MANAGEMENT OF THE FEDERATION OF INDIAN CHAMBERS OF COMMERCE AND INDUSTRY versus THEIR WORKMAN, SHRI R. K. MITTAL

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MANAGEMENT OF THE FEDERATION OF INDIAN CHAMRERS OF COMMERCE AND INDUSTRY v. THEIR WORKMAN, SURI R. K. MITTAL November 15, 1971 [C. A. VAIDIALINGAM AND P. JAGANMOHAN REDDY, JJ.]

Industrial Disputes Act, 1947, s. 2(j)-'Jndustry' what is-Federation

of Indian Chc.n1ber.\· of Commerce attd Industry whether an 'industry',

Do111estic Inquiry-Finding as to 1nisconduct of e111ployee arrived at 1vithout evidence-Labour Court is justified in going into evidence' and deter1nining question for itself.

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The respondent was an employee of the appellant Federation. His services were lent to the Indian National Committee of International Cham ber of Commerce on the occasion of the 20th Congress of the International Chamber of Commerce held in Delhi in February 1965. He claimed over time payment for 40 days whereas he was paid only for 7 days., He thereupon sent lawyers' notices to the Appellant Federation, to the Indian National Committee aforesaid as well as to the International Chamber of Commerce. This was held t~ be misconduct by >n Enquiry Officer appointed by the.appellant. The consequent industrial dispute was reforred to the Labour Court. A preliminary issue was raised that the Federation \\'J.S not an industrv and therefore the Labour Court haJ. no jurisdiction to adiudicate oil thC reference. 1·his preliminary objection was overruled aud it was held on the evidence that the charge held proved in the domes tic inquiry was illegal and unjustified; that the Secretary had no authority to terminate the services; that the Ma_nagement did not like the trade union activities of the .respondent. that the actioo of tern1ination of services of the respondent amounted to victimisation and that even if it was not an act of victimisation in anv event the punis.hment was ~evere and therefore this Court. it amounted to victimisation. The Federation appealed to After a re,iew of the cases relating to the definition of 'industry' in s. 2(j) of the Industrial Disputes Act, 1947,

HELD :

the organisation

(i) The !inch-pin of the definition of industrv is to ascertain is discharging namely the systematic activitv which \.\-hether it partakes the nature of a business or trade, or is an undertaking or manufacture. or calling of employers. If it is that and there is a co· operation of the employer and the employee resulting in the production of material services. it is an industry notwithstandin2 that its objects are charitable or that it does not make profit or even where profits are made. they are not distributed among the members. [376 G]

In the Safdarj11ng Hospital case and the connected cas"' of the Tuber· culosis Hospital and the Kurji Holi Family Hospital it was found that none of them carried on an economic activity analogous to trade or business. The criteria that in the two latter hospitals the object wos charitable does ~ot ap!'°ar to ha~e been the sole test Jor concluding that they were not In _on~ case the dominant activity was research and training md!"stnes. wh!c~ n~cessa:1Iy involved t:e~tment also. In the other case though the activity 11 earned on was tra1~r~g. research and treatment, the distribution o! .'urplus as profit was proh1b1ted. The cumulative effect of these acti· \lties and the nature of such activities determined the question whether

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these institutions were an industry or not, not that because their respec tive objects were charitable, that alone was considered to be the criteria for not considering it as an industry. [372 A-C]

The cases under the Income-tax Act are of Iitlle assistance in deter n1inipg whether an orgariisation, association or undertaking is an industry no!Withstanding the fact that its main object is charitable. The object of an o_rganisation may be charitable but, nevertheless, Its activity may be cornmcrcial so as to satisfy the definition of an 'industry' as explained and elucidated by this Court particularly in the Safdarjung Hospital case. We could the1efore envisage an institution having its aims and-objects charj table. and yei its activities coulcl bring it within the definiti9n of industry in s. 2(j). [374 F-H]

The fact that in s, 32(5) of the Payment of Bonus Act Chambers of Commerce and certain other organisations \Vith charitable purpose '"''ere excluded did not go to show that thev were not industries. No such in ference would arise nor can this provision be of heip in the construction of s. 2(j) of the Act. [376 DJ

