defined in_ _Section_ _2(1)-0f_ Each of these appeals by special leave was directed against the award made by the Labour Court. I . ###### 1 The appellant in Civil Appeal No. 5415 of 1985, a foreman in the Mechanical Constrnction Division under the Irrigation Department, had filed an application nnder Section 33C-2 of the Industrial Disputes D Act, 1947 ('the Act') before the Labour Court for the recovery of arrears of annual increments. The appellant in Civil Appeal No. 2168 of 1987 was a T. Mate in the P.W.D. Drainage Division. When his services were terminated without complying with the requirements of the law, he challenged the E termination before the Labour Court. The appellant in the remaining appeal was an operator in the Mechanical Division, under the Irrigation Department of Haryana State. His services were terminated and thereupon he approached the Labour Court challenging the order of termination. F G In each of these cases, challenge was advanced by the Governmental authority to the maintainability of the application before the Labour Court on the ground that the employer was not an 'industry' and the Act did not apply. The Labour Court upheld the objection and declined relief to the appellants. Allowing the appeals with observations, the Court, HELD: The common question in these appeals was whether the Irrigation Department was an 'industry'. The definition of 'industry' is given in Section 2(j) of the Act. By Section 2(c) of the Amending Act (46 H of 1982) this definition had been amended but the amendment has not 616 DES RAJ _v._ STATE OF PUNJAB 617 yet been brought into force. Since the amended statutory definition was not yet in force, the parent definition and the judicial pronouncements thereon had to be referred to for finding the law. The field is covered by pronouncements of this Court and is not necessary to go beyond the precedents such as decisions in _D.N. Banerji_ v. _P.R. Mukherjee_ & _Ors.,_ [1953] SCR 302; _State_ _of Bombay and Ors._ v. _The Hospital_ A ~· _Mazdoor Sabha_ & _Ors.,_ [1960] 2 SCR 866; _Corporation of the City of_ B _Nagpurv. Its Employees,_ [1960] 2 SCR 942; _ManagementofSafdarjang_ _Hospital_ v. _Ku/dip Singh Sethi,_ [1971] SCR 177; and the decision of a seven-Judge Bench in _Bangalore Water Supply and Sewerage Board_ v. _A. Rajappa_ & _Ors.,_ [1978] 2 SCC 213. [621F-G] In case the Irrigation Department was accepted to be an "industry", there was no dispute that each of the appellants would be a 'workman' and each of the claims would constitute an ''industrial dispute" as defined in Section 2(s) and (k) of the Act, respectively. [621G] Judicial notice could be taken of the position that Haryana and Punjab originally constituted one State and Haryana became separate from i966. The Irrigation Department of the erstwhile Punjab State was discharging the State's obligations created under the Northern India Canal and Drainage Act, 1873. The Administration Report of the year 1981-82 of the Public Works Department, Irrigation Branch, which really deals with the Irrigation Department, was produced before the Court. [634B-C] Counsel for the appellants placed before the Court some cases of different High Courts in support of his stand that the Irrigation Department should be considered as an industry, i.e. _Madhya Pradesh Irriga-_ _tion Karamchari Sangh_ v. _State of Madhya Pradesh_ & _Anr.,_ [1972] LLJ 374; _State_ _of Rajasthan_ v. _The Industrial Tribunal, Rajasthan,_ [1970] RLW 137; _Dinesh Sharma_ & _Ors._ v. _State_ _of Bihar_ & _Ors.,_ [1983] Bibar L.J.R. 207 and _Chief Engineer, Irrigations Orissa_ v. _Harihar_ _Patra_ & _Anr.,_ [1977] L.I.C. 1033. [638E-F] c D E F On the tests, as already laid down in the judgments, the Court did G not think the facts found in this case could take the Irrigation Department outside the purview of the definition of 'Industry'. The main functions of the Irrigation Department where subjected to the Domi nant Nature test evolved by Krishna Iyer J. in _Bangalor Water Supply_ _and Sewerage Board_ v. _A. Rajappa_ & _Ors.,_ [1978] 2 SCC 213, decided by a seven-Judges Bench, clearly come within the ambit of industry. H 618 SUPREME COURT REPORTS [19881 3 S.C.R. A Perhaps keeping in view the observations of the learned Judges of the seven-Judges Bench, the definition of industry as occurring in section 2Ul of the Act was amended by Act 46 of 1982. However, the Court could not gather as to why even six years after the amendment to the definition of industry in section 2(j) of the Act came on the statute book, the same had not been brought into force. The court on more than one B occasion had indicated that the position should be clarified by an appropriate amendment, and, when keeping in view the opinion of this Court, the law was sought to be amended, it was appropriate that the same should be brought into force as such or with such further alterations as might be considered necessary a'!d the legislative view of the matter, made know.n and the confusion in the field, cleared up. Bare C Acts and Commentaries on the Industrial Disputes Act had brought in the new definition, deleting the old one with a note that the new provision had yet to come into force. This situation had further added to the confusion. [639F-H; 640A-B] The appeals succeeded. It was made clear that in the event of the _D_ definition of _industry_ being changed either by enforcement of the new definition of industry or by any other legislative change, it would always be open to the aggrieved Irrigation Department to raise the issue again and the present decision would not stand in the way of such an attempt in view of the altered situation. [640B-C] E _D.N. Banerji_ v. _P.R. Mukherjee_ _&_ _Ors.,_ [1953] SCR 302; _State of_ _Bombay_ _&_ _Ors._ v. _The Hospital Mazdoor Sabha_ _&_ _Ors.,_ [1960] 2 SCR 365; _Corporation of the City of Nagpur_ v. _Its Employees,_ [1960] 2 SCR 942; _Management of Safdarjang Hospital_ v. _Ku/dip Singh Sethi,_ [1971] 1 SCR 177; _Bangalore Water Supply and Sewerage Board_ v. _A._ _Rajappa_ _&_ _Ors.,_ [1978] 2 SCC 213; _Om Prakash_ v. _M/s Executive_ F _Engineer,_ _SYL,_ _Kurukshetra_ _&_ _Ors.,_ [1984] Current L.J. 349; _State_ _of Punjab_ v. _Ku/dip Singh_ _&_ _Anr.,_ [1983] 1 L.L.J. 307; _Madhya_ _Pradesh Irrigation Karamchari Sangh_ v. _State_ _of Madhya Pradesh_ _&_ _Anr.,_ [1972] LLJ 374; _State_ _of Rajasthan_ v. _The Industrial Tribunal,_ _Rajasthan,_ [1970] RLW 137; _Dinesh Sharma_ _&_ _Ors._ v. _State of Bihar_ _&_ _Ors.,_ [1983] Bihar L.J.R. 207 and _Chief Engineer, Irrigation, Orissa_ v. G _Harihar Patra_ _&_ _Anr.,_ [1977] L.I.C. 1033, referred to. CIVIL APPELLA1E JURISDICTION: Civil Appeal No. 5415 of 1985 etc. From the