State of U.P. v Jai Bir Singh (2005)

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". Jai Bir Singh is the case that tells you it is not the last word — and gives reasons.

It is a Constitution Bench of five which, having surveyed the whole line of authority, concluded that there are compelling reasons for referring the interpretation of s. 2(j) to a larger Bench for reconsideration of Bangalore Water, and directed the papers to be placed before the Chief Justice for constituting one.

Two cautions before you write on it. First, this Bench did not overrule Bangalore Water; a Bench of five could not, and it expressly left the substantive question to the larger Bench. Second, everything it says about the merits of the definition — sovereign functions, liberal professions, the worker-oriented approach — is said as a reason for referring, not as a decision. Write it that way.

The appeal, with connected cases, was listed before the Constitution Bench on a reference made by a Bench of three Judges which found an apparent conflict between two earlier decisions of the Court:

• Chief Conservator of Forests v Jagannath Maruti Kondhare (1996), a Bench of three, which on the strength of Bangalore Water held the Social Forestry Department to be covered by the definition of "industry"; and
• State of Gujarat v Pratamsingh Narsinh Parmar (2001), a Bench of two, which took a different view.

The underlying question was whether the "social forestry" department of the State — a welfare scheme undertaken for improvement of the environment — falls within s. 2(j). Because the difference between the two Benches lay in how each had culled the ratio of Bangalore Water, and because the correctness of Bangalore Water was doubted in the connected matters, the cases were placed before this Bench.

For the employers. The expansive meaning given to "industry" in Bangalore Water, with certain specified exceptions carved out, is not warranted by the language of the definition clause. There is no unanimity among the Judges in that case on what a sovereign function is. In a constitutional democracy where sovereignty vests in the people, all welfare activities undertaken by the State in discharge of its obligations under Part IV are sovereign functions; restricting sovereign functions to "inalienable functions" such as law and order, legislation, the judiciary and administration is uncalled for. Further, the legislature responded to Bangalore Water by the Amendment Act of 1982, which took specified activities out of "industry"; though the substituted definition has never been notified into force, it is part of the statute and may be used to construe the unamended clause. It was also argued that the piecemeal notification of the 1982 Act — every other amendment brought into force, this one withheld — is not contemplated by s. 1(2) of that Act.

For the employees (Ms Indira Jaising and Mr Colin Gonsalves). Bangalore Water has been binding for more than 23 years and has worked to the satisfaction of the industrial field; on the principle of stare decisis the Court should refrain from referring it. The Union's explanation in Aeltemesh Rein v Union of India (1988) for not enforcing the amended definition — that no alternative machinery had been provided for redressal of the disputes of employees in the excluded categories — is a sound justification, and no mandamus lies to compel enforcement of an Act.

1. It was not a unanimous decision, and the opinions were delivered out of sequence. Krishna Iyer J spoke for himself, Bhagwati and Desai JJ. Beg CJ agreed generally but recorded that the opinion had to be given that day because "From tomorrow I cease to have any authority as a Judge to deliver it", so he had "really no time to discuss the large number of cases cited before us". He also doubted the very vocabulary: "I do not feel happy about the use of the term" sovereign here, preferring "governmental", and thought that only services governed by separate rules and constitutional provisions such as Arts. 310 and 311 should be excluded.

Chandrachud J and Jaswant Singh J (for himself and Tulzapurkar J) had not prepared their opinions on the day of delivery, recording only that "We will give our reasons later indicating the area of concurrence and divergence, if any". Chandrachud CJ delivered his on 7 April 1978 — after Beg CJ's retirement, and therefore seen by neither him nor the other three. Jaswant Singh J's opinion, a dissent, came later still.

The consequence drawn is a striking one: Krishna Iyer J and the two Judges who spoke through him "did not have the benefit of the dissenting opinion of the other two judges" nor of Chandrachud J's partly dissenting opinion. In that situation, the Court said, "it is difficult to ascertain whether the opinion of Krishna Iyer J." on behalf of himself, Bhagwati and Desai JJ "can be held to be an authoritative precedent which would require no reconsideration".

2. The Judges themselves treated the exercise as provisional. The conclusions in Bangalore Water were expressed to hold "until overruled by a larger Bench or superseded by the legislative branch", and the opinion said of itself that it "has no pontifical flavour but seeks to serve the future hour till changes in the law or in industrial culture occur". Chandrachud CJ had gone further: "I consider, with great respect, that the problem is far too policy-oriented to be satisfactorily settled by judicial decisions. The Parliament must step in". The dissent called on the Legislature to step in "with a comprehensive bill to clear up the fog".