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Secretary, Madras Gynikhana Club Eniployees Union v. Manage1nent bf Gymkha11a Club, [1968]1 S.C.R. 742, State of Bombay & Ors. v. Hospital Mazdoor Sabha, [1960] 2 S.C.R. 866, D. N. Banerjee v. P. R. Mukherjee, [1953] S.C.R. 302, Baroda Boroilgh Municipality v. Jts Workmen, [!~60] 2 S.C.R. 942, Corporation of the City of Nagpur v. Employees, [1960] 2 S. C. R, 942. Unirersity of Vethi v. Ram Nath, [1964] 2 S. C.R. 703. A hmedabad Textile Industry"s Research Assn. v. State of Bomhay, [1961] 2 S.C.R. 480, National Umu11 of Commercial : 1962] Supp. 3 S.C.R. 157, Harinagar Employees v. M. P. Melwr, Cane Farm & Ors. v. State of Bihar, [1964] 2 S.C.R. 458, Cricket Club of India Ltd. v. Bombay Labour Union, [1969] I S.C,R. 600, Manage mem of Safdarjung Hospital, New Delhi v. Ku/dip Singh Sethi, [1971] 1 S.C.R. 177, Commissioner for Special Purposes of Income-tax v. Pemsc/, [1891] A.C. 531, C.I.T .. Madras v. Andhra Chamber of Con,,nerce, (1965] I S.C.R. 565. Hyderabad Stock Exchange Ltd, v. C./.T., [1967] J.T.R. 195, C./.T. West Bengal v. Bengal Home hiclustries Assn. [1963] 48 J.T.R. 181. Commissioner of Inland Revenue v. City of G/as11ow Police Atheletical Assn. [1963] 34 T.C. 76, Bombay, Pan;rapole v. Workmen. C. A. No. 133 I /66 dt. 16-8-71. La/it Hari Ayurvadic College Plrarmac)' v. Its Workmen Union, A.l.R. 1960 S.C. 1261 and Workmen employed in the Madras Pinlrapo/e v. Madras Pinjrapo/e, [1962] 2 L.L.J. 472, considered.

(ii) The above being the position in Jaw the mere fact that the appel lant Federation had charitable aims and objects would not take it out of the definition of industry. An examination of the activities of the Fede· ration showed that the Federation carried on sy.,tematic activities to assist Its n1embers and other business men and industrialists .ind even to non members as for instance in giving them the right to their bulletin; in taking up their cases and solving their difficulties and in ob tainin~ concessi.ons and facilities for them fron1 the __ Government. Thesl.! activities were business activities and material ~ervices p:nde1 ed to husi nessn1en traders and industrialists who are members of the c?nstifl1ent~ of the Federation. There could be no doubt that the Federation was an industry within the meaning of s. 2(j) of the Act [379 A-Cl

;ubscribe to

(iii) The Enquiry Officer in tlvo domestic enquiry held that having .re gard to the emphatic assertion of t_he ~espondent that ht had no intention to bring disrepute to the Federation 1n any way and that he was only

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MANAGEMENT F.J.C.C.I. V. WORKMAN

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trying to get his legitimate dues "it is not necessary to analyse the exact intention, l)ut the effect has been to convey to the Jnternatconal Chamber of Commerce a low impression about the Federation and ti1~reby to 11ring down the prestige of the Federation in the eyes of th~ International Chamber of Commerce". In spite of this finding the Enquiry Officer found that the respondent's action was clearly subversive of <lisc.:iplinc and i·n his opinion deserved to be so treated. In view of the fact thaL the don1estic tr.ibunat acted on no evidence at all because it was found that the intention with which the respondent had issued the notices ro International Chamber of Commerce and I ndustrv could not be asccrtain(:d, the: Tri bu· nal was justified in allowing evidence to be led and on that cviden•oc to come to the conclusion that the termination of service v.·as \vrong. [379 E-G; 380 F]

the

W. M. Agnani v. Badri Dass, [1963] I L.L.J. 684 and Hind Cons truction,& Engineering Co. Ltd. v. Theil' Workmen. [1965] 2 S.C.R. 85. referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 244

of 1967.

Appeal by special leave from the Award dated November 22.

1966 of the Labour Court, Delhi in I.D. No. 33 of 1966.

G. B. Pai, P. N. Tiwari, and 0. C. Mathur,

for the appel

lant.

M. K. Ramam11rthi, J. Ramamurthi and Madan Mohan, for

the respondem.