Order dated 7.1.1985 of the Presiding Officer, Labour H Court, Amritsar in Application No. 547of1979. -"\ _.r··_ J DES RAJ _v._ STATE OF PUNJAB (MISRA, J. J 619 Jitendera Sharma, P. Gaur, D.K. Garg, K.K. Mohan and R.C. Kaushik for the Appellants. S.C. Mohanta, Mahabir Singh and C.M. Nayar for the Respondents. The Judgment of the Court was delivered by _I_ RANGANATH MISRA, J. Each of these appeals is by special leave and is directed against the Award made in different disputes by the Labour Court. The common justification for ignoring the High Court and approaching this Court directly by way of special leave, according to Mr. Jitendra Sharma for each of the appellant);, is that there are a couple of Full Bench decisions of the Punjab and Haryana High Court holding that the Irrigation Department of the State Governmei:t of Pun jab is not an 'industry' and no useful purpose would have been served by routing the matters through the High Court as the Full Bench decision would have been followed. The appellant in Civil Appeal No. 5415 of 1985 was a Foreman in the Mechanical Construction Division under the Irrigation Department and had applied under Section 33 C-2 of the Industrial Disputes Act, 1947, (hereinafter referred to as 'the Act') before the Labour Court for recovery of arrears of annual increments. The appellant in Civil Appeal No. 2168 of 1987 was a T. Mate in A B c D E the P. W.D. Drainage Division. When his services were terminated without complying with the requirements of the law, he challenged the termination before the Labour Court. The appellant in the remaining appeal was an Operator in the Mechanical Division, Rohtak under the Irrigation Department of Haryana State. His services were terminated F and thereupon he approached the Labour Court disputing the validity of the said order. In each of these cases challenge was advanced by the governmental authority to the maintainability of the application before the Labour Court on the ground that the employer was not an 'industry' and the Act did not apply. The Labour Court by different orders made in each of these cases upheld the objection and declined G relief to the employees. The common question in these appeals, therefore, is as to whether the Irrigation Department of either Government **is an 'industry'.** The definition of 'industry' occurring in Section 2 of the Act has now to be seen. The Act defines 'industry' in Section 2(J) to mean: H A B c D 620 SUPREME COURT REPORTS [1988] 3 S.C.R. "any business, trade undertaking, manufacturer or calling of employers and includes any calling service, employment, handicraft, or industrial occupation or avocation of **workmen."** By Section 2(c) of the Amending Act (46 of 1982), thls definition has been amended but the amendment has not yet been brought into force. The amended definition of "industry" is as follows: "Industry means any systematic activity carried on by cooperation 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, (i) any capital has been invested for the purpose of carrying on such activity; or (ii) such activity is carried on with a motive to make any gain or profit, A > E and includes (a) any activity of the Dock Labour Board established under Section 5A of the Dock Workers (Regulation of Employment) Act, 1948; F G H (b) 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 puposes of this sub-clause, 'agricultural operation' does not include any activity carried on in a _(_ ,._ DES RAJ _v._ STATE OF PUNJAB [MISRA, J.J 621 plantation as defined in clause (f) of Section 2 of the Plan- A tationsLabour Act, 1951; or (2) hospitals or dispensaries; or (3) educational, scientific, research or training institu**tions; or** **B** (4) institutions owned or managed by organisation 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 c D J (8) any activity, being a profession practised by an individual or body of individuals, if the number of persons employed by the individual or body of individuals in rela- E tion to such profession is less than ten; or (9) any activity, being an activity carried on by a cooperative society or a club or any other like body of individuals, if the number of persons employed by the cooperative society, club or other like body of individuals in F relation to such activity is less than ten;" Since the amended statutory definition is not yet in force, the parent definition and judicial pronouncements have to be referred to for finding the law. The field is covered by pronouncements of this Conrt and it is not necessary to go beyond these precedents. In case the Irrigation G Department is accepted to be "industry", there is no dispute that each of the appellants would be a ''workman" and each of the claims would constitute an "industrial dispute" as defined in Section 2(s) and (k) respectively. A five-Judge Bench in _D.N. Banerji_ v. _P.R. Mukherjee_ _&_ _Ors.,_ H 622 SUPREME COURT REPORTS [1988] 3 S.C.R. ~ A B c D E F G H I 1953] SCR 302 considered the scope of the definition of _industry._ Chandrashekhara Aiyer, J. speaking for the Court stated: "It is therefore incumbent on us to ascertain what the statute means by _industry_ and _industrial dispute,_ leaving aside the original meaning attributed to the words in a simpler state of society, when we had only one employer ._,. ' perhaps, doing a particular trade or carrying on a particular business with the help of his own tools, material and skill and employing a few workmen in the process of production or manufacture, and when such disputes that occurred did not go behind individual levels into acute fights between rival organisations of workmen and employers, and when !arge scale strikes and lock-outs throwing society into chaos and confusion were practically unknown. Legislation had to keep pace with the march of times and to provide for new situations. Social evolution is a process of constant growth, and the State cannot afford to stand still without taking adequate measures by means of legislation to solve large and momentous problems that arise in the industrial field from day to day almost ..... When our Act came to be passed, labour disputes had already assulljed big proportions, and. there were clashes between workmen and ·employers in several instances. We can assume therefore ~ that it was to meet such a situation that the Act was enacted, and it is consequently necessary to give the terms employed in the Act referring to such disputes as wide an import as reasonably possible. Do the definitions of _industry, industrial dispute_ and _workman_ take in the extended significance or exclude it? Though the word _undertaking_ in the definition of _industry_ is wedged in between business and trade on