Coir Board, Ernakulam, Cochin v Indira Devi P.S. (1998)

Bangalore Water Supply and Sewerage Board v A. Rajappa (1978) is the seven-Judge decision every student learns as the last word on the meaning of "industry". Coir Board is where the Supreme Court itself said, twenty years on, that the last word should be reopened. The Court did not overrule anything — a two-Judge Bench could not — but it set out, in strong language, why the Bangalore Water Supply test had become unworkable and asked the Chief Justice to consider a larger Bench.

For your answers, this case is the bridge between Bangalore Water Supply and the later reconsideration of it. It also contains a compact history of the definition of "industry" from D.N. Banerji to Physical Research Laboratory, which you can borrow as the skeleton of a long answer.

The Coir Board was set up under the Coir Industry Act 1953. Under s. 10 its duty is "to promote by such measures as it thinks fit the development under the control of the Central Government of the coir industry" — by promoting exports, regulating production, research, statistics, grading, marketing and the like. For marketing it maintains show rooms and sales depots, selling products of registered consignors for a commission.

The Board employed certain temporary clerks and typists, who were discharged. They claimed their services could be terminated only in accordance with the Industrial Disputes Act 1947.

A Full Bench of the Kerala High Court, deciding this along with similar questions about many Government departments, Government companies, statutory corporations and local bodies, held that the Coir Board is an "industry", so that Chapter V-A applied to the termination of its temporary clerks and typists. The Board appealed.

1. Is the Coir Board an "industry" within s. 2(j) of the Industrial Disputes Act 1947?
2. Does the test laid down in Bangalore Water Supply need reconsideration?

The Court did not finally decide the appeal. It directed "that the matter be placed before the Hon'ble the chief justice of India to consider whether a larger Bench should be constituted to re-consider the decision of this Court in Bangalore Water Supply and Sewerage Board's (supra)."

The history the Court traced

• State of Bombay v Hospital Mazdoor Sabha (1960): "undertaking" connoted an activity systematically and habitually undertaken for production or distribution of goods or for rendering material services with the help of employees; profit motive was irrelevant.
• The narrower line: National Union of Commercial Employees v M.R. Meher (an attorney's profession not an industry), University of Delhi v Ram Nath (education not an industry), Madras Gymkhana Club and Cricket Club of India (self-serving clubs not industries), and Safdar Jung Hospital (1970), where a six-Judge Bench held that "Hospitals run by Government and even by private associations not on commercial lines but on charitable lines, or as part of the functions of Government Department of Health cannot be included in the definition of industry."
• Bangalore Water Supply (1978), by a majority of five to two, overruled Safdar Jung and University of Delhi, and laid down the dominant nature test. The dissent, applying noscitur a sociis, would have confined the definition to activities "systematically or habitually undertaken on commercial lines by private entrepreneurs". The Court noted that even the majority in Bangalore Water Supply thought legislation was necessary to settle the position.
• Later cases left uncertainty: Physical Research Laboratory v K.G. Sharma (1997) held a research laboratory not an industry; Sub-Divisional Inspector of Post, Vaikam v Theyyam Joseph (1996) and Bombay Telephone Canteen Employees' Association (1997) went one way, and a three-Judge Bench in General Manager, Telecom v S. Srinivasa Rao (1997) held those two not correctly decided in view of Bangalore Water Supply.

Why reconsideration was needed

The Court said: "The experience of the last two decades does not appear to be entirely happy." Applying the Act to organisations not intended to be covered "might have done more damage than good, not merely to the organisations but also to employees by the curtailment of employment opportunities".

Its main concern was the removal of the profit motive: "The elimination of profit motive or a desire to generate income as the purpose of industrial activity" had brought a large number of philanthropic and charitable activities within the Act. It gave the example of voluntary organisations running workshops for poor and destitute women, and observed that "A large number of such voluntary welfare schemes have had to be abandoned because of the wide interpretation given to the term industry."

The 1982 amendment

Parliament had itself responded to Bangalore Water Supply by the Amending Act 46 of 1982, redefining "industry" and excluding hospitals, educational, scientific and research institutions, charitable and philanthropic services, and sovereign functions. But, the Court noted, "Unfortunately, despite the legislative mandate the definition has not been notified by the Executive as having come into force." Since the difficulty arose from judicial interpretation, there was no reason why the matter should not be judicially re-examined.

Applied to the Coir Board

The Board's function is to promote the coir industry, open markets and make its products more marketable; it is not set up to run any industry itself. "Looking to the predominant purpose for which it is set up we would not call it an industry." But on the Bangalore Water Supply tests it has employers and employees and does useful work for others, so "it will have to be called an industry under the Industrial Disputes Act." The Court's conclusion: "We do not think that such a sweeping test was contemplated by the Industrial Disputes Act, nor do we think that every organisation which does useful service and employs people can be labelled as industry."

Strictly, there is no binding ratio on the meaning of "industry": a two-Judge Bench was bound by Bangalore Water Supply and could only ask for reconsideration. What the case stands for is the Court's reasoned view that the Bangalore Water Supply test is too sweeping — that an organisation which merely promotes an industry, rather than running one, would not on its predominant purpose be an industry, and that not every organisation which does useful service and employs people should be labelled an industry. The proper course, which the Court took, was to place the matter before the Chief Justice for a larger Bench.

• Long answer: Critically examine the definition of "industry" under s. 2(j) of the Industrial Disputes Act 1947. Use the Court's history as your skeleton (Hospital Mazdoor Sabha → Safdar Jung → Bangalore Water Supply → later uncertainty), then use Coir Board for the criticism and the unnotified 1982 amendment.
• Short note: Coir Board v Indira Devi. State what the Board does, why it would not be an industry on predominant purpose but must be on the Bangalore Water Supply test, and that the matter was referred to the Chief Justice.
• Precision point: say plainly that a two-Judge Bench did not overrule and could not overrule a seven-Judge decision; it asked the Chief Justice to consider a larger Bench.
• Problem question: a charitable workshop for destitute women is sued under the Act. Apply Bangalore Water Supply (it is likely an industry) and use Coir Board to argue why that result has been doubted.