University of Delhi v Ram Nath (1963)

This is the case that takes education out of s. 2(j), and it is the third decision in the line on the definition of "industry". It is striking because it is written by Gajendragadkar J, the author of Hospital Mazdoor Sabha three years earlier, and it narrows the field by a route that case had left open.

Its method is what makes it examinable. The Court does not attack the working principle of Hospital Mazdoor Sabha at all. It reasons instead from s. 2(s): teachers are admittedly not workmen; teachers are the whole body of persons with whose co-operation education is carried on; therefore the Act cannot have intended education to be an industry for the sake of a handful of subordinate staff. To that it adds the predominant activity test, borrowed from Corporation of the City of Nagpur and turned against the employees.

It is also the source of the sentence every student quotes: education "is more a mission and a vocation rather than a profession or trade or business".

Two employees, Ram Nath and Asgar Masih, applied under s. 33C(2) against the University of Delhi (appellant 1) and the Principal, Miranda House, University College for Women (appellant 2). Appellant 2 is run by appellant 1, so in substance the claim was against the University.

Ram Nath's case was that he had been employed as a driver by appellant 2 in October 1949, and was served with notice on 1 May 1961 that, his services being no longer required, he would be discharged on payment of one month's salary in lieu of notice. Asgar Masih made substantially similar allegations: he had been employed in the first instance by appellant 1 as a driver, was transferred to appellant 2 on 1 October 1949, and his services were similarly terminated by notice on 1 May 1961 on payment of one month's salary in advance.

It was common ground that the University found that running the buses for the convenience of the girl students attending the college resulted in loss, and so decided to discontinue that amenity. Inevitably the two drivers had to be retrenched. There was therefore no dispute that the retrenchment was genuine, and no element of mala fides or unfair labour practice. It was also common ground that if the employees were workmen and the work carried on was an industry, s. 25F had not been complied with and the retrenchment amount payable under it had not been paid.

The University resisted the petitions on the preliminary ground that it was not an employer under s. 2(g), that the work it carried on was not an industry under s. 2(j), and that the applications under s. 33C(2) were therefore incompetent. The Tribunal rejected the objection, considered the merits, and directed the appellants to pay Rs. 1,050 to each respondent as retrenchment compensation.

The appellants came by special leave. The only ground of challenge was that the work carried on by the University is not an industry under s. 2(j).

The Court stated the importance of the point plainly. "Though the question thus raised by these two appeals lies within a narrow compass, its importance is very great. If it is held that the work of imparting education conducted by educational institutions like the University of Delhi is an industry under s. 2(j), all the educational institutions in the country may be brought within the purview of the Act", their disputes would be industrial disputes referable under s. 10(1), and employees could apply under s. 33C(2).

For the appellants: the Tribunal erred in giving s. 2(j) its widest denotation "by adopting a mechanical and literal rule of construction"; the policy of the Act is clearly to leave education and educational institutions outside it.

For the respondents: s. 2(j) defines industry "deliberately in words of widest amplitude" and there is no justification for putting any artificial restraint on it. They relied on the working principle laid down in State of Bombay v Hospital Mazdoor Sabha, which the Court set out again in full: an activity systematically or habitually undertaken for the production or distribution of goods or for the rendering of material services to the community at large or a part of it with the help of employees is an undertaking; such an activity generally involves the co-operation of employer and employees; its object is the satisfaction of material human needs; it must be organised or arranged in the manner in which trade or business is generally organised or arranged; it must not be casual, nor for oneself, nor for pleasure. Their argument was that "service", expressly included in the definition, need not be confined to material service and ought to include educational or cultural service.

The Court conceded the force of the argument at the threshold: "Having regard to the fact that the word 'industry' as defined in the Act takes within its sweep any calling or service or employment, it cannot be denied that there is prima facie some force in the argument urged by the respondents."

The Court's answer begins by pressing the respondents' own premise to its consequence.

The main function of an educational institution is to impart education. If imparting education is an industry in reference to which the institution is the employer, "it must follow that the teachers who co-operate with the institution and assist it with their labour in imparting education are the employees of the institution, and so, normally, one would expect that the teachers would be employees who would be entitled to the benefits of the Act." The co-operation between employer and employees — between capital and labour — "must, on the respondents' contention, find its parallel in the co-operation between the educational institution and its teachers."

The Court then set itself the discipline of following the argument wherever it led: "It would, no doubt, sound somewhat strange that education should be described as industry and the teachers as workmen within the meaning of the Act, but if the literal construction for which the respondents contend is accepted, that consequence must follow. If the scheme of the Act and the other relevant considerations necessarily lead to the said consequence, the Court will have to accept the respondents' contention notwithstanding the fact that it does not fit in with the generally accepted sense of the word 'industry'."