the one hand and manufacture on the other, and though therefore it might mean only a business or trade undertaking, still it must be remembered that if that were so, there was no need to use the word separately from business or trade. The wider import is attracted even more clearly when we look at the latter part of the definition which refers to _calling, service, employ-_ _ment_ or _industrial occupation_ _or_ _avocation_ _of workmen._ _Undertaking_ in the first part of the definition and _industrial_ _occupation or avocation_ in the second part obviously mean much more than what is ordinarily understood by trade or business. The definition was appparently intended to ~~ ~ #### ) ·~ -~, ### .. ~ DES RAJ _v._ STATE OF PUNJAB [MISRA, J.I 623 include within its scope what might not strictly be called a trade or business venture." The ratio in _Mukherjee's_ case was relied upon by a three-Judge Bench in _State_ _of Bombay_ _&_ _Ors._ v. _The Hospital Mazdoor Sabha_ _&_ _Ors.,_ I 1960] 2 SCR 866 and Gajendragadkar, J. who spoke for the Bench observed: "There is another point which cannot be ignored. Section 2(j) does not define _industry_ in the usual manner by prescribing what it means: the first clause of the definition gives the statutory meaning of _industry_ and the second - clause deliberately refers to several other items of industry and brings them in the definition in an inclusive way. It is obvious that the words used in an inclusive definition denote extension and cannot be treated as restricted in any sense. Where we are dealing with an inclusive definition it would be inappropriate to put a restrictive interpretation upon terms of wider denotation." "Besides, it would be relevant to point out that too much reliance cannot be placed on what are described as the essential attributes or features of trade or business ·as conventionally understood. The conventional meaning attributed to the words _trade and business_ has lost some of its validity for the purpose of industrial adjudication. Industrial adjudication has necessarily to be aware of the current of socio-economic thought around; it must recognise that in the modem welfare State healthy industrial relations are a matter of paramount importance and its essential function is to assist the State by helping a solution of industrial disputes which constitute a distinct and persistent phenomenon of modern industrialised States in attempting to solve industrial disputes, industrial adjudication does not and should not adopt a doctrinaire approach. It must evolve some working principles and should generally avoid formulating or adopting abstract generalisations. Nevertheless it can't harp back to old age notions about the relations between employer and the employee or to the doctrine of _laissez faire_ which then governed the regulation of the said relations. That is why, we think, in construing the wide words used in section 2(j) it would be erroneous to attach undue importance to the attributes A B c D E F G H ~. ' 624 SUPREME COURT REPORTS [ 1988] 3 S.C.R. associated with business or trade in the popular mind in A days gone by." The Bench thereafter adverted to the negative side and stated: "It would be possible to exclude some activities from B section 2(j) without any difficulty. Negatively stated the ~ activities of the Government which can be properly described as regal or soveriegn activities are outside the scope of section 2(j). These are functions which a constitutional government can and must undertake for governance and,.., which no private citizen can undertake. This position is not c in dispute. to suggest that An attempt is, however, made in view of the Directive Principles enun-by the appellant -.... ciated ideal of a welfare state which has been placed before the in Part IV of the Constitution and in view of the ') country, Governments, both at the level of States as well as \.at the Centre undertake several welfare activities; and the D argument is that the field of governmental or regal activities which are excluded from the operation of section 2(j) should be extended to cover other activities undertaken by the Governments in pursuit of their welfare policies. In our opinion, this contention cannot be accepted. The activities which do not fall within section 2(j) and which are des- _r\_ E cribed as governmental or regal or soveriegn have been pithily described by Lord Watson as 'the primary and inalienable functions of a contitutional Government'; and it is only these activities that are outside the scope of section 2(j). It sounds incongruous and self-contradictory to suggest that activities undertaken by the Government in ..__ F the interests of socio-economic progress of the country as beneficial measures should be exempted from the operalion of the Act which in substance is a very important beneficial measure itself." Applying the stated principles, this Court in that case held that the J.J. G Group of Hospitals came within the definition of _industry._ ,,,..._ Within a couple of weeks from the _Hospital Mazdoor Sabha's_ case (supra), the same Bench in the case of _Corporation of the City of_ _Nagpurv. Its Employees,_ [1960] 2 SCR 942, this time Subba Rao, J., as he then was, speaking for the Court examined the self-same question. H Before the Court were available two _precedents-Mukherjee's_ case DES RAJ _v._ STATE OF PUNJAB [MISRA, J. [ 625 (supra) and _Hospital Mazdoor Sabha's_ case (supra) and_ it was stated: _>--_ A "Before considering the positive aspects of the definition, what is not an industry may be considered. However wide the definition of _industry_ may be, it cannot include the regal or soveriegn functions of State .. This is the agreed basis of the arguments at the Bar though the learned B counsel differed on the ambit of such functions. While the _F_ learned counsel for the Corporation would like to enlarge the scope of these functions so as to comprehend all the welfare activities of a modem State, theleamed counsel for the respondents would seek to confine them to what are aptly termed _the primary and inalienable functions_ _of a_ c _),._ _**constitutional Government.''