The Judgment of the Court was delivered by

P. Jaganmohan Reddy, J.

In this Appeal the Award of the Labour Court directing reinstatement of the Respondent R. K. Mittal, an employee of the Appellant (hereinafter referred to as 'the Federation') with full back wages and continuity of service In February, 1965, the 20th Congress of Inter is challenged. national Chamber of Commerce was held in Delhi for which pur pose a Committee known as the Indian National Committee oi International Chamber of Commerce was brought into existence and the services of the Respondent alon·g with other workmen were loaned to it by the Federation. The Respondent worked for about 40 days but was only paid overtime for about 7 days and conse quently he claimed overtime for the remainder of the days as according to him other workmen had also been paid similarly. This claim was not admitted by the Federation with the result that the Respondent caused a Lawyer's notice to be issued to the Federation, to the Indian Nati6nal Committee of International Chambers of Commerce and to the International Chamber of C.ommerce with .its Head Office at Paris. demanding payment of his dues amounting to about Rs. 600/-. When no replies were received, he caused another notice to be served threatenine: to file a suit whereupon the International Chamber of Commerce sent a telegram to the Federation enquiring whether it should deal

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with the matter or whether they would deal with it. To this the Federation replied that it will deal with it, but it appears that the claim of the Respondent was not settled. The Respondent then filed a suit for the payment of the arrears. The Federation felt that this action of the Respondent in causing legal notices to be served on the International Chamber of Commerce was. taken . with a view to bringing the Federation into disrepute, and it was capable of so bringing it in the eyes of the International Chamber of Commerce which Act being inconsistent with his dut~~s and obligations as an employee constituted misconduct. A charge s~eet. was ~erved on the Respondent and a domestic enquiry was held m which he was held to be guilty of misconduct. This finding was forwarded to the Secretary who instead of dismissing him took a lenient view and terminated his services. Thereafter it is alleged that he filed a suit against the Federation and subsequently raised referred to the Labour Court an industrial dispute which was for determination of the following issues namely whether the termi natio~ of the services ~f Shri R. K. Mittal is illegal and unjustified an.d 1f . so wha! d1Tecuons are necessary in this respect. After tlm rcterence It Is stated that the suit filed by him have been withdrawn.

It \\as alleged that the wcirkmen"s grie~an~e. wa~ unjustified and in spite of his being informed that no d1scnmmat1on has been practised he with a view 10 ~arass the management and .compcll it bv unfair means to pay hun more than what was leg1umately due· 10 him started making complaints simultaneously to the Federation ~nd International Chamber of Commerce which ~id not employ him and with the fulJ knowledge that whatever gne vance he ]coitimately had. had to be resolved only by a reference to the Fede~ation which was his employer. It was avered that the enquiry conducted was fully in accordan~e with the p~inciples of natural justice and requirements of law, that the findmgs of the Enquiry Officer were fair. reasonable and ful.ly support~ by the records of the Enquiry and that these defimtely estabhshed the In any case th.e Federation was not an guilt of the Respondent. industrv. On behalf of the Respondent tt was contended that the Federaiion alone was not the host but it was the Indian National Committee of the International Chamber of Commerce constituted of some officials of the Federation and the International Chamber of Commerce which conducted the 20th Congress and it was this Committee that emofoved the Respondent and oaid him and the other workmen their remunerations. The attendance of the work men was marked in a s~oarate attendance register maintained for all such workmen who were engaged to work for the Congress irrc~oective of the fact whether those were the employ!'Cs of the Federation or otherwise. that in spite of the representations wllen

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MANAGEMENT F.J.C.C.I. V. WORKMAN

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the management did not reply, the Respondent consulted two Lawyers and instructed them to serve necessary legal notices wh0> advised him that as the work related to the 20th Congress was managed by an independent Committee his claim for the remune ration against the Federation alone would not lie and that he would have to make a claim on all the three bodies namely the Federation, the Indian National Committee of International Chamber of Commerce and the International Chamber of Com merce, Paris, who constituted and managed the affairs of ihe Congress. He denied that there was any ma/a ftde on his part nor did he ever intend to defame the Federation by serving a notice in accordance with the legal advise given to him. He, however, expressed his sincere regrets to the management and submitted his appeal to the Secretary General of the Federation and requested him to consider the matter, but it was not even acknowldged. In any case the punishment of discharge in such a small- matter is too severe and compktely out of proportion and smacks of victimi sation. The assertion that the Federation was not an industry was denied.

