Introduction – Industrial Disputes Act
The term ‘industry’ under the Industrial Disputes Act, 1947 has sparked decades of legal debate, stretching far beyond factories and workshops to encompass hospitals, universities, municipal services, and even spiritual institutions. Rooted in the triple test laid down in Bangalore Water Supply v. R. Rajappa, the definition hinges on systematic activity, employer-employee cooperation, and the production of goods or services, regardless of profit motives or governmental ties.
This expansive interpretation has blurred traditional boundaries, bringing diverse sectors under labour law protections while excluding sovereign functions and casual enterprises. As India’s economic landscape evolves, understanding what qualifies as an ‘industry’ becomes critical for employers, employees, and policymakers alike. This article explores key judicial rulings, exceptions, and the enduring impact of this fluid definition on India’s industrial relations.
Definition of the Term ‘Industry’ under the Industrial Disputes Act
Section 2(j) of the Industrial Disputes Act, 1947 defines ‘industry’ as “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 to satisfy human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature)”.
On a plain reading, this definition appears broad, encompassing a wide array of activities where employers and workmen are engaged. However, the lack of specific criteria for distinguishing ‘industrial’ from ‘non-industrial’ activities led to significant ambiguity and a series of legal battles, primarily centered around whether sovereign functions of the state, charitable institutions, educational bodies, and professional organizations fell within its ambit.
The “Triple Test” and Its Broadening Impact
The definitive interpretation of ‘Industry’ emerged from the landmark seven-judge bench decision in Bangalore Water Supply & Sewerage Board v. A. Rajappa and Ors. (AIR 1978 SC 548). The judgement fundamentally redefined the term ‘Industry’ by establishing the ‘Triple Test’. The important principles of the Triple Test include:
- There must be a systematic activity.
- There must be co-operation between the employer and employees.
- The activity must be for the production and/or distribution of goods or services calculated to satisfy human wants and wishes.
The Bangalore Water Supply case notably broadened the scope of ‘Industry’ by declaring that the motive to make a gain or profit is irrelevant. An activity can be an ‘industry’ even if it is run by a charitable organization or for public welfare. Regal or sovereign functions of the government, such as legislative, judicial, defence, and police, would fall outside the ambit, but ‘welfare activities’ or ‘commercial enterprises’ undertaken by the government fall within the ambit of the term ‘industry’. Professions such as legal, medical, or educational can be called an ‘industry’ if they satisfy the Triple Test, especially if the service is rendered to the community rather than individual clients in an isolated professional setup.
Corporations and Municipal Undertakings
The Municipal Undertakings are generally engaged in services which are of public utility in nature, but some or part of the functions discharged by them may also be of the type which would be discharged by sovereign bodies. In such cases, the courts have generally held that the municipalities engaged in multifarious activities would be ‘industries’ within the definition of Sec. 2(j).
In the case of D.N. Banerjee v P.R. Mukherjee (AIR 1953 SC 58), it was held that a public utility service (railways, telephones and the supply of power, light or water to the public) or ‘undertaking’ run by Municipal Corporation would constitute an industry even though it is carried on with the aid of taxation and no immediate material gain by way of profit was envisaged, because there was a co-operation between capital and the labour and rendering of material services to the public.
In Corporation of the City of Nagpur v Its Employees (AIR 1960 SC 675), the court held that municipal functions were analogous to ‘business operations,’ and hence municipal functions of a corporation would fall within the definition of industry.
The Supreme Court in the Bangalore Water Supply v A. Rajappa case approved the law laid down in the Corporation of the City of Nagpur case.
Similarly, in the case of Parmanand v Nagar Palika, Debra Dun (2003) 9 SCC 290, the Engineering Department of Municipality (Nagar Palika) was held to be an industry.
Hence, it can be said that the Corporations and Municipal Undertakings fall under the definition of the term ‘industries’ within the definition of Sec. 2(j).
Clubs
The clubs are voluntary organisations formed by the members for their entertainment and pleasure. The functioning of such clubs is governed by certain by-laws framed to regulate their management, and such bodies sometimes also employ a large number of employees to cater to the demands of their members.
In the cases of Cricket Club of India Ltd v Bombay Labour Union (AIR 1969 SC 276) & Madras Gymkhana Club case (AIR 1968 SC 554), the clubs were held not to be industries, primarily because they were identified as self-serving institution, not carrying any trade or industry without a clear element of “trade or business.”