**_ -~ The Court analysed the activities of the various departments of the Corporation and observed: "We can also visualize different situations. A parti- D cular activity of a municipality may be covered by the definition of _industry._ If the financial and administrative departments are slowly in charge of that activity, there can be no difficulty in treating those two departments also as part of the industry. But there may be cases where the said "}. two departments may not only be in charge of a particular E activity or service covered by the definition of _industry_ but also in charge of other activity or activities falling outside the defintion of _industry._ In such cases a working rule may be evolved to advance social justice consistent with the ..../ principles of equity. In such cases the solution to the problem depends upon the answer to the question whether F such a department is primarily and predominantly concemed with industrial activity or incidentially connected therewith." "The result of the discussion may be summarised thus: ( l) the definition of _industry_ in the Act is very comprehensive. G It is in two parts one part defines it from the stand point of the employer and the other from the stand point of the _)._ employee. Ifan activity falls under either part of the definition it will be an industry within the meaning of the Act. (2) The history of industrial disputes and the legislation recognises the basic concept that the activity shall be an orga- H 626 SUPREME COURT REPORTS [1988] 3 S.C.R. nised one and not that which pertains to private or personal employment. (3) The regal functions prescribed as primary and inalienable functions of State though statutorily delegated to a corporation or necessarily excluded from the purview of the definition. Such regal functions shall be confined to legislative power, administration of law and judicial power. (4) If a service rendered by an individual or a private person would be an industry, it would equally be an industry in the hands of a corporation. (5) If a service rendered by a corporation is an industry, the employees in the department connected with that service, whether financial, administrative or executive, would be entitled to .the benefits of the Act. (6) If a department of a municipality discharges many functions some pertaining to industry as defined in the Act and the other non-industrial activities, the predominant functions of the department shall be the criterion for the purposes of the Act." A B c D Applying these tests, this Court examined as to whether the various departments of the Corporation came within the definiton or not. Then came the decision of a Constitution Bench in the case of _Manage-_ _ment of Safdarjung Hospital_ v. _Ku/dip Singh Sethi,_ [1971] I SCR 177 where Chief Justice Hidayatullah spoke for the Court. Referring to the E F G H definition of _industry,_ the learned Chief Justice observed: _r\_ "This definition is in two parts. The first part says that it means any business, trade, undertaking, manufacture or calling of employers and then goes on to say that includes any calling, service, employment, handicraft or industrial occupation or avocation of workmen ..... ". "Therefore, an industry is to be found when the employers are carrying on any business, trade, undertaking, manufacture or calling of employers. If they are not, there is no industry as such. What is meant by these expressions was discussed in a large number of cases which have been considered elaborately in the _Gymkhana Club_ case [1968] 1 SCR 742. The conclusions in that case may be stated: 'Primarily, therefore, industrial disputes occur when operation undertaken rests upon cooperation between employer and employees with a view to production and distribution of material goods, in other A B c _'!-·_ DES RAJ _v._ STATE OF PUNJAB [MISRA, J.[ 627 words, wealth, but they may arise also in cases ·where the cooperation is to produce material services. Tho normal cases are those in which the production or distribution is of material goods or wealth and they will fall within the expressions trade, business or **manufacture.'** " )..- In _Safdarjung Hospital's_ case the-decision in _Hospital Mazdoor Sabha_ case was analysed and the Court came to the following conclusion: "In our judgment, the Hospital Mazdoor Sabha's case took the extreme view of the matter which was not justified:" _)_ ) ( J, Then came the case of _Bangalore Water Supply and Sewerage Board_ v. _A._ _Rajappa_ _&_ _Ors.,_ 11978) 2 SCC 213. This time the same point was before a seven-Judge Bench of this Court. This judgment undertood a review of the entire law. Krishna Iyer, J. spoke for himself, Bhagwati and Desai, JJ. In paragraph 139 of the judgment it was stated: D - _"Banerjee_ (supra) amplified by _Corporation_ _of_ _Nagpur_ (supra), in effect met with its waterloo in _Safdar-_ _jung_ (supra). But in this latter case two voices could be herard and subsequent rulings zigzagged and conflicted precisely because of this built-in ambivalence. It behoves E us, therefore, hopefully to abolish blurred edges, illumine penumbra! areas and overrule what we regard as wrong. Hesistency, half-tones and hunting with the hounds and running with the hare can claim heavy penalty in the shape of industrial confusion, adjudicatory quandary and administrative perplexity at a time when the nation is striv- F ing ·to promote employment through diverse strategies which need, for their smooth fulfilnient, less stress and distress, more mutual understanding and trust based on a dynamic rule of law which speaks clearly, firmly and humanely. If the salt of law lose its savour of progressive certainty where with small it be stalled? So we proceed to G formulate the principles, deducible from our discussion which are decisive, positively and negatively, of the identity _ofindustry_ under the Act. We speak, not exhaustively, but to the extent covered by the debate ~t the bar and, to that extent, authoritatively, until overruled by a larger bench or superseded by the legislative branch." H 628 SUPREME COURT REPORTS [1988] 3 S.C.R. _"Industry_ as defined in section 2(j) and explained in,.....(' _Banerjee_ (supra) has a wide import. (a) Where (i) systematic activity, (ii) organised by cooperation 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. (b) Absence of profit motive or gainful objective is irrelevant, be the venture in the public, joint, private or ~ other sector. ( c) The true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer-employee relations. ( d) If the organisation is a trade or business it does not cease to be one because of philanthropy animating the .undertaking. Although section 2(j) uses words of the widest amplitude in its two limbs, their meaning cannot be magnified to over-reach itself. _Undenaking_ must suffer a contextual and associational shrinkage as explained in _Banerjee_ and in this judgment; so also, service, calling and the like. This yields the inference that all organized activities possessing the triple elements in I, although not trade or business, may still be _industry_ provided _the nature_ _of_ _the_ _activity,_ viz. the employer-employee basis, bears resemblance to what we find