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Judgment
S. Mohan, J.—An interesting question, which defies exactness, viz., as to the definition of ''industry'' under the Industrial Disputes Act,
1947, arises for consideration in this writ petition. The short facts are as follows:
By G.O.R.No. 2887 (Labour), dated 30th December, 1968, the Government of Tamil Nadu referred to the Additional Labour Court, Madras,
the Industrial Dispute which arose between the workmen (the writ petitioner) and the management of the Madras Flying Club limited for
adjudication.
It was contended on behalf of the writ petitioner that there are about 39 employees in the organisation, that there was a prior Gratuity Scheme in
force from 1948 to 1952, which was discontinued later, and hence a Gratuity Scheme should be introduced.
The Management of the Madras Flying Glub Limited (the second respondent in the writ petition) in an elaborate counter contended that though
there was a Gratuity Scheme in force, earlier, still, as per the directions of the Director-General of Civil Aviation, it had to be discontinued. The
Club owed its existence to the subsidies, subventions, loan of aircraft, building and hanger, exemption from payment of land and housing charges,
etc., given by the Central Government and the present financial position of the Club would not permit the introduction of the Gratuity Scheme. In
an additional counter, it was also contended that the Madras Flying Club was an industry as defined in Section 2(j) of the Industrial Disputes Act,
1947, (hereinafter referred to as the Act), and therefore, a reference for adjudication u/s 10(1)(e) of the Act was not maintainable, more so, in
view of the decision of the Supreme Court in Cricket Club of India Vs. Bombay Labour Union and Another, . It was further stated that the
DirectorGeneral of Civil Aviation was subsidising the Club and without his assistance, the operation of the Club will come to a standstill, and the
Club had also been informed that having regard to its activities, it could not be termed an ''industry'' within the meaning of Rule 2(13) of the
Payment of Bonus Act. The definition of ''industry'' in the Industrial Disputes Act and the Payment of Bonus Act, being the same, the Club is not an
''industry.''
In reply to these contentions, submission was made on behalf of the workmen that the Club was rendering service to non-members. Ever since
its incorporation, it was assisting the Tata & Sons Limited in connection with the air-mail service, that it was maintaining the air-crafts belonging to
Tatas, that the Club was charging fees for undertaking the work of advertising and the distribution of hand-bills, and that the Club was also
providing joy rides for non-members, charging fees. Further, it was arranging chartered nights resides imparting training in the aircraft maintenance
engineering on payment of Rs. 50 per month. The Club owned immovable property to the tune of Rs. 15 lakhs. Overhauling and servicing of the
air-crafts were undertaken by the Club. In addition to the above, the Factories Act was made applicable and, hence, it will be an ''industry''.
This dispute was numbered as I.D. NO. 6 of 1969 and came up for adjudication before the Additional Labour Court, Madras (the first
respondent in the writ petition). By its order dated 31st May, 1971, the first respondent held that the decision rendered in the Cricket Club of
India Vs. Bombay Labour Union and Another, . would practically govern this case and as such, the Madras Flying Club Limited was not an
industry, as defined in Section 2 (j) of the Act.
It is to quash this order, that the workmen have preferred this writ petition.
Mr. K.S. Narayanan appearing for the petitioner submits that the order of the Tribunal is incorrect in law. Though there was some doubt as to
the meaning of ''industry'' and the law was somewhat nebulous, in view of the decision of the Supreme Court in Civil Appeal No. 1297 of 1970
dated 6th October, 1975, it cannot any longer be contended that the respondent Club is not an industry. Having regard to the later development of
the law, wherein the word ''industry'' has been elaborately considered the decision of the Labour Court must be held to be unsound. In support of
this submission, the learned Counsel relies on the decisions in The Bombay Panjrapole, Bhuleshwar Vs. The Workmen and Another, . and the
Management of The Federation of Indian Chambers of Commerce and Industry Vs. Their Workman, Shri R. K. Mittal, . The very case relied on
by the second respondent was also taken note of by the later Supreme Court decision, while considering the definition of industry elaborately. The
only direct case is, the one relating to the V.S. Shankar and Others Vs. Reserve Bank of India and Another, . and that will support the stand of the
writ petitioner.