Three definitions were then read together. Section 2(g)(i) and (ii) define "employer" in relation to an industry carried on by or under the authority of a department of the Central or a State Government, and in relation to one carried on by or on behalf of a local authority. Section 2(j) is the definition in issue. Section 2(s) defines a "workman" as, inter alia, any person, including an apprentice, employed in any industry to do any skilled or unskilled manual, supervisory, technical or clerical work for hire or reward.

And then the decisive concession, recorded as common ground:

"It is common ground that teachers employed by educational institutions, whether the said institutions are imparting primary, secondary, collegiate or postgraduate education, are not workmen under s. 2(s)."

It follows that "the whole body of employees with whose co-operation the work of imparting education is carried on by educational institutions do not fall within the purview of s. 2(s)", and any disputes between them and their institutions are outside the Act. So if imparting education were an industry, "the bulk of the employees being outside the purview of the Act, the only disputes which can fall within the scope of the Act are those which arise between such institutions and their subordinate staff."

"In our opinion, having regard to the fact that the work of education is primarily and exclusively carried on with the assistance of the labour and co-operation of teachers, the omission of the whole class of teachers from the definition prescribed by s. 2(s) has an important bearing and significance … It could not have been the policy of the Act that education should be treated as industry for the benefit of a very minor and insignificant number of persons who may be employed by educational institutions to carry on the duties of the subordinate staff. Reading ss. 2(g), (j) and (s) together, we are inclined to hold that the work of education carried on by educational institutions like the University of Delhi is not an industry within the meaning of the Act."

Having reached that conclusion on the scheme of the Act, the Court added the passage for which the case is best known.

"The distinctive purpose and object of education would make it very difficult to assimilate it to the position of any trade, business or calling or service within the meaning of s. 2(j). Education seeks to build up the personality of the pupil by assisting his physical, intellectual, moral and emotional development. To speak of this educational process in terms of industry sounds so completely incongruous that one is not surprised that the Act has deliberately so defined workman under s. 2(s) as to exclude teachers from its scope."

The Court was careful about what this does not mean. "Under the sense of values recognised both by the traditional and conservative as well as the modern and progressive social outlook, teaching and teachers are, no doubt, assigned a high place of honour … A proper sense of values would naturally hold teaching and teachers in high esteem, though power or wealth may not be associated with them. It cannot be denied that the concept of social justice is wide enough to include teaching and teachers, and the requirement that teachers should receive proper emoluments and other amenities which is essentially based on social justice cannot be disputed; but the effect of excluding teachers from s. 2(s) is only this, that the remedy available for the betterment of their financial prospects does not fall under the Act." The Court pointed to the Education Departments of the State Governments and the Union Government and the University Grants Commission, which consider the problem and assist teachers by requiring proper scales of pay and reasonable terms and conditions of service. But problems connected with teachers and their salaries are outside the Act; and since teachers are the sole class of employees with whose co-operation education is imparted, "their exclusion from the purview of the Act necessarily corroborates the conclusion that education itself is not within its scope."

The Court then examined the University itself, established and incorporated as a teaching and affiliating University under the Delhi University Act 1922 (No. 8 of 1922). Its organisation consists of the Officers — the Chancellor, the Pro-Chancellor, the Vice-Chancellor, the Treasurer, the Registrar, the Deans of Faculties and others — and its authorities — the Court, the Executive Council, the Academic Council, the Finance Committee, the Faculties and others (ss. 8 and 17). These authorities are composed of the teachers of the University, classified as Professors, Readers and Lecturers, and other persons interested in education.

"It is well known that this organisation does not contribute capital of itself in carrying out its work of imparting higher education. It receives grants from the Central Government, from the University Grants Commission and from charitable donors and charitable institutions. It also receives some income from tuition fees. But then it seems very difficult to postulate that in the work of imparting education, the University of Delhi contributes any capital as such. This work is carried on by the University with the co-operation of all its teachers and it would sound inappropriate to hold that this work is in the nature of a trade or business, or that it amounts to rendering of service which can be treated as an industry under the Act." The same would be equally true of all educational institutions founded primarily for the purpose of imparting education.

This is the reasoning that decides the fate of the two drivers.

"It is true that like all educational institutions the University of Delhi employs subordinate staff and this subordinate staff does the work assigned to it; but in the main scheme of imparting education, this subordinate staff plays such a minor, subsidiary and insignificant part that it would be unreasonable to allow this work to lend its industrial colour to the principal activity of the University which is imparting education. The work of promoting education is carried on by the University and its teachers and if the teachers are excluded from the purview of the Act, it would be unreasonable to regard the work of imparting education as industry only because its minor, subsidiary and incidental work may seem to partake of the character of service which may fall under s. 2(j)."