in trade or business. This takes into the fold of _industry_ undertakings, callings and services, adventures 'analogous to the _carrying_ on of the trade or business'. All features, other than the methodology of carrying on the activity viz. in organizing the cooperation between employer and employee, may be dissimilar. It does not matter, if on the employment terms there is analogy. A B c D E F G H DES RAJ _v._ STATE OF PUNJAB !MISRA, J.I 629 Application of these guidelines should not stop short A of their logical reach by invocation of creeds, cults or inner sense of incongruity or outer sense of motivation for or resultant of the economic operations. The ideology of the Act being industrial peace, regulation and resolution of industrial disputes between employer and workmen, the _k_ range of this statutory ideology must inform the reach of . . B the statutory definition. Nothing less, nothing more. (a) The consequences are (i) professions, (ii) clubs, -~. (iii) educational institutions, (iv) cooperatives, (v) research .:l institutes, (vi) charitable projects and (vii) other kindred adventures, if they fulfil the triple tests listed in I cannot be c exempted from the scope of section 2(j). (b) A restricted category of professions, clubs, cooperatives and even _gurukulas_ and little research lab.s, may qualify for exemption if, in simple ventures, substantial and, going by the dominant nature criterion, substantively, D no employees are entertained but in minimal matters, marginal employees are hired without destroying the nonemployee character of the unit. (c) If, in a pious or altruistic mission many employ themselves, free or for small honoraria or like return, E mainly drawn by sharing in the purpose or case, such as lawyers volunteering to run a free legal services clinic or doctors serving in their spare hours in a free medical centre or _ashramites_ working at the bidding of the holiness, divin __)_ _)._ doctors serving in their spare hours in a free medical centre or _ashramites_ working at the bidding of the holiness, divinity or like central personality, and the services are supplied free or at nominal cost and those who seive ·are not F engaged for remuneration or on the basis of master and servant relationship, then, the institution is not an industry even if stray servants, manual or technical, are hired. Such eleemosynary or like undertakings alone are exempt-not other generosity, compassion, developmental passion or project. G _The dominant nature test:_ (a) 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 H A B c D E F G H 630 SUPREME COURT REPORTS 11988) 3 S.C.R. -'. the _University_ _of Delhi_ v. _Ram Nath,_ 11964) 2 SCR 703 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_ although those who are not _workmen_ by definition may not benefit by the --4, status. · (b) Notwithstanding the previous clauses, sovereign functions, strictly understood, (alone) qualify for exemp· tion, not the welfare activities or economic adventures undertaken by government or statutory bodies. ( c) Even in departments discharging sovereign func· tions, if there are units which are industries and they are substantially severable, then they can be considered to come within section 2(j). ( d) Constitutional and competently enacted legisla· tive provisions may well remove from the scope of the Act categories which otherwise may be covered thereby." Beg, 0., wrote a separate judgment and prefaced it by saying: "I am in general agreement with the line of thinking adopted and the conclusions reached by my learned brother Krishna Iyer." In paragraph 149 of the judgment, the learned Chief Justice observed: "In his heroic efforts, my learned brother Krishna Iyer, if I may say so with great respect, has not discarded the tests of _industry_ formulated in the past. Indeed, he has actually restored the tests laid down by this Court in _D. N._ _Banerjee's_ case, and, after that, in _Corporation of the City_ _of Nagpur_ v. _Its Employees,_ and _State_ _of Bombay_ v. _The_ _Hospital Mazdoor Sabha_ to their pristine glory." _r'-_ The learned Chief Justice again stated: "Each of us is likely to have a subjective notion about _industry._ For objectivity, we have to look first to the words _)-._ DES RAJ _v._ STATE OF PUNJAB [MISRA, J.] 631 used in the statutory provision defining industry in an .A attempt to find the meaning. If that meaning is clear, we need proceed no further. But, the trouble here is that the words found there do not yield a meaning so readily. They refer to what employers or workers may do as parts of their ~ ordinary avocation or business in life ..... " B "Thus, in order to draw the _circle of industry,_ to use the expression of my learned brother Iyer, we do not find even the term _workman_ illuminating. The definition only ### enables us to see that certain classes of persons employed ##### _r·_ in the service of the State are excluded from the purview of ;l industrial dispute which the Act seeks to provide for in the in the service of the State are excluded from the purview of industrial dispute which the Act seeks to provide for in the c interests of industrial peace and harmony between the employers and employees so that the welfare of the nation is secured. The result is that we have then to tum to the preamble to find the object of the Act itself, to the legislative history of the Act, and to the socio-economic ethos and aspirations and needs of the times in which the Act was D **passed."** After quoting the definition of _industry,_ the learned Chief Justice pro·}- ceeded to say in paragraph 158 of the judgment: _J "It seems to me that the definition was not meant to E provide more than a guide. It raises doubts as to what could be meant by the _calling of employers_ even if business, trade, undertaking or manufacture could be found capable of being more clearly delineated. It is clear that there is no mention here of any profit motive. Obviously, the work _manufacture_ of employers could not be interpreted lite- F rally. It merely means a process of manufacture in which the employers may be engaged. It is, however, evident that the term _employer_ necessarily postulates employees without whom there can be no employers ..... " In paragraph 165 of the judgment, the learned Chief Justice added: G _)._ "I have contended myself with a very brief and hurried outline of my line of thinking partly because I am in agr<.ement with the conclusions of my learned brother Krishna Iyer and I also endorse his reasoning almost ,wholly, but even more because the opinion I have dictated H A B c 632 SUPREME COURT REPORTS [1988] 3 S.C.R. ~ just now must be given today if I have to deliver it at all. From