Secretary, Madras Gymkhana Club Employees' Union v Management of the Gymkhana Club (1967)

Before 1978 the Supreme Court decided "is it an industry?" case by case — municipalities, hospitals, a solicitor's firm, a university — and the tests kept shifting. In Madras Gymkhana Hidayatullah J. stopped to take stock, criticised the earlier tests, and restated the definition around its first part: the employer's occupation must be a business, trade, undertaking, manufacture or calling.

Applied to a large non-proprietary members' club, the answer was not an industry. However big the club and however organised, it existed only to serve its own members; it was a self-serving institution, not an enterprise analogous to trade or business.

This is the high point of the narrow reading of s. 2(j). The citator note printed with the report marks the case as overruled by AIR 1978 SC 548 — Bangalore Water Supply and Sewerage Board v A. Rajappa — so you must read the two together.

The Madras Gymkhana Club was admittedly a members' club, not a proprietary club. At the end of 1962 it had about 1200 members, 800 of them active. It provided a venue for sports and games (a golf course, tennis courts, rugby and football grounds, indoor games) and facilities for recreation and entertainment, including dances, dinners and a catering department. It employed 194 people — officers, clerks, peons, stewards, butlers and others. Its income and expenditure were about four and a quarter lakh rupees and its wage bill between one and two lakh rupees. It was run by an annually elected committee. Guests were admitted, but only on the invitation of members.

The employees claimed bonus for 1962. The Industrial Tribunal, Madras held (award of 2 September 1964) that the club was not an industry and rejected the claim. The Employees' Union appealed by special leave.

1. What does "industry" in s. 2(j) mean, and how do its two parts relate?
2. What is the meaning of "undertaking" in the definition?
3. Is a non-proprietary members' club an industry?

The appeal was dismissed. The club was not an industry and the Tribunal was right. No order as to costs.

The two parts of s. 2(j)

The definition is in two parts. The first part, "business, trade, undertaking, manufacture or calling of employers", looks at the employer's occupation and gives the true meaning of industry. The second part, from the employees' side, only extends the concept to the different kinds of work the employees do. But "the second part standing alone cannot define 'industry'. An industry is not to be found in every case of employment or service." The Court's example: a person who employs a cook receives service, but there is no industry, because the employer's activity is none of the five things in the first part.

So "what must be established is the existence of an industry viewed from the angle of what the employer is doing and if the definition from the angle of the employer's occupation is satisfied, all who render service and fall within the definition of workman come within the fold of industry irrespective of what they do."

The settled principles

The Court summarised the position: "Every human activity in which enters the relationship of employers and employees, is not necessarily creative of an industry." Domestic service, administrative services of public officials, services in aid of professional men such as doctors and lawyers, and the employment of teachers are excluded. "Primarily, therefore, industrial disputes occur when the operation undertaken rests upon cooperation between employers and employees with a view to production and distribution of material goods, in other words, wealth, but they may arise also in cases where the cooperation is to produce material services."

The meaning of "undertaking"

"Undertaking" is the most elastic word in the definition, but it takes its colour from the others. The Court adopted the test from D.N. Banerjee and Baroda Borough Municipality: "the word 'undertaking' must be defined as "any business or any work or project which one engages in orattempts as an enterprise analogous to business or trade."" Profit motive and private capital are not essential, but the activity "must not be casual but must be distinctly systematic."

Earlier tests criticised

• State of Bombay v Hospital Mazdoor Sabha relied on the test "could the activity be carried on by a private individual?" The Court described the Hospital case as "on the verge" and said "There are reasons to think that it took the extreme view of an industry."
• The Court called the extension of the test in Corporation of City of Nagpur "unfortunate", saying it "contradicted the earlier cases".
• The test from the Ahmedabad Textile Industry Research Association case, that workmen must not share in the product of their labour, was not universal: "There may be occasions when the workmen may receive a share of the produce either as part of their wages or as bonus or as a benefit."
• The "direct and essential nexus" test of the Solicitor's case (National Union of Commercial Employees v Meher) could not be universal either: "What partnership can exist between the Company and/or Board of Directors on the one hand and the menial staff employed to sweep floors on the other?" Learned professions are excluded not because such a partnership is absent but because the employer's occupation does not satisfy the definition.

Application to the club

The Union relied on the club's scale, its catering and bar, its parties for guests and its reciprocal arrangements with other clubs. The Court rejected all of these: "We, cannot go by the size of the club or the largeness of its membership or the number or extent of there activities. We have to consider the essential character of the Club activity in relation to the definition of industry."

The club did not follow a trade or business, did not manufacture, and running a club was not the calling of its members. The only question was whether it was an undertaking. The Court accepted that it was organised like a business and produced services and, in its catering department, some goods. But "the services are to the members themselves for their own pleasure and amusement and the material goods are for their consumption. In other words, the club exists for its members."

Guests made no difference: "the circumstance that guests are admitted is irrelevant to determine if the club is an industry." The club remained "a member's self-serving institution." Catering to the needs of a section of the community is not enough; "This must be done as part of trade or business or as an undertaking analogous to trade or business. This element is completely missing in a members' club."

Nor did the club have an existence apart from its members: "the club is identified with its members at a given point of time. Thus it cannot be said that the club has an existence apart from the members."

The Calcutta High Court's contrary observations in the Bengal Club and Royal Calcutta Golf Club cases — single-Judge decisions about incorporated clubs run for profit — were described as "clearly obiter" and disapproved.

Conclusion: "In our judgment the Madras Gymkhana Club being a members' club is not an industry and the Tribunal was right in so declaring."

Whether an activity is an industry under s. 2(j) is decided by the first part of the definition — the employer's occupation must be a business, trade, manufacture or calling, or an undertaking in the sense of a systematic enterprise analogous to business or trade producing material goods or material services. Once that is shown, everyone employed is within the industry whatever their work. A non-proprietary members' club, which serves only its own members (and their guests) for their own pleasure, is a self-serving institution and not an undertaking analogous to trade or business; it is therefore not an industry, whatever its size or organisation.

• Direct question: Define "industry" under s. 2(j) of the Industrial Disputes Act. Trace the development of the concept through the case law. Place Madras Gymkhana as the narrow restatement before Bangalore Water Supply: the first part of the definition controls, "undertaking" means an enterprise analogous to trade or business, and clubs are self-serving.
• Problem question: employees of a members' sports club claim bonus. State the Madras Gymkhana reasoning — size, organisation, catering and guests are irrelevant; the club exists for its members — and then say how the position changed after Bangalore Water Supply.
• Short note: Madras Gymkhana Club case. Cover the two-part definition, the definition of "undertaking", the criticism of the private-individual, no-share and direct-nexus tests, and the self-serving club holding.
• Comparison: set the case against Hospital Mazdoor Sabha (wide view) and Bangalore Water Supply (the later wide view that overruled this one).