Whatever that may be, on the admitted facts, there is no difficulty in holding that the second respondent-Club is an industry. The Club was
started in the year 1930 and was registered under the Companies Act. It is maintaining a workshop, where 25 to 30 workmen are regularly
employed. The Factories Act is made applicable. The Provident Fund and Gratuity Schemes are in force. There are Standing Orders. Flying
facilities are provided for non-members. The Club undertakes overhauling. Joy rides are provided as seen from W-1, W-2, W-3 and W-5. The
evidence of W.W.-1 discloses the various material services rendered by the Club.
Mr. M.A. Sadanand, learned Counsel for the second respondent, would refer to the Memorandum of Association of the Club and submit that
the true object of the formation of the Club was the encouragement and developmentof the study of aeronautics in all its branches and the various''
sub-clauses under Clause (3) will clearly go to show that this is not a profit making organisation and cannot be called an ''industry''. In construing
the definition, according to him, the two decisions of the Supreme Court in The Management of Safdarjung Hospital, New Delhi Vs. Kuldip Singh
Sethi, . The Dhanrajgirji Hospital Vs. The Workmen, . will have to be taken note of. Those two cases are of great assistance to the Club.
In deciding this question, I need no better than to refer to the decision in Civil Appeal NO. 1297 of 1970 dated 6th October, 1975, wherein
speaking for the Bench of the Supreme Court, Bhagwati, J., eloquently lays down the law as follows:
Here, in this case, once again arises the question as to what is an ''industry"" within the meaning of the Industrial Disputes Act, 1947. This question
has continually baffled and perplexed the Courts in our country. There have been various judicial ventures in this, rather volatile area of the law.
The Act gives a definition of ''industry'' in Section 2 (j) but this definition is not very clear and it has defied analysis so that judicial effort has been
ultimately reduced merely to evolving tests by reference to characteristics regarded as essential for constituting an activity as an ''industry''. The
decided cases show that these tests have not been uniform; they have been guided more by an empirical rather than a strictly analytical approach.
Sometimes these tests have been liberally conceived, sometimes narrowly. The latest exposition is to be found in the judgment of a Bench of six
Judges of this Court in Safdarjung Hospital v. K.S. Sethi (1970) 2 S.CJ. 755. But while applying the tests indicated in this decision, it is necessary
to remember that the Industrial Disputes Act, 1947, is a legislation intended to bring about peace and harmony between managementand labour in
an ''industry'' so that production does not suffer and at the same time, labour is not exploited and discontented and therefore, the tests must be so
applied as to give the widest possible connotation to the term ''industry''. Whenever a question arises whether a particular concern is an ''industry''
the approach must be broad and liberal and not rigid or doctrinaire. We cannot forget that it is a social welfare legislation we are interpreting and
we must place such an interpretation as would advance the object and purpose of the Legislation and give full meaning and effect to it in the
achievement of its avowed social objective.
In that case, the point that arose for adjudication was whether the Indian Standards Institution was an ''industry'' or not. It was pointed out that:
The Industrial Tribunal proceeded to examine the legal position for the purpose of determining when a particular activity can be regarded as an
industry within the meaning of Section 2(j) of the Act. It observed that there were five tests laid down by the decisions of this Court in Secretary,
Madras Gymkhana Club Employees'' Union Vs. Management of the Gymkhana Club, . and Cricket Club of India Vs. Bombay Labour Union and
Another, . which were required to be satisfied before an activity could be held to be an ''industry'' and they were as follows:
(1) Whether the operation undertaken rests upon co-operation between employers and employees with a view to production and distribution of
material goods or material services;
(2) It must bear the definite character of trade or business or manufacture or calling or must be capable of being described as an undertaking
analogous to business or trade resulting in material goods or material services;
(3) The activity to be considered as an ''industry'' must not be casual but must be distinctly systematic;
(4) The work for which labour of workmen is required, must be productive and workmen must be following an employment, calling or industrial
avocation; and
(5) When private individuals are the employers, the industry is run with capital and with a view to profits. These two circumstances may not exist
when Government or local authority enters upon business, trade, manufacture or an undertaking analogous to trade.
It was further held:
Now, the word ''industry'' is defined in Section 2(j) and that section reads:
Industry'' means any business, trade, undertaking, manufacture or calling of employers, and includes any calling, service, employment handicraft or
industrial occupation or avocation of workmen.