Before the Tribunal a preliminary issue was raised that the Federation was not an industry and therefore, the Labour Court had no jurisdiction to adjudicate on the reference. This preli minary objection was overruled and it was held on the evidence, that the charge held proved against the Respondent in the domes tic enquiry was illegal and unjustified; that the Secretary had no authority to terminate the services; that the Management did not like 'the trade union activities, th;rt the action of termination of services of the Respondent amounted to victimisation ·and that even if it was no.t an act of victimisation in any event the punish ment is severe and therefore, it amounted to victimisation .

. Even IJ.efore us similar arguments as were urged before the It Tribunafhave been again agitated with further amplification. is contended that the Federation is not an industry in that, neither its activity is industrial nor its objects commercial but on the· other hand they are of a non-business character and are charitable.

The Appellant contends that the Federation· was not constitu ted for any one employer or group of emplo~ers but was to su~­ serve th·~ good of the business of the commumty as a whole. This object of the Federation is achieved in various ways. The Fe.dera tion is always nominated by. the Goyernment' as a me~ber m an Advisory Committee on vanous nalional and Internalional Com mittees which make economic policies. It organises exhibitions with the active financial support and cooperation of the Govern In order to promote Indian business, it undertakes publica ment. tions and arbitration which are ancilliary to its main activi.ties namely the promotion of business for the community as a whole·

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It is also contended which is an object of general public utility. that the Memorandum and article of the Association of the Federation and the evidence on record show that the Federation does not follow any trade, business, manufact'ure or undertakin~ or calling of employers in the production of material goods or material services nor does it have a profit motive. On the basis of these activities and· objects of the Federation, the following material services nor does it have a profit motive. On the basis of these activities and objects of the Federation, followina thr'ee propositions were submitted on behalf of the Appellant :~

the

(I) This Court has uniformly held that unless the test that the activities carried on by the employer is trade, commerce. industry o~ manufacture or of render ing material service is satisfied, it will not be an industry under the Act.

(2). The promotion of trade and commerce, which is the main activity of the employer in this case, is not· an actiyjty in the nature of or analogous to the activities under the first proposition.

( 3) As a corollary it follows that the Federation which is really carrying on an activity considered to be subserves a an object of general public utility and charitable purpose cannot be held to be an industry.

The promotion of trade and commerce, it is submitted is a (;haritable object which is the dominant object of 1he Federation .and hence it is not an industry as held in some of the recent cases by this Court. What has to be seen is whether the promotion of trade, commerce or industry which is considered to be a charit able object can be termed as a business or trade resulting in the production of material services wthin the meaning of an industry under- Section 2 (j) of the Act. In brief it was argued that if both ·the ends and means are charitable, the ends being the activity and the means the object, the undertaking cannot come within the -definition of industry: In support of this, several decisions render ed under the Indian Income-tax Act have been pressed into service and relied upon.

The Respondent's contention on the other hand is that the main objects of the Federation are given by it in Clauses 3(a) to(k) of its pamphlet "Federation of Indian Chamber of Commerce and Industry-Organisation-Functions"; that the Federation under takes national and Intern.ational Exhibition having held such -lO exhibitions in 1961 and 1965 earning huge profits of Rs. lakhs and Rs. 22 lnkhs respectively; that the Appellant federation

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MANAGEMENT F.1.c.c.1. V. WORKMAN

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carries 011 the activities of publication of Books and Magazines and publishes fortnightly .~eview, tha~ it e~deavours to take-up with the concerned authont1es the specific difficulues expressed by its members. in their day .to day business; that it arranges com mercial arbitrations between co-members and between non members; that it has set up a tribunal of Arbi1tratio~ f~r the determination, settlement and adjustment of commercial disputes · relating to business, trade and manufacture_ arisin~ between parties in India or a party in India and a party m foreign country who agree or have agreed in writing to submit such . disputes. and differences for arbitration under the rules of the Tribunal and earns huge amounts as service charges from the parties who submit their disputes to the Tribunal set up by the Federation; that it is constructing a museum to advertise and publicise the products of the Indian manufacturers and that it renders liaison service to members as well as non-members in the matter of procuring licences, capital issue, Company Law problems, tax problems etc. All these activities the Respondept contends show that the Federa tion is carrying on activities and perfonning all such functions as would benefit .the business communiity and the industrialists for securing concessions in taxation and foreign exchange which activities have benefited several industries in a great measure and would clearly establish that it is an industry.