tomorrow I cease to have any authority as a Judge to deliver it. Therefore, I have really no time to discuss the large numbner of cases cited before us, including those what are known as _sovereign_ functions." Chandrachud, J., as he then was, on behalf of himself Jaswant Singh and Tulzapurkar, JJ. added a note by saying: "We are in respectful agreement with the view expressed by Krishna Iyer, J. that the appeal should be dismissed. We will give our reasons later indicating the _area_ _of_ _concurrence and divergence,_ (underlining is ours) if any, on the various points in controversy on which our learned Brother has dwelt." On 7th of April, the reasonings were delivered by Chief Justice Chandrachud for himself as by theri Jaswant Singh, J. delivered a D separate set of reasonings for himself and Tulzapurkar, J. The learned Chief Justice (because by then he had assumed that office) referred to several authorities and tests and in paragraph 181 of the judgment stated: E F G H " ......... **These refinments are, with respect,** **are** not warranted by the words of the definition, apart from the consideration that in practice they make the application of the definition to concrete cases dependent upon a factual assessment so highly subjective as to lead to confusion and uncertainty in the understanding of the true legal position. Granting that the language of the definition is so wide that some limitation ought to be read into it, one must step at a point beyond which the definition will skid into a domain too rarefied to be realistic. Whether the cooperation between the employer and the employee is the proximate cause of the ultimate product and bears direct nexus with it is a test which is almost impossible of application with any degree of assurance or certitude. It will be as much true to say that the solicitor's assistant, managing clerk, librarian and the typist do not directly contribute to the intellectual end product which is a creation of his personal professional skill as that, without their active assistance and cooperation it will be impossible for him to function effectively. The unhappy state of affairs in which the law is marooned will DES RAJ _v._ STATE OF PUNJAB [MISRA, J. [ 633 continue to baffle the skilled professional and his employees alike as also the Judge who has to perform the unenviable task of sitting in judgment over the directness A of the cooperation between the employer and the employee, untill such time as the legislature decides to manifest its intention by the use of clear and indubious language. Besides the fact that this Court has so held in B _N(ltional Union_ _of Commercial Employees_ v. _M.R. Meher,_ _Industrial Tribunal, Bombay,_ [1962] Supp. 3 SCR 157 the legislature will find a plausible case for exempting the learned and liberal professions of lawyers, solicitors, doctors, engineers, chartered accountants and the like from the operation of industrial laws. But until that hap- C pens, I consider that in the presen~·state of the law it is difficult by judicial interpretation to create exemptions in favour of any particular class." B J_ _J The remaining two learned Judges added their separate opinion and in the concluding part stated: D "In view of the difficulty experienced by all of us in defining the true denotation of the term _industry_ and divergence of opinion in regard thereto- as has been the case with this Bench also-we think, it is high.time that the Legislature steps in with a comprehensive bill to clear up E the fog and remove the doubts and set at rest once for all the controversy which crops up from time to time in relation to the ·meaning of the aforesaid term rendering it necessary for larger Benches of this Court to be constituted which are driven to the necessity of evolving a working formula to cover particular cases." F The ultimate·position available from the seven-Judge Bench decision, therefore, is that while three learned Judges delivered their view through Krishna Iyer, J., Beg CJ spoke somewhat differently, yet agreed with the conclusion· reached by Krishna Iyer J. Chandrachud, CJ. also agreed with the majority while the remaining two learned G Judges looked for legislative clarification to meet the situation. Perhaps keeping in view the observations of the learned Judges constituting the seven-Judge Bench, the definition of _industry_ as occuring in· section 2(j) of the Act. was amended by Act 46 of 1982. Though almost six years have elapsed since the amendment came on to H 634 SUPREME COURT REPORTS (1988] 3 S.C.R. the Statute Book, it has not been enforced yet. Bare Acts and Commentaries on the Industrial Disputes Act have, however. brought in the new definition by deleting the old one with a ncro <hat tk n:w . ·.provision has yet to come into force. This situation has further added - to the confusion. A B c D E G H It is now time to tum to the facts of the case. Judicial notice can _1._ be taken of the position that Haryana an(! Pun jab originally constituted· one State and Haryana has become separate from 1966. The Irrigation Department of the erstwhile Punjab State was discharging the State's obligations created undi:r the Northern India Canal and \.1 Drainage Act; 1873. The Administration Report of the year 1981-82 of _?'_ the Public Works Department, Irrigation Branch, which really deals \_ with the irrigation department has been produced before us with r notice thereof to the appellants' learned counsel. We may extract a ·part of the Report: . " ''The irrigation department which was set-up more _(_ ·than 100 years ago is mainly responsible to provide water supplies for the substance and development of agriculture in the 30.36 hectare cultivable area of the State covered by canal command. This requires harnessing of the surface and grounds water resources of the State and their equitable distribution to the beneficiaries, within Canal Command area. This task involves construction· of mult' ipurposes, major, medium and minor irrigation projects, maintenance of net work of channels, regulation of canal supplies, enforcement of water laws etc. and levying of crop-wise water supply rates on the irrigators for recovery through! the state Revenue Department. Extension, improvement and modernisation of the age old canal system is also continued to be done simultaneously by the Department. Besides the irrigation the department also provides water for drinking purposes to villages and towns in the State. The canal water supplies are also being made available for the industrial development in areas where no other source for water supplies exists". ''The State of Punjab was reorganised in the year 1966 and a number of disputes on the sharing of water/ powers with successor States croped up. The issues regarding apportionment of Ravi Beas Waters over the preparation uses falling to the share of erstwhile Punjab, DES RAJ _v._ STAlE OF PUNJAB (MISRA, J.I 635 ·apportionment of rights and liabilities of Bhakra Nangal A Project, retention of control of Irrigation Head Works of Harike, Ropar and Ferozepur by Punjab; restoration of J3hakra Nangal Project and Beas Project to Punjab etc. etc. are also dealt with by the Department." . B c D E F ._ i ''The Irrigation Department is also responsible to provide protection to the· valuable irrigated lands and public property from flooding, river action and water logging. This requires construction of flood protection, river training, drainage and anti·waterlogging works and **their maintenance."