This definition is in two parts. The first part says that it means any business, trade, undertaking, manufacture or calling of employers and then it goes
to say in the second part that it includes any calling, service, employment, handicraft, or industries, occupation or avocation of workmen. This
Court had occasion to Consider this definition in the case of The State of Bombay and Others Vs. The Hospital Mazdoor Sabha and Others,
where this Court sought to expand the concept of ''industry'' by a process of judicial interpretation (to meet the changing requirements of modern
currents of socio-economic thought.) It was pointed out by this Court that ''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."" But this interpretation of the definition was disapproved by a
larger bench of this Court in The Management of Safdarjung Hospital, New Delhi Vs. Kuldip Singh Sethi, . We shall immediately proceed to
examine that decision, as that is the decision which presently holds the field and must ultimately govern the determination of the present case. But,
before we do so, we must refer to another decision of this Court which came a little before Safdarjung Hosptital case. That is the decision in
Secretary, Madras Gymkhana Club Employees'' Union Vs. Management of the Gymkhana Club, . While dealing with the definition of ''industry'' in
this case, it was pointed out by this Court that denotation of the term ''industry'' is to be found in the first part relating to employers and the full
connotation of the term is intended to include the second part relating to workmen"" and it was concluded; if the activity can be described as an
industry with reference to the occupation of the employers, the ambit of the industry, under the force of the second part, takes in the different kinds
of activity of the employees mentioned in the second part. But the second part standing alone cannot define ''industry''. By the inclusive part of the
definition the labour force employed in an industry is made an integral part of the industry for purposes of industrial disputes although industry is
ordinarily something which employers create or undertake. We may point out that the concept underlying the observation that ''industry'' is
ordinarily something which employers create or undertake is gradually yielding place to the modern concept which regards industry as a joint
venture undertaken by employers and workmen, an enterprise which belongs equally to both. But we need not dwell on this any longer, as it is not
of immediate concern to us in this case. It is sufficient to point out that the interpretation of the definition of ''industry* given in the Secretary,
Madras Gymkhana Club Employees'' Union Vs. Management of the Gymkhana Club, . struck a slightly different note from what it was understood
to mean in the The State of Bombay and Others Vs. The Hospital Mazdoor Sabha and Others, . But again in The Management of Safdarjung
Hospital, New Delhi Vs. Kuldip Singh Sethi, . this Court found it necessary to qualify what it had said in the Madras Gymkhana,Case in regard to
the meaning of ''industry'' and after referring to the definition of industry in Section 4 of the Commonwealth Conciliation and Arbitration Act, 1909-
1970 this Court observed:
Although the two definitions are worded differently the purport of both is the same. It is not necessary to view our definition in two parts. The
definition read as a whole denotes a collective ... enterprise in which employer and employees are associated. It does not exist either by employers
alone or by employees alone. It exists only when there is a relationship between employers and employees, the former engaged in business, trade,
undertaking , manufacture or calling of employers and the latter engaged in any calling, service, employment, handicraft or industrial occupation or
avocation. There must, therefore, be an enterprise in which the employers follow their avocation as detailed in the definition and employ workmen.
The definition no doubt seeks to define ''industry'' with reference to employers'' occupation but includes the employees, for without the two there
can be no industry. An industry is only to be found when there are employers and employees, the former relying upon the services of the latter to
fulfil their own occupations.
This Court then proceeded to add, that
every case of employment is not necessarily productive of an industry. Domestic employment, administrative services of public officials, service in
aid of occupation of professional men, also disclose relationship of employers and employees but they cannot be regarded as in the course of
industry.
A workman can be regarded as one employed in an industry only ""if he is following one of the vacations mentioned in conjunction with his
employers engaged in the vocations mentioned in relation to the employers"". Thus, basic requirement of ''industry'' is that the employers must be
carrying on any business, trade, undertaking, manufacture or calling of employers. If they are not, there is no industry as such."" Now, what these
expressions mean has been discussed in a large number of cases decided by this Court. These cases have all been reviewed in the Secretary,
Madras Gymkhana Club Employees'' Union Vs. Management of the Gymkhana Club, .
Again at page 1546, the learned Judge has quoted the judgment of Hidayatullah, C.J., in The Management of Safdarjung Hospital, New Delhi Vs.
Kuldip Singh Sethi, . as follows:
What is meant by ''material'' service in this context was explained by the learned Chief Justice in these words:
Material services are not services which depend wholly or largely upon the contribution of professional knowledge, skill or dexterity for the
production of a result. Such services being given individually and by individuals are services no doubt but not material services. Even an
establishment where many such operate cannot be said to convert their professional services into material services. Material services involve an
activity carried, on through cooperation between employers and employees to provide the community with the use of something such an electric
power, water, transportation, mail delivery, telephones and the like. In providing these services, there may be employment of trained men and even
professional men, but the emphasis is not on what these men do but upon the productivity of a service organised as an industry and commercially
valuable. Thus the services of professional men involving benefit to individuals according to their needs, such as doctors, teachers, lawyers,
solicitors, etc., are easily distinguishable from an activity such as transport service. The latter is of a commercial character in which something is
brought into existence quite apart from the benefit to particular individuals. It is the production of this something which is described as the
production of material services.