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On the legal aspect it is submitted that the provisions of the Income-tax Act or the Trust Act are inapplicable in that they are not concerned with the activities but with the object which an undertaking pursues, particularly in respect of the Income-tax Act where an institution is exempted from tax liability if it has a charitable object. Even assuming that the undertaking has an object of general public utility within th.e meaning of the exemp tion, it does not ipso facto determine its activity nor does it snow that it is not an industrial activity. Under the Act the learned Advocate contends it is the nature of the activity that is the, test and though an organisation may have a charitable object it may nonetheless carry on an activity which comes within the term industry, nor does the distribution of profits or otherwise is a crucial element in determining whether its activities are industrial and the undertakii:ig an industry within the meaning of Sec. 2(j). lt is further sublllltted that what has been concentrated in all the cases cited by the learned Advocate for the Appellant under the Income-tax Act is what was the dominant object of the assessee and not what it does, because in those cases the Courts were not concerned in determining what was the nature of the activities but were only concerned in ascertaining what was the dominant objec!. Whether ~ese decisions are relevant for deciding the question whether a dispute referred to is an industrial dispute under the Act will be dealt wiith presently.

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Before we examine the nature of the activities of the Federa tion it will be useful to deduce the principles which are applicable for determining whether the activities of an undertaking are such as would justify it being treated as an industry for the purposes of an industrial dispute under the Industrial Disputes Act 194 7 (hereinafter called 'the Act'). The Act it may be stated makes provision for the investigation and settlement of industrial dis putes and for certain other purposes. The meaning to be given to the words Industrial Dispute in Section 2 (k), Industry in Sec. 2(i), Employer in Sec. 2(g) and Workmen in Sec. 2(s) are rele vant for ascertaining whether an undertaking is an industry or otherwise. These definitions are as follows : - Section 2:

(g) "employer" means-

(i) in relation to an industry carried on by or under the authority of any department of the Central Government or a State Govern ment, the authority prescribed in this be half, or where no authority is prescribed, the head of the department;

(ii) in relation to an industry carried on by or on behalf of a legal authority, the chief executive officer Of that authority;

(j) "industry" means any business,

trade, under taking, manufacture or calling of employers and includes any calling service, employment, handi craft, or industrial occupation or avocation of - workmen;

(k) "industrial dispute" means any dispute or differ ence between employers ang employers or between employers and workmen, or between workmen and workmen, which is connected with the the employment or non-employment or terms of employment or with the conditions of labour, of any person;

(s) "workman" means any person

(including an apprentice) employed in any industry to do any skilled or unskilled manual, supervisory, techni cal or clerical work for hire or reward, whether the terms of employment be express or implied. and for the purposes of any proceeding under this Act in relation to an industrial dispute, in cludes any such person who has been dismissed.

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discharged or retrenched in. connection with, ~r as a consequence of, that dispute, or whose dis missal, discharge or retrenchment has led to that dispute, bin does not include any such person- (i) Who is subject to the Anny Act, 1950. or the Navy

the Air Force Act, 1950, or (Discipline) Act, 1934; or

(ii) Who is employed in the Police service or :is an officer or other employee of a prison: vr (iii) Who is employed mainly in a managerial

or administrative capacity; or

(iv) Who, being employed in

a superviso~y capacity, drawn wages exceeding five hundred rupees per mensem or exercise5, either by the nature of the duties attached the powers to the office or by wsted in him, functions mainly of a mana gerial na'ture.

reason of

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relation

A cursory examination of the definition of industry in Se~. 2(j) without the assistance of the case law would show that 1.t has been divided into 2 parts; the first is, as meaning any busi ness, trade, undertaking, manufacture or calling of employers and the second is, as including any calling. service, employment, handicraft, or industrial occupation or avocation oJ' workmen. The first part defines it in relation to the activities of the under taking i.e., the employer while the second. in the nature of the work done by the employees· and gives an extended connotation though this part standing· alone cannot define what In either case the activ~iy--whether of the under an industry is. taking or the employees of that undertaking are to be determined in relation to its being a business, trade. undertaking, manufacture In several cases decided by this Court. or calling of employers. these definitions have been understood differently in their applica tion to the facts and circumstances of each case which prompted Hidayatullah, J., as he then was in the Secretarv, Madras Gnn khana Club Emp/o);ees Union v. Management of the Grmkiwna Club,(') after pointing out that the definitions in the· .-\ct are borr~~ed fro~ other statutes particularly the latter part of the definition of mdustry· was taken from Sec. 4 of the Common wealth Conciliation and Arbitration Act, which had caused some trouble, to say "Decisions rendered on these definition (and some others very similar)" have naturally influenced opinion makina in this Court. The Australian cases in particut.ir l:i~en ~11brose all the time" (p. 754).