** ''The Department has also to plan· ahead for irriga· tion development in the State for which purpose proposal of irrigation schemes are investigated, surveyed and prepared in advance. Feasibility of irrigation schemes for hydropower generation from the existing and proposed irrigation schemes is also investigated by the Department and their execution undertaken. The execution of new irri· gation schemes, extention and improvement of existing schemes requires preparation of detailed designs of chan· nels and their necessary works. This work is also done by the Department." "During designs, e'xecution and maintenance of the - irrigation, flood control and drainage projects, field prob· !ems arise for the solution of which research, model studies and laboratory experiments have to be conducted. The Department undertakes this work as well." "Having shared with the neighbouring States almost entire water resources of the rivers flowing through the Pun jab water has now become a constraint to keep the tempo of the development of irrigated agriculture in the State. For this purpose it has not only become necessary to G evaluate the total water resources of the State but also plan conjunctive use of surface and ground water for the optimum development of this precious resource. Further it has become necessary to conserve irrigation supplies and propogate their use economically through innovative water distribution system like sprinklers, drip system, etc." H ' 636 SUPREME COURT REPORTS [19881 3 S.C.R. ~ #### I [-] A B c D E F G H "The Irrigation Department plans and execute reclamation of salt or thur affected areas within cannal command. Measurements of discharges in the Ravi, the Beas and the Sutlej desides the beings and drains in the State is also carried out by the irrigation department. These observations which are being made for the last over 60 years have provided basic data to the design of multipurposes Bhakhra '""' Nangal, Beas and Beas Sutlej Link projects which have transformed economies not only of the State of Punjab but also of the State of Haryana and Rajasthan. ...... The fact extracted from the Report apparently give a picture of the activities of the Irrigation Department. There is a full-Bench judgment of the Punjab and Haryana High Court in the case of _Om Prakash_ v. _Mis_ _Executive Er.gineers,_ _SYL,_ _Kurukshetra_ & _Ors.,_ [19841 Current L.J. 349 where the question that came up for consideration before the full Bench was thus stated; whether the irrigation department of the State (of Punjab) comes within the ambit of _industry_ in section 2(j) of the Industrial disputes Act, 1947? The Court took into account the judgment of another full-Bench decision of the same Court in the case of _State of Punjab_ v. _Ku/dip Singh_ & _Anr.,_ I 1983 I 1 L.L.J. 307 where the question for consideration was whether the Public Works Department of the State Government was an _industry._ In _Om Prakash's_ case (supra), the full Bench-barely took note of the decision of this Court in _Bangalore Water Supply_ case (supra) but did not deal with it. It also took into account the position of the Irrigation Department in Punjab keeping in the background the provisions of the Northern India Canal and Drainage Act of 1873 and stated: "The irrigation department is a branch of the public works department. It provides a reasonably assured source of water for crops through the net work of canals. The irrigation department also carries out schemes and takes measures for protecting crops from the menace of floods during the times of abnormal rainfall. In the olden times when there was no canals, agriculture was very limited and cultivators depended solely on rainfall. By the passage of time it was thought necessary to build irrigation and drainage works for the pupose of providing better water facilities to the· farmers on whom depends the economy of this country. These works could only be built by the Government. DES RAJ _v._ STATE OF PUNJAB [MISRA, J.[ 637 _,k_ The western Jamuna canal which serves the State of A Haryana was the first major irrigation work which was initialy constructed by Feroze Shah Tuglaq in 1351. It was reconditioned by Akbar in 1568 and was extended in 1626 in the reign of Shahjahan. The canal was constructed in a reasonably serviceable form by the British during 1817,.. ' .. 1823. Then the Upper Bari doab canal, Sirhind canal, B Lower Chinah canal and Lower Jhelum canal etc., were constructed. Thereafter, many other projects have come up and the ones which need mention are Bhakra Nangal project with its network of Bhakra System and the Beas ### ###### y- project. All these projects have been carried out by the state at the state expense. It is understandable that such c ~-. projects could not at all be undertaken by private enter preneurs or could be left in their hands for execution. Further, water is a state subject as per entry 17 in List II of Seventh Schedule of the Constitution. Even before coming into force of the Constitution, water of rivers and streams was considered to be belonging to the State ..... Thus it D would be evident that the water has at all times been a State subject and the State can exercise full executive powers in all matters connected with the water. The State supplies water to the farmers through the network of canals. It is correct that water rates are realised from the farmers but they are not realised for the cost of the water. In other E words, the State does not sell water to the farmers. As contended justifiably by the learned Advocate General, the water charges are not even sufficient to meet the establishment and maintenance expenses of the depart###### ). ment. Moreover, the water rates have never been realised ~-. establishment and maintenance expenses of the depart###### ). ment. Moreover, the water rates have never been realised . ' on the basis of