I am particularly referring to these decisions copiously , because most of the decisions which deal with the meaning of ''industry'' have been
considered thereunder.
In The Bombay Panjrapole, Bhuleshwar Vs. The Workmen and Another, . the question arose whether the activities of the Bombay
Pinjrapole,would fall within the purview of ''industry'' u/s 2(j) of the Act. The Supreme Court held that the value of the milk sold in the market being
substantially more than the milk utilised for the sick and the infirm Animals, the activities of the Bombay Pinjrapole were carried on as a buiness for
making profit and hence, an industry. It is somewhat interesting to note that the two decisions relating to workmen employed in Workmen
employed in the Madras Pinjrapole Vs. Management of the Madras Pinjrapole and Another, . and Madras Pinjrapole Vs. Their Workmen and
Another, . were noted in this case and it was held:
We have referred at some length to the Madras Pinjrapole case to show the analogy of the activities of the Madras Pinjrapole to the Bombay;
Pinjrapole. Save for the fact that the Madras Pinjrapole definitely and expressly changed its objective by starting a dairy farm and purchasing milch
cows and stud bulls there is very little difference between the facts of the case before us and those in the Madras Pinjrapole case.
About the very decision relied on by the Labour Court (the second respondent in this case), it was observed by the Supreme Court in the The
Bombay Panjrapole, Bhuleshwar Vs. The Workmen and Another, .
In this view of the matter, it is hardly necessary to consider the other cases which were cited at the Bar, namely, Secretary, Madras Gymkhana
Club Employees'' Union Vs. Management of the Gymkhana Club, . Cricket Club of India Vs. Bombay Labour Union and Another, . and
Harinagar Cane Farm and Others Vs. State of Bihar and Others, . It was remarked in the Secretary, Madras Gymkhana Club Employees'' Union
Vs. Management of the Gymkhana Club, . that the activity of the club is conducted with the aid of employees who follow callings or avocations
and that the activities of the club were not a calling or business of its members or managing committee and there was no undertaking analogous to
trade or business. In the Cricket Club''s case the Court examined the different activities of the club and came to the conclusion that they did not
lead to the inference that the club Was carrying on an industry.
The case reported in Management of The Federation of Indian Chambers of Commerce and Industry Vs. Their Workman, Shri R. K. Mittal, .
related to the activities of the Federation of Indian Chambers of Commerce and Industries and it was held that it was an industry and the absence
of profit motive or distribution of profits was held not relevant in deciding this question. The material passage for the purpose of the case on hand,
occurs at page 645 which is as follows:
It appears to us that the terms for determining whether a dispute is an industrial dispute, or not have been enunciated and the principles crystalised
as a result of the several decisions of this Court which is what are applicable to this case. There is, therefore, no warrant to allow any other element
to be added to criteria laid down for determining what an indvstry is. In our view the linch-pin of the definition of industry is to ascertain the
systematic activity which the organisation is discharging, namely, whether it partakes the nature of a business or trade, or is an undertaking or
manufacture or calling, of employers. If it is that and there is co-operation of the employer and the employees resulting in the production of material
services, it is an industry notwithstanding that its objects are charitable or that it does not make profit or, even where profits are made, they are not
distributed among the members.
In Patiala Aviation Club v. Labour Court (1974) I L.L.J. 410. the question that arose before the Punjab and Haryana High Court was whether the
Patiala Aviation Club, which was engaged in the promotion of art and science of aviation and aeronautics and also carrying on business as private
and commercial air carriers would fall within the definition of industry, notwithstanding the non-payment of dividends by way of profit to the
members of the Club. It was held to be an industry. In dealing with this question, the decision in Cricket Club of India Vs. Bombay Labour Union
and Another, . was discussed and it was held:
In Cricket Club of India case, the Supreme Court was concerned with the question whether a self-serving club could be re--garded as an industry
or not. It was conceded in the case that the club also ran canteens which catered to the needs of its members and outsiders. But while elaborating
this aspect of the case, the Court observed thus:
This indicates that the provision of of these stalls is not for the purpose of carrying on an activity of selling snacks and soft drinks to outsiders, but is
really intended as provision of a facility to persons participating in or coming to watch the tournament in order that, tournaments may be run
successfully. These stalls are thus brought into existence as a part of the activity of promotion of games and is not a systematic activity for the
purpose of carrying on transactions of sale of snacks and soft drinks to outsiders. The opening of stalls on two such occasions in a year with this
limited object cannot be held to be an undertaking of the nature of business or trade.