"have

(I) [1968] I S.C.R. 742.

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For the first time in the State of Bombay & Ors. v. The Hospital Mazdoor Sabha & Ors.( 1 ) a Hospital was held to be an industry within the meaning of Sec. 2(j) of the Act. That .was a case in which the Hospital was run by the Go~er1!ment. A d1stmc tion was sought to be made between the actlv1Ues of. t~~ Gov~m­ ment in its Regal or sovereign sphere and other activ1ties wluch were undertaken in the socio economic progress of the country as beneficial measures. The former were held not to come withln the ambit of Sec. 2 (j) while it was said that it would be incongru ous and contradictory to suggest that the latter activities should be exempted from the operation of the Act which in substance is a very important benefiCial measure in itself. This latter conclu sion was sought to be. supported by a reference to the definition of employer ins. 2(g)(i) as meaning "in relation to an industry carried on by or under the authority of any Department of the Central Government or State Government authority prescribed in this behalf, or where no authority is prescribed the Head of the Department". This definition Gajendragadkar, J., as he chen was said "clearly indicates that the legislature intended th~ appli cution of the Act "to activities of the Governme1<1 which fall within .. Sec. 2(j). ·In considering the question as to whether the group of hospitals run ........ undoubtedly for the "purpose of giving medical relief to the citizens and "for helping to impa1t medical education are an undertal<ing "or not, rt would be pertinent to enquire whether an "activity of a like nature would be an under taking if it is carried on by a private citizen or a group of "private citizens. There is no doubt that if a "Hospital is run by private citizens for profit it "would be an undertaking very much lib the trade or "business in their conventional sense. We have already ''stated that the presence of profit motive is not "essentiai for bringing an undertaking within Sec. 2(j)". Even where no profits are earned or even where it is run without charging fees it was considered to be an undertaking because it is lhe character of the a.ctivities involved in running the Hosoital which b:ings lht institu tion of the H?spital within the meaning of Sec. 2(j). The several ~tti:bute~ which are necessary to constitute the activity into an unaertakmg analogous to trade or business have been stated though the difficulty of setting out all the possible attributes defi ~itely t,; exhaustively was recognised, and as working principle 1t was stated that (a) an ~ctivity !s .~yst~matically or habitually undert~ken for the ~roduct~on or d1stnbu!ion of goods or for the rendenng of matenal services to the community at lar"e or a part of such community with the help of emplovees is an° under taking; (b) such an activity generally involws ·the cooperation of the employer and the employees with the obj(ct of satisfying

0) [1960] 2 S.C.R. 866.

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material human needs; ( c) it must be organised or arranged in a manner in which trade or business is generally organised or arranged; (d) it must not be casual, nor must it be for on~self nor for pleasure. After setting the aforesaid it was also observed !hat "the manner in which the activity in question is organised or arranged, the condition of the cooperation between employer .and the employee necessary for its success and ils object to render material servi~e to the community can be regarded. as ;ome of the features which are distinctive of activities to which Sec. 2(j) applies". This decision also considered the question whether any quid pro quo was necessary for bringing an activity under Sec. 2(j) and it was held that no such· element wa~ involved. Tli.is case was considered to be on the verge as taking an extreme view in the Madras Gymkhana Club(') case, to which one r_;f us Vaidialingam, J., was a party.

The Gymkhana Club case reviewed the previous case law in D. N. Banerji v. P. R. Mukherjee & Ors.('), Baroda Borough Municipality v. Its Workman('), The Corporation of the City of Nagpur v. Its Employees('), University of Delhi & Anr. v. Ram Nath('), The Ahmedabad Textile Industry's Research Association v. The State of Bombay & Ors.("), (Association Case). The National Union of Commercial Employees & Anr. v. M. P. Meher, Industrial Tribunal, Bombay & Ors.('), (the Solicitor case), Harinagar Cane Farm & Ors. v. State of Bihar & Ors.('). State of Bombay & Ors. v. The Hospital Mazdoor Sabha & Ors.("), to asc<rtain the criterfa for detaining what an 'industrial dispute' under Sec. 2(k) and an 'industry' under Sec. 2(j) of the Act, is for the purpose of a reference of a dispute between employer and employee under Sec. 10(1) of the Act. Hidayatullah, J. as he then was thought that the changes made in tile meaning of the expression used in the definition of industry in the Act by the several decisions referred to therein 'disclosed a procrustean approach. to the problem', and that "too much insistence upon partnership between employers and ·employees is ev;dent in the Solicitor's case and too little in Association's case" (page 751- 752). In the Association case which was a Research Association maintained by the Textile Industry and employing technical and other staff, the tests for determining whether the activities of the Assa<;iation could be construed as an industry as laid down in the Hospital cas~ we~e repeated and applied. It was pointed out that for the first time Ill that case, namely the Association case "a fresh test. was added that as the employees had no right> in the results