On profit, the Court was scrupulous not to overstate its point. "It is well known that the University of Delhi and most other educational institutions are not formed or conducted for making profit; no doubt, the absence of profit motive would not take the work of any institution outside s. 2(j) if the requirements of the said definition are otherwise satisfied. We have referred to the absence of profit motive only to emphasise the fact that the work undertaken by such educational institutions differs from the normal concept of trade or business."

And then the sentence to quote:

"Indeed, from a rational point of view, it would be regarded as inappropriate to describe education even as a profession. Education in its true aspect is more a mission and a vocation rather than a profession or trade or business, however wide may be the denotation of the two latter words under the Act."

Therefore it would be unreasonable to hold that educational institutions are employers within s. 2(g) or that the work of teaching carried on by them is an industry under s. 2(j), "because, essentially, the creation of a well-educated, healthy young generation imbued with a rational progressive outlook on life, which is the sole aim of education, cannot at all be compared or assimilated with what may be described as an industrial process."

The University of Delhi and Miranda House run by it are not carrying on an industry under s. 2(j), and the applications made by the respondents under s. 33C(2) are therefore incompetent. The appeals were allowed, the orders of the Industrial Tribunal set aside and the petitions dismissed. There was no order as to costs.

Note what the result costs the respondents. The retrenchment was admittedly genuine; the buses had been run at a loss and were discontinued; but it was also admitted that s. 25F had not been complied with. The drivers lost their compensation not on the merits but because the forum had no jurisdiction — the institution was not an industry at all.

State of Bombay v Hospital Mazdoor Sabha — that case had considered the implications of s. 2(j) "somewhat elaborately", but "it was expressly stated that the Court was not then expressing any opinion on the question as to whether running an educational institution would be an industry". The question was therefore open.

Lalit Hari Ayurvedic College Pharmacy, Pilibhit v Lalit Hari Ayurvedic College Pharmacy Workers Union, Pilibhit — a similar statement was made. Having held on the broad facts that the appellant's activity was an undertaking under s. 2(j), the Court added that it was not called upon to decide whether running an educational institution would be an industry.

The Ahmedabad Textile Industry's Research Association v The State of Bombay — in holding that the Research Association was carrying on an industry, the Court "took the precaution of observing that the activities of the Association had little in common with the activities of what may be called a purely educational institution", emphasising that its work was distinct and separate from that of an institution carrying on purely educational activities.

So the question "thus left open has been raised by the present appeals for our decision."

The Federated State School Teachers' Association of Australia v The State of Victoria — the respondents argued that since Hospital Mazdoor Sabha had approved the minority judgment of Isaacs J, who held that a teachers' dispute was an industrial dispute, this Court had by implication accepted his conclusion. The Court held the argument "not well founded". Hospital Mazdoor Sabha expressed general approval of the social philosophy to which Isaacs J gave expression, "but it deliberately took the precaution of making a specific statement that though the general views expressed by Isaacs J appeared to the Court to be acceptable, the Court should not be understood as having concurred in his final conclusion in regard to the character of educational activities … The observation made in the judgment leaving open that question was not a casual or an accidental observation; it was made deliberately to avoid a possible argument in future that the said judgment impliedly accepted the conclusion of Isaacs J."

The Court then set out the Australian decision itself. The dispute concerned wages and conditions of service of teachers employed by the States in their schemes of national education; the question was whether the States' educational activities constituted an industry within s. 4 of the Commonwealth Conciliation and Arbitration Act 1904–28. The majority held that the teachers' occupation was not an "industrial" occupation and the dispute not an "industrial dispute" within s. 51 of the Constitution: "If the carrying on a system of public education is not within the sphere of industrialism, those who confine their efforts to that activity cannot be engaged in an industry or in an industrial occupation or pursuit." The argument that a private person carrying on the same activity would be described as a business, trade or industry was repelled thus: "a private person could no more carry on this system of public education than he could carry on His Majesty's Treasury or any of the other executive departments of Government; and if he were authorised to do so, which was almost inconceivable, then he would no more carry on an industry than the State does now." Rich J, concurring, observed that "teaching does not, like banking and insurance, play a part in the scheme of national industrial activity", and rejected Isaacs J's view that education plays a direct part in the promotion of industry, since an industrial system could exist without national education: "The existence of human beings is no doubt necessary but it is absurd to suggest that everything that goes to make the man forms a part of the community industrially organised with a view to the production and distribution of wealth."