However, the Supreme Court in the Bangalore Water Supply case overruled the above decisions and held that in these clubs, there was an element of ‘industry’ present and hence they fall within the definition of industry as given in Sec. 2(j). It was held that, where clubs employ workmen whose co-operation produces goods and services for a section of the community, and operations are organized like a business, they constitute an ‘industry’. The Court recognized that even if members own the institution, they act as employers. It did, however, differentiate self-service clubs with minimal hired employees, suggesting they might fall outside the industrial pool.
Hospitals, Educational Institutions, And Research Institutes
A. Hospitals
In the case of State of Bombay v Hospital Mazdoor Sabha (AIR 1960 SC 610), the Supreme Court held that the State was carrying on an ‘undertaking’ within Sec. 2(j) when it ran a group of hospitals to provide medical of the citizens and for helping to help impart medical education.
A more restrictive view emerged in Management of Safdarjung Hospital v Kuldip Singh (AIR 1970 SC 1406), wherein it was held that a place of treatment of patients run as a department of the government was not an industry because it was a part of the functions of the government. In Dhanrajgiri Hospital v Workmen (AIR 1975 SC 2032), the court held that the main activity of the hospital was imparting training in nursing, and the beds in the hospital were meant for their practical training. It was held not to be an industry as it was not carrying on any economic activity like trade or business.
However, in Bangalore Water Supply v A. Rajappa (AIR 1978 SC 548), the Supreme Court overruled the Safdarjung Hospital and Dhanrajgiri Hospital cases, and approved the law laid down in the Hospital Mazdoor Sabha case. It was held that hospital facilities, research products, and training, being a service activity, were to be classified as an industry. The Government department, while undertaking welfare activities, cannot be said to be out of industry if such activities are carried on business lines and hence lie outside the ambit of Sec. 2(j) of the Act.
Thus it can be said that such hospitals that are run by the Government in the nature of its sovereign functions with the sole object of rendering free service to the patients are not industry. But all other hospitals, both public and private, whether charitable or commercial, would be industry if they fulfill the triple test laid down in Bangalore Water Supply case.
B. Educational Institutions
Educational institutions are places that engage in rendering material services to the community at large. There are certain institutions large enough, employing persons in various capacities besides teachers who wholly and exclusively devote themselves to the academic work. The large categories of persons employed in educational institutions have given them the semblance of a place like an industry.
In the case of University of Delhi v Ram Nath (AIR 1963 SC 1873), it was held by the Supreme Court that the work of imparting education is more a mission and a vocation than a profession or trade or business and therefore a University was not an industry. The aim of an educational institution was to impart education and therefore it cannot be called an ‘industrial process.’
However, this case was overruled by the Bangalore Water Supply case wherein it was held that if the triple tests of systematic activity, co-operation between employer and employee, and production of goods and services were alone to be applied, a University, a College, or a teaching institute would be considered as an industry. There are a number of other activities of the University Administration, which are industrial, although ancillary to the main cultural enterprise. For instance, a University may have a large printing press as a separate but considerable unit of management. It may have a large fleet of transport services with an army of running staff.
The Supreme Court rejected the argument that education was not industry because it develops the personality of the pupil. It said: “It is true that our social values assign a high place to education. But how does it follow from this that education is not an industry? We have to look at the educational activity from the need of the Act, and see whether the ingredients of industry are fulfilled.”
In Sumer Chand v The Presiding Officer, Labour Court, Ambala (1992) 1 LLJ 394 (P&H), it was held that Kurukshetra University was an ‘industry’ and a person employed therewith as a carpenter would be a ‘workman’ under the ID Act.
C. Research Institutions
In the case of Ahmedabad Textile Industry’s Research Association v State of Bombay (AIR 1961 SC 484), an association was formed to found a scientific research institute. The institute was to carry on research in connection with the textile and other allied trades to increase efficiency. The Supreme Court held that, though the association was established for research, the main object was to benefit the members of the association, and it was organised and arranged in the manner in which a trade or business was generally organised, which postulates co-operation between employers and employees. For such reasons, the association was held to be ‘an industry’.