the quantity of the water supplied. These F rates are dependant upon the class of crops raised by the farmers and have been fixed in terms of per acre. It may be noted that rates for crops, such as wheat, sugarcane, cotton, rice are higher than the other crops such as gram, oil seeds, bajra and maize etc. In other words, the water charges have been linked on the principle of bearability, G that is, paying capacity of the farmer dependant upon his ,J.. income from the kind of crop raised by him. The water is supplied on the basis of the holding of each farmer in terms of cultivable commanded area, that is, on the basis of uniform and equitable yardstick. Again, the water charges are remitted when the crops are damaged by natural H 638 SUPREME COURT REPORTS (1988] 3 S.C.R. A B c D .. departments are essentially government functions and that . _(_ these functions neither partake of the nature of trade and business ·nor are even remotely analogous thereto and that this department does not come within the ambit of _industry_ as defined in section 2(j) of the Act." calamities such as locust, hailstroms, floods or drought etc. **Further, the construction** **of canals, dams,** **batrag:!3,** **and** other projects cannot be entrusted to some pri-1ate ~3nds. The construction of these works involves cur~··•---· acquisition of land which can also be done by the State. Merely this fact that water is supplied by charging certain rates cannot warrant a finding that the state is indulging in trade or business activity or an activity which is analogous to trade, business or economic venture. From what has been stated above, there can be gainsaying that the func' tions of the irrigation department cannot at all be left to private enterprise. The facts which weighed in holding that ·the construction and maintenance of national and state . highways by the State does not come within the ambit of . _: : industry_ in _Ku/dip Singh's_ case (supra) are present so far as the irrigation department is concerned ...... In this view of the matter, I hold that the functions of the irrigation _(_ - _I_ Mr. Shatma for the appellants placed before us some cases of _-y·_ E different High Courts in support of his stand that the Irrigation Department should be considered as _industry._ The first of these cases is.that of _Madhya Pradesh Irrigation Karamchari Sangh_ v. _State_ _of_ _Madhya Pradesh_ _&_ _Anr.,_ (1972( LU 374 where the Madhya Pradesh High Court found the Chambal Hyde! Irrigation Project to be an industry'. .The facts of that case reveal that the Project therein was a l F 'multy-purpose one which was used for generating electricity as also for _)_ imgation purposes. On the facts found therein, the High Court came to the conclusion that it came within the definition under section 2(j) of the Act. ' . /· In _State_ _of Rajasthan_ v. _The Industrial Tribunal, Rajasthan,_ G (1970] RLW 137 the question for consideration before the Rajasthan High Court was whether the Survey and Investigation Division of Irri- )-.. gation Department was an _industry._ In paragraph 26, the learned Judge came to the conclusion by saying: H "In view of the aforesaid decisions of the Supreme Court, I find it difficult to hold that the activities of the DES RAJ _v._ STATE OF PUNJAB [MISRA, J.J 639 State Government by organising its Survey and Investiga- A tion .Division in the Irrigation Department through which the State Government rendered services in the matter of supplying water by constructing canals and dams does not fall within the ambit of the sovereign or regal functions of the State. Such service to the people at large, in my opinion, comes within the ambit of the expression _industry_ as B defined in section 2(j) of the Act." c D E F G H -~ ## l ###### ' # L The finding runs contrary to the conclusion. If in the opinion of the learned Judge, it was difficult to hold that the activities did not fall within the ambit of the sovereign or regal functions, then the conclusion should have been different. In _Dinesh Sharma_ _&_ _Ors._ v. _State of Bihar_ _&_ _Ors.,_ [19831 Bihar L.J.R. 207, a Division Bench of the Patna High Court was considering if the Public Health Engineering Department of the State of Bihar was an _industry._ In paragraph 8 of the judgment, reliance was placed on the _Bangalore Water Supply_ case (supra) and the _Nagpur Corporation_ case (supra) and it was held that the said department of the State Government of Bihar was an _industry._ In _Chief Engineer, Irrigation,_ _Orissa_ v. _Harihar Patra_ _&_ _Anr.,_ [1977] L.I.C. 1033 a Division Bench of the Orissa High Court was considering whether the Salandi Irrigation Project in that State was an _industry._ The High Court relied upon the earlier full-Bench decision of its own Court and soine of the decisions of this Court which we have referred to above, and came to hold that the irrigation project was an _industry._ The Administrative Report of the facts found by the High Court in the instant case have attempted to draw out certain special features. The legal position has been indicated in the earlier part of our judgment. On the tests, as already laid down in the judgments, we do not think these facts found in this case can take out the Irrigation Department outside the purview of the definition of 'industry'. We have already referred to the Dominant Nature test evolved by Krishna Iyer, J. The main functions of the Irrigation Department where subjected to the Dominant Nature test clearly come within the ambit of industry. We have not been able to gather as to why even six years after the amendment has been brought to the definition of _industry_ in section 2(j) of the Act the same has not been brought into force. This Court on more than one occasion has indicated that the position should be clarified by an appropriate amendment and when keeping in view the opinion of this Court, the law was sought to be amended, it is 640 SUPREME COURT REPORTS [1988] 3 S.C.R. A appropriate that the same should be brought into force as such or with such further alterations as may be considered necessary, and the legislative view of the matter is made known and the confusion in the field is cleared up. B c For the reasons we have indicated above, these appeals succeed. We make it clear that in the event of the definition of _industry_ being changed either by enforcement of the new definition of _industry_ or by any other legislative change, it would always be open to the aggrieved Irrigation Department to raise the issue again and the present decision would not stand in the way of such an attempt in view of the altered situation. The appeals are allowed without costs. S.L. Appeals allowed. ~