Isaacs J had dissented strongly, arguing that State education constituted in itself an independent industrial operation as a service rendered to the community, and that there is at least as much reason for including educational establishments in the constitutional power as labour services as there is to include insurance companies as capital services, observing that "industrial education is less and less left to apprenticeship systems" and that "the efficiency of the worker is generally directly affected by his education". The Court said that while it had already concurred in his general observations about the scope of industrial disputes, "with respect, it is not easy to accept the theory of the learned judge", and that "the comment made by Rich J on this reasoning of Isaacs J is not without force."

It added a point of statutory distinction candidates should keep: under the Australian Act the definition of "employee" is wider than "workman" under our s. 2(s) — any employee in any industry, including any person whose usual occupation is that of employee in any industry — so that teachers would fall within it. "Thus, it is clear that the main difficulty which arises from the definition of workman prescribed by s. 2(s) in our Act did not arise under the definition of employee in the Australian Act, and that is undoubtedly one important point of distinction."

The Corporation of the City of Nagpur v Its Employees — the respondents' strongest authority, because there the Corporation's education department had been held to fall within the definition. The question there was whether and to what extent the municipal activities of the Corporation fell within "industry" as defined by s. 2(14) of the C.P. and Berar Industrial Disputes Settlement Act 1947. The State Industrial Court had held the Corporation and all its departments covered; the High Court rejected the Corporation's plea that its activities were not an industry but remanded for determination of which departments fell within the definition; after remand the Industrial Court found all departments to constitute an industry except five; the Corporation appealed by special leave and failed, and no appeal was preferred by the employees in respect of the five excluded departments.

The Supreme Court in the present case made three points about it.

First, what was actually argued there was that the Corporation's activities were regal or governmental in character. That argument was examined and rejected: it was conceded that the regal functions "described as primary and inalienable functions of the State" are outside the Berar Act and remain outside if delegated to a Corporation, but the Court held that these regal functions must be confined to legislative power, administration of law and judicial power.

Second, in dealing with the departments the Court there observed that if a service rendered by an individual or a private person would be an industry, it would equally be an industry in the hands of a corporation, and held that where a department discharges many functions, some industrial and some not, "the predominant functions of the department shall be the criterion for the purposes of the Act". As to the education department, under which the Corporation looked after primary education within its limits, it was observed that the service rendered could be done by private persons, so that the subordinate menial employees of the department came within the definition of employees.

Third — and this is the distinction — "reading the judgment as a whole there can be no doubt that the question as to whether educational work carried on by educational institutions like the University of Delhi which have been formed primarily and solely for the purpose of imparting education amounts to an industry … was not argued before the Court and was not really raised in that form."

The Court then turned the predominant activity test round: "if the test of the character of the predominant activity of the institution which was applied to the Corporation is applied to the University of Delhi, the answer would be plainly against the respondents. The predominant activity of the University of Delhi is outside the Act, because teaching and teachers connected with it do not come within its purview, and so, the minor and incidental activity carried on by the subordinate staff which may fall within the purview of the Act cannot alter the predominant character of the institution."

It closed with an observation on precedent that is worth remembering for its candour. The Bench that left the question open in Hospital Mazdoor Sabha was the same Bench that heard Corporation of the City of Nagpur, and the two matters were argued soon after each other, the judgments being delivered on 29 January 1960 and 10 February 1960 respectively. The question now raised "was not raised, nor argued" in the Nagpur case and cannot be said to have been decided even incidentally merely because the education department was among those properly included in the award. "If we had been satisfied that the said judgment had decided this point, we would either have followed the said decision, or would have referred the question to a larger Bench."

This is the first retreat. D.N. Banerji had brought municipalities in and Hospital Mazdoor Sabha had brought State hospitals in on a broad functional test. This judgment leaves both standing and yet narrows the field, by a route peculiar to itself.

The mechanism is s. 2(s). The Court does not say that education fails the working principle; it says that the class of persons who actually do the work — teachers — are admittedly not workmen, so the Act cannot have been meant to cover the institution for the sake of the subordinate staff alone. To that it adds the predominant activity test, so that the industrial character of an incidental service (running buses) cannot colour a non-industrial principal activity (teaching).

That reasoning has a reach beyond universities, and Safdarjung would later invoke it: there the Court approved this decision expressly, on the footing that the employees' services were in aid of professional men and not productive of material services. By 1970 the position was municipality in, State hospital out, university out, members' club out.

Two features of the judgment repay attention because they became the targets of later criticism. It rests a definitional conclusion on a concession — that teachers are not workmen — rather than on the character of the activity. And it allows the status of the principal class of employees to determine whether the subordinate class gets the Act's protection, which is precisely the sequence a later and larger Bench would reverse when it separated the question whether an undertaking is an industry from the question whether a given employee is a workman.