In short, the Supreme Court drew distinction between ordinary trade activity and an activity of this type which was indulged in for the purpose
ancillary to the main purpose of the club.
In the light of the above principles of law, I will now proceed to examine the facts of this case.
As rightly contended by Mr. Somayaji, a number of commercial activities are carried on by the second respondent-club. Firstly, joy ride is
evidenced by Exhibits W-1 and W-3. Exhibit W-5 shows the statement of revenue earned by joy ride nights. That Exhibit also shows the revenue
earned by chartered flights. What is important to be noted is, that these activities are carried in a systematic fashion. In addition to the above, the
evidence of W.W. 1 shows the various material services rendered by the Club. He is categoric in his statement that charges are levied at the rate of
Rs. 50 for non-members in affording training in ground-engineering. Besides, charges are made for maintenance of planes owned by Tatas.
Services relating to film and aerial photography are also afforded. Aerial spraying of notices are also carried out. These are offered to non-
members, a lew of them were English Electrical Company, Burmah-shell, Binny Engineering and Simpson and Company.
Having regard to this evidence, I am of the view that the second and third te''sts adumbrated in the Secretary, Madras Gymkhana Club
Employees'' Union Vs. Management of the Gymkhana Club, . and the Cricket Club of India Vs. Bombay Labour Union and Another, . (which
have been extracted above) are satisfied in the instant case.
Turning to Clause 3 of the Memorandum of Association of the Club, on which reliance is placed on by the second respondent, there again, I
find that the activities mentioned in the sub-clauses clearly partake the character of business activity. It cannot be contended, as is sought to be
done by the respondent-Club, that these are done as ancillaries to the main activity of the Club. Overhauling, maintenance and repair, and letting
them for hire have not been casual. Just as in the Patiala Aviation Club''s case (1974) I L.L.J. 410. the Memorandum of Association shows an
equal amount of emphasis with regard to these commercial activities. The fact that it is a non-profit-making Club, even assuming it to be so, is not
material.
The Management of Safdarjung Hospital, New Delhi Vs. Kuldip Singh Sethi, . dealt with the question as to whether a Hospital or Nursing
Home or Dispensary could be considered an industry. It was held therein that the Safdarjung Hospital, New Delhi, was not an industry as it has
not embarked on economic activity analogous to trade or business. It was also held that the Tuberculosis Hospital, New Delhi, is not an industry as
it is wholly charitable and its dominant purpose is research and training.
These cases are not of any assistance to the respondent-Club.
Again in The Dhanrajgirji Hospital Vs. The Workmen, . on the same principles, it was held that the Dhanrajgirji Hospital, Sholapur was not an
industry.
This case is distinguishable because of the systematic business activity that is carried on by the Club.
By a reading of the order of the Labour Court, 1 find that it was influenced to a great extent by Exhibit W-8, which cannot have any bearing in
deciding this legal question, which, as has been pointed out repeatedly, must be decided on its own merits. Nor is it correct on the part of the
Labour Court to hold that the activities evidenced by W-2, W-3, W-4 and W-5 will not go to show that the Flying Club had any commercial idea
behind it,
This finding ignores Clause (1) of Exhibit M-6.
I have already referred to the decisions of the Supreme Court and the Punjab and Haryana High Court where in the Cricket Club of India Vs.
Bombay Labour Union and Another, . was noted and how in that case the Club was held to be an industry. But, the position here is very different.
I am unable to agree. with the finding of the Labour Court that providing of joy rides, aerial spraying or permitting chartered flights, were all done
with a view to encourage the development of the study of aeronautics. On the contrary, these activities are done only with a commercial motive
and there is no nexus between the main object, viz., study of aeronautics and these activities.
In the result, I hold that the second respondent-Club is an industry within the meaning of the definition of Section 2(j) of the Act. The order of
the Labour Court is quashed. The Writ Petition is allowed and the rule nisi is made absolute. However, I make no orders as to costs.