(I) [1968] I S.C.R. 742. (2) [1953] S.C.R. 302. (3) [1957] S.C.R. 33. (4) [1960] (2) S.C.R. 942. (5) [1964] (2) S.C.R. 70}.

10-L500SupCl/72

(6) [1961] (2) S.C.R. 480. (7) [1962] (Suppl.) (3) S.C.R. 157. (8) [1964] (2) S.C.R. 458. (9) [t960] 2 S.C.R. 866.

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[1972] 2 S.C.R.

of their labour or in the nature of business and trade, the partn~~ - ship is only association between the employer and c.mployee . Further after setting out the various facts of tne relatJonsh1p of employers and employees and the need to correlate this to a~ industry it was observed at page 752, "st~te.d ~roadly the defim tion of 'industrial dispute' con.tains two hm1tauons. Fmtly,_ the adjective 'industrial relates the dispute to an industry as detmed in the Act and, secondly, the defimt10n expressly states tliat not disputes and differences of all sorts but only those which bear upon the relationship of employers and workmen and the term3 of employment and conditions of labour are contemplat~d''. It was also pointed out at page 755 that "The principles so far settled come to this. Every human activity in which enters the relation ship of employers and employees, is not necessarily creative of an industry. Personal services rendered by domestic and other ser v;;nts, administrative services of public officials, service in aid of occupations of professional men, such as doctors and bwyers etc ..... must be excluded becaus_e they do not come within the denotation of the term 'industry'. Primarily, therefore. ind~strial disputes occur when the operation undertaken rests upon coopera tion 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 normal cases are those in which the pro they duction or distribution is of material goods or wealth and w!ll fall within the expressions trade, business a11d m;inufacture". Again at page 756, the principle was summed up thus : "it is, therefore, clear that before the work engaged it (in) can be des cril>cd as an industry, it must bear the definite cliaracter of 'trade' or 'business' or 'manufacture' or 'calling' or must be capable of beinir described as an undertaking resulting in material gcods or material services". In this context the meaning .i~ the word 'trade' was considered to bear the meaning given in the Halshury'.1 Lall's o_I En~/ and as (a) exchange of goods for goods or goods for moneys; (b) any business carried on with a view to nrofit whether manual or mercantile, as distinguished from th~ liberal arts or leArned professions and from agriculture; and busiress means an enterprise which is au occupation as distinguished from pleasure. Manu.facture is a k_ind of productive industry in which the making of articles ~r matenal (often ?n a large scale) is by physical Jabour or ~echamcal power. Callml! denotes the following of a pro fess10n or trade". The word 'undertaking' which is the most elastic was g!ven as 'any business or anv work or project which one engages m or attempts as an enterprise analo<Tous to lJusiness or 'trade'. This test was said to have been laid d~wn in Baner;i;s the Baroda Borough Municipality case(i), and followed (I( 1953 S.C.R. 302.

in

A

ll

c

D

E

F

G

H

MANAGEMENT F.1.c.c.1. v. WORKMAN

365

(laganmohan Reddy, /.)

case (1), and it was observed that "Its extension in the Corpora tion case "was unfortunate and contradicted the earlier cases". Even where the activity is considered to be an industry the second question which arises is the nature of the work which the employees rende~. The work must be productive and workmen must be following an employment calling or industrial avocation and are not working in a managerial capacity nor .are they highly paid It is also not necessary that the workmen should supervisors. receive a share though there may be occasions when he may receive a share of tho~ produce as part of their wages or as bonus as a benefit.