Regarding Sovereign Functions, in the case of Harjirit Thukral v UOI (1990 LIC 154), it was held that Indian Space & Research Organisation (ISRO) was not an industry due to its bearing on sovereign functions. However, in the case of R. Sreenivasan v Labour Court, Hyderabad (1990 2 Lab LJ 577 (AP), the National Remote Sensing Agency (NRSA) was held to be an industry, as some of its functions involved non-sovereign consultancy services. The Central Research Institute for Yoga was also held to be an ‘Industry’ in Suresh Kumar v UOI, 1990 LIC NOC 75 (Del).
Professional Firms And Other Activities
The early view on professional firms was seen in the case of National Union of Commercial Employees v M.R. Meher (AIR 1962 SC 1080) (“Solicitor’s Case”). It was held that a solicitor’s firm carrying on the work of an attorney was not an industry. The job would have no direct relation to the professional service rendered by the solicitor. There was, no doubt, a kind of co-operation between the solicitor and his employees, but it was a co-operation at work (e.g., clerical or typing work) and had no direct or immediate relation to the advice or service which the solicitor rendered to his client.
This aspect of the “Solicitor’s Case” was largely modified by Bangalore Water Supply, which brought professional firms within the ambit of ‘industry’, if they satisfied the “Triple Test” in their organized form, especially when serving the community rather than purely individual clients.
In the case of Management of the FICCI v Workmen (AIR 1972 SC 763), the Federation of India Chambers of Commerce and Industry was held to be an industry. The Federation carried on systematic activities to assist its members and other businessmen, in giving them the right to subscribe to the association, to participate in the conferences, and in obtaining concessions and facilities for them from the Government. Such activities are considered business activities and hence would fall under the definition of the term ‘industry’. On similar lines, the Indian Standards Institution was also held to an industry.
A Charitable non-profit making social service organisation, ‘Bihar Relief Committee’ in the case of Bihar Relief I vs State Of Bihar, (1979)IILLJ53PAT, was found to be an ‘industry’ based on the principles laid down in the Bangalore Water Supply case. Similarly, Bihar Khadi Gramodyog Sangh was also held to be an industry. A society which was formed for the protection, care, and treatment of aged, infirm, and injured cows, etc., and also engaged in the activity of selling milk was held to be an industry in the case of The Bombay Panjrapole v The Workmen AIR 1971 SC 2422.
In the case of the Workmen of M/s. Baikuntha Nath Debasthan Trust v State of W.B. (1991) 1 Lab LJ 145, it was held that, where worship is done by Pujaris on a regular wage basis and where it appeared from the balance sheet that there remained a large surplus in the funds after expenses were paid for making prasad, it was clear that the enterprise was commercial and for that reason ‘Mandir’ would be called an industry. However, the Orissa High Court has held that the Sri Jagannath Temple was a spiritual institution and its predominant function was the spiritual benefit of the Hindu public, and therefore, its Managing Committee was not engaged in industry.
A village Panchayat is not an industry. But, the Panchayat supplying and providing drinking water by installing hand pumps and arranging repairs etc., was held to be an industry. A Trade Union has also been held to be an industry in the case of Dattatraya Gopal Paranjpe v Rashtriya Mill Mazdoor Sangh (1995) 2 Lab LJ 913 (Bom).
Government Department – Industrial Disputes Act
Government departments carrying out activities analogous to trade or business have been brought under the definition of ‘industry’. Departments like Tourism and Railways have been held to be industries.
The Telecommunication Department of the government was held to be an “industry” since it was engaged in a commercial activity and the department was not engaged in discharging any of the sovereign functions of the State in the case of General Manager, Telecom v A. Srinivasa Rao (1997) 8 SCC 767. The Supreme Court overruled the decisions of the Theyam Joseph case (1996) 8 SCC 489, in which it was held that the functions of the Postal Department were a part of the sovereign functions of the State and therefore, not an “industry” and the Bombay Telephone Canteen Employees’ Asscn. (AIR 1997 SC 2817) case in which it was held that the Telephone Nigam was not an “industry”. In Ash Rani v Div. Enggr., Telecom Dept. (2001) 9 SCC 382, the Telecom Department was again held to be an industry.
In the case of Haryana Woollen Dev. Corpn. In Case (1993) 2 LLJ 318, it was held that a Corporation set up by the State Government for the upliftment of women or the weaker section of the society by giving financial help and training was an industry.
In All India Radio v Santosh Kumar (1998) 3 SCC 237, it was held that the word “industry” covered “All India Radio” and the activities of commercial advertisements telecast/broadcast and further promotions cannot be said to be purely sovereign.