3. The legislature responded, and the response was frozen. The Amendment Act of 1982 substituted a new definition excluding specified categories, but the notification under s. 1(2) has never issued. The observations of the dissent, the Court said, "have proved prophetic": the amended provision has lain dormant for more than 23 years while "the unamended definition with the same vagueness and lack of precision continues to confuse the courts and the parties".

4. The earlier reference in Coir Board. In Coir Board v Indira Devi (1998) a Bench of two, through Sujata V. Manohar J, had already asked for a larger Bench, observing that "The experience of the last two decades does not appear to be entirely happy" and that application of the Act to organisations quite possibly not intended to be covered "might have done more damage than good, not merely to the organizations but also to employees by the curtailment of employment opportunities". That request was declined by a Bench of three in 2000 on the footing that a Bench bound by Bangalore Water could not refer it. The present Court noted that, on Central Board of Dawoodi Bohra Community v State of Maharashtra (2005), it had been open to the Chief Justice to constitute the larger Bench — and that in any case "no such inhibition limits the power of this Bench of five judges".

These are the passages examiners like, and they must be presented as reasons for reference.

On the premise of the majority opinion. Bangalore Water proceeded on the footing that "a worker-oriented statute must receive a construction where conceptual keynote thought must be the worker and the community". The Court respectfully disagreed with that premise: the main aim of the statute "is to regulate and harmonize relationships between employers and employees for maintaining industrial peace and social harmony", and the definition deserves interpretation keeping in view the interests of the employer who puts in capital and expertise as well as of the workers. A worker-oriented approach, "unmindful of the interest of the employer or the owner of the industry and the public who are ultimate beneficiaries, would be a one sided approach". The Court turned Krishna Iyer J's own caution against the result: one must not "fall into the trap of definitional expansionism" nor "truncate the obvious amplitude of the provision to fit it into our mental mould of beliefs and prejudices".

On the practical experience. Over-emphasis on workers' rights and undue curtailment of the employer's right to organise his business had, in the Court's experience, produced awards of heavy back wages which "sometimes result in taking away the very substratum of the industry" and compel employers of moderate means to close down. "Exploitation of workers and the employers has to be equally checked." An over-expansive definition "might be a deterrent to private enterprise in India where public employment opportunities are scarce", and bringing liberal professions within it is "experienced as a hurdle by professionals in their self pursuits" — regulation of those professions "should be subject of a separate suitable legislation".

A caveat on sovereign functions. The Court entered "a caveat on confining sovereign functions' to the traditional so described as inalienable functions'". The concept of sovereignty in a constitutional democracy differs from the traditional one confined to law and order, defence, law making and justice dispensation; sovereignty vests in the people and the State is obliged to discharge its Part IV obligations. Hence, "wherever the government undertakes public welfare activities in discharge of its constitutional obligations, as provided in part-IV of the Constitution, such activities should be treated as activities in discharge of sovereign functions falling outside the purview of `industry'". Whether employees in such welfare activities need protection "may be a subject of separate legislation".

A preference for the older line. The Court said it was "inclined to accept the view expressed by the six judges' Bench in the case of the Management of Safdarjung Hospital" — a decision Bangalore Water had overruled — that although profit motive is irrelevant, the activity must be "analogous to trade or business in a commercial sense"; and that industry means "only trade and business, manufacture, or undertaking analogous to trade or business for the production of material goods or wealth and material services". Mere enumeration as a public utility service under s. 2(n) and the First Schedule is not decisive: what is declared must "be an industry in the first place". It added that in hospitals and education, where the motto is service to the community, rights such as strike, close down and lay off are not contemplated, and if patients or students were left to the mercy of employer and employees exercising those rights at will, "the very purpose of the service activity would be frustrated". It concluded, with Hospital Mazdoor Sabha, that though s. 2(j) uses words of very wide denotation, "a line would have to be drawn in a fair and just manner so as to exclude some calling service or undertakings".

The Court decided no question of substance and made a reference.

1. There are "compelling reasons more than on before us" for referring the interpretation of the definition of "industry" in s. 2(j) to a larger Bench and for reconsideration by it, if necessary, of Bangalore Water Supply and Sewerage Board. The larger Bench "will have to necessarily go into all legal questions in all dimensions and depth".
2. This Court "must, therefore, reconsider where the line should be drawn and what limitations can and should be reasonably implied in interpreting the wide words used in section 2(j)".
3. The Court expressly declined to go further: "We do not consider it necessary to say anything more and leave it to the larger Bench to give such meaning and effect to the definition clause in the present context", keeping in view the amended definition "kept dormant for long 23 years".
4. The side-issue whether the Government could be compelled to notify the 1982 definition was not decided: no substantive petition or prayer for mandamus was before the Court.
5. Direction: the cases to be placed before the Chief Justice of India "for constituting a suitable larger Bench for reconsideration of the judgment of this Court in the case of Bangalore Water".