Definition of Industry

Case Description

In 1978, a seven-judge Bench of the Supreme Court had given a wide interpretation to the word ‘industry’ under the Industrial Disputes Act, 1947 (‘ID Act’). Since a higher threshold of labour rights flow from the definition of an industry, a need for a revision of the definition of ‘industry’ has been expressed. The Supreme Court also raised doubts about the correctness of the 1978 decision. Accordingly, a nine-judge Bench will be constituted to clarify the definition of the word ‘industry’.

The term ‘industry’ is defined under Section 2(j) of the ID Act. Among other things, the definition include any organized activity involving co-operation between the employer and his workmen for the production, supply or distribution of goods and services.

In 1978, a seven-judge bench in Bangalore Water Supply held that ‘industry’ has to be read widely in light of the broad definition in the ID Act. Accordingly, every profession regardless of profit motive was included within ‘industry’. This led to a situation where even universities, charitable organizations and autonomous institutions are included within the ambit of industry. However, the Court ruled that there must be a minimum number of employees for a business or profession to be considered an industry. So, domestic workers, individual tradesmen and other such professions were therefore excluded from the Act.

It is interesting to note that even the Supreme Court was forced to ask the legislature to clarify what exactly the definition aimed to cover. In 1982, Parliament passed an amendment to the ID Act which created several exceptions to the definition. But this amendment was never brought into force (notified) by the government and so, the original definition under the ID Act, 1947 continues to be the law in force.

This extremely broad definition of industry has led to litigation in courts across the country as to whether certain professions are an ‘industry’ or not. This is primarily because any person who works in an industry as defined by the ID Act is entitled to the various protections under the Act. These protections include a mandatory notice period before someone is removed from service, maximum hours of work, leave etc.

In recent times, these stringent labour standards have led to demands for a restrictive reading of the word ‘industry’ by industry bodies and the States of Gujarat, Uttar Pradesh and Haryana in order to usher in labour reforms. The States want the definition of ‘industry’ to be limited to the manufacturing sector.

In 2005, a five-judge Constitution Bench referred the decision in Bangalore Water Supply for reconsideration. The Supreme Court was of the opinion that the majority judgment in Bangalore Water Supply was not unanimous and had been been subject to varying interpretations by the judiciary.

Furthermore, the focus of the ID Act was to ensure a harmonious relationship between the employer and the employee. The worker-oriented focus of Bangalore Water Supply has become an impediment to a harmonious relationship according to the five-judge Bench. The Court also alluded to the helplesness of the executive and the legislature to bring about the necessary amendments. Accordingly, it called for the constitution of a larger bench.

In 2017, a seven-judge Bench of the Supreme Court passed an order for the constitution of a nine-judge Bench in light of the 2005 referral order.