However, some governmental functions, particularly those considered purely sovereign or essential for state governance, remain outside the scope of the term ‘industry’. In Najeema Beevi v Public Service Commission, 1983 1 LLJ 443 (Ker.), it was held that the functions of the Public Service Commission, like the administration of justice, and the inclusion and the P.S.C., are not an industry. The irrigation department of the State was held not to be an industry in the case of State of U.P. v Industrial Tribunal IV, Agra (2002) IV LLJ (Supp) 50
In Dandakarnya Project, Koraput v Workmen (AIR 1997 SC 852), the Central Government referred certain disputes, arising out of the termination of the employees of the Dandakarnya Project, to the Industrial Tribunal (under Sec. 10 of the I.D. Act). The management of the project contended that the project was undertaken by the Government as a part of its sovereign function to rehabilitate the refugees from Pakistan and was therefore not an ‘industry’ and, accordingly, the Reference was incompetent. The Supreme Court held that, bearing in mind the dominant nature of the activities of the project and the nature of the duties discharged by the workers, the project should be considered as an ‘industry’.
Whether a particular function of the State is or is not a sovereign function depends on the nature of the power and the manner of its exercise. Pachgaon Parwati Scheme in Pune District and afforestation work in Ahmednagar District undertaken by the Forest Department of the State Government of Maharashtra were held to be an industry and not part of sovereign functions of the State in the case of Chief Conservator of Forests v Jagannath Maruti Kondhare (1996) 2 SCC 293. ‘Agricultural Produce Market Committee’ was held to be an industry as per Agricultural Produce Market Committee v K.S. Nirvanapattap, 1998 Lab IC 1312 (Karnt). In the case of State of Gujarat v Pratum Singh N. Parmar (2001) I LLJ 1118 (SC), it was held that the Forest Department in the State of Gujarat was not an industry.
Therefore, it can be presumed that the government departments that carry out activities for trade or business can be brought under the definition of ‘industry’, while those that are carried out as a part of the sovereign function of the state will not form part of the term ‘industry’.
Conclusion – Industrial Disputes Act
The definition of the term ‘industry’ under the Industrial Disputes Act, 1947, has evolved through different judicial interpretations to evolve into a dynamic and inclusive concept, exceeding the traditional notions of trade and manufacturing. The landmark Bangalore Water Supply judgment established the ‘triple test’ to include systematic activity, employer-employee cooperation, and production of goods/services as the three pillars for determining whether an entity constitutes an ‘industry’ or not, irrespective of the profit motives or governmental affiliation. This interpretation had brought diverse sectors, from hospitals and educational institutions to municipal services and professional firms, within the ambit of labour law protections, while also carefully excluding sovereign functions of the state from the meaning of the term ‘industry’.
The judiciary’s nuanced approach had balanced economic realities with social welfare, ensuring that entities are held accountable to the labour standards, even if they operate under charitable or public-service mandates. However, the exclusion of purely sovereign functions such as legislative, judicial, and core governmental duties creates a fine distinction between regulatory authority and industrial enterprise. Ultimately, it is for employers, employees, and policymakers to understand this framework to navigate industrial disputes and foster equitable workplace practices.
About Us
Corrida Legal is a boutique corporate & employment law firm serving as a strategic partner to businesses by helping them navigate transactions, fundraising-investor readiness, operational contracts, workforce management, data privacy, and disputes. The firm provides specialized and end-to-end corporate & employment law solutions, thereby eliminating the need for multiple law firm engagements. We are actively working on transactional drafting & advisory, operational & employment-related contracts, POSH, HR & data privacy-related compliances and audits, India-entry strategy & incorporation, statutory and labour law-related licenses, and registrations, and we defend our clients before all Indian courts to ensure seamless operations.
We keep our client’s future-ready by ensuring compliance with the upcoming Indian Labour codes on Wages, Industrial Relations, Social Security, Occupational Safety, Health, and Working Conditions – and the Digital Personal Data Protection Act, 2023. With offices across India including Gurgaon, Mumbai and Delhi coupled with global partnerships with international law firms in Dubai, Singapore, the United Kingdom, and the USA, we are the preferred law firm for India entry and international business setups. Reach out to us on LinkedIn or contact us at contact@corridalegal.com/+91-9211410147 in case you require any legal assistance. Visit our publications page for detailed articles on contemporary legal issues and updates.