Applying the aforesaid tests it was held that afcer the first part of the definition and the essential character of the Club is taken into consideration, the activity of the Club cannot be described as a 'trade', 'business', or 'manufacture' and the running of the club is not a 'calling' of the· Respondent Club or its managing committee; nor can the Club be said to exist for its members though occasionally strangers also take benefit from its services. It was pointed out that even after the admission of guests the club remains the member's self-servicing institution, an<l while no doubt the material needs or wants of a section of the com munity is catered for, this is not enough, but· that must be done as part of trade or business or as an undertaking analogous to trade or business, which element was found to be comrilct~ly missing in a "member's" club. In the end in answer to the contw tion that the case of the Club is the Hospital case, it was said "That case is one which may be said to be on the verge. There are reasons. to think that it took the extreme view of an industry" and that "the case oi a 'members' club is beyond even the confines established by that case"

indistinguishuble

from

The Gymkhana case(') was referred to in the Cricket Club of India Ltd. v. The Bombay Labour Union and Anr.I'). In that case a preliminary objection was taken on behalf of the Club that it was not an industry and the provisions of the Act were not applicable to it. so that a reference under Sec. 10 was not com petent. The Tribunal rejected this objectioa r.gainst which the Club came in appeal before this Court. It may be noticed that the Appellant was Registered under the Indian Companies Act 1913 with the objects set out in paragraph 3, clauses (a), ( c). Id). ( c), (J) and ( na) of the Memorandum of Association of the Cl~b. The Gymkhana Club case was sought to be di;tin!!uished on the ground that the activities of encouragin!! and oromotin!! the <>ame of Cricket in India and elsewhere mentioned fo clause (a), flnan Cln!! and assisting in financing visits of foreign teams and of

(I) [19571 S.C.R. 33. (2) [1968] I S.C.R.742.

(l) [1969] I S.C.R. 600.

B

c

D

E

F

G

H

366

SUPREME COURT REPORTS

(1972] 2 S.C.R.

A

B

c

D

visits of Indian teams to foreign countries in cl. ( c), organising and promoting or assisting in the organisation or promotion of provincial Cricket Associations and Inter-Provincial Tournaments in cl. ( d) etc., are not activities which should form part of a sociai or recreational club. This Court found that the Appellant was a Club of members organised with the primary object of encouraging sports and games; that the income earned by the Club from investments of immovable properties could not be held to be income that accrued· to it with the aid and cooperation of the employees: From the evidence it was clear that in·effect no employees of the Club were engaged in looking after the buildings which were let out for use as shops and offices; that the facility of residential accommodation provided by the Club could not be said to be in the nature of keeping a Hotel a> this facility was provided exclusively for members of the Club at much lower charges than those prevailing in the city with comparable accom modation; that the catering provided in the refreshment room of the Club was also confined to the members of the Club only. No outsider is allowed to take advantage of this facility, and the bye-laws of the Club lay down that even if a guest was introduced by a Member, the guest is not entitled to pay for any refreshment served to him; that although large parties were held at the Club where catering was provided by the Club and non-Members attended such parties, these facilities were in fact provided at the instance of the Members of the Club; nor was there any evidence that a large number of such parties were held for drawing an inf~rence that holding such parties was a systematic arrangement by which the Club was attempting to make p~ofits. The catering facilities to members and outsiders at the stalls at the time of tournament were so provided only twice a year and at conces sional rates and could not therefore be said to be for the purpose of carrying on an activity for selling snacks and soft drinks to outsiders; but is really intended as provision of a facility to per- som participating in or coming to watch the t'.luniaments in order It appears that the test matches that these may run successfully. It also appears that the were held in the Stadium of the Club. Club was making a large income therefrom. Of the 17 matches held there during the period, each match netted nearly 2 lakhs. Evel'! so, _it was held that h~lding of test matches or the c:atering provided m the stalls at the time of these matches was a subsidiary purpose to the promotion and encouragement of the oermns whose interest in the game of Cricket was not -systematic and consequently was not in the nature of carrying on trade or. busness but were act~vities in the promotion of the game of cticket. The income H derived from all these activities was incidental which ir.come was · later util!sed for the purpose of fulfilling its other objects as incor porated m the Memorandum Of Association

G

E

F

A

Ii

c

D

E

MANAGEMENT F.I.C.C.J, V, WORKMAN

367

(Jaganmohan Reddy, J.)

After setting out and examining in detail the object and the purposes for which the Club came into existence and the Stadium was constructed and used, Bhargava, J, at page 613 observed on behalf of the Court : -

"In these circumstances we are not inclined to ac cept the submission made on behalf of the workmen that this activity by the Clubs is an undertaking in the nature It is, in fact, an activity in the of trade or business. course ·of promotion of the game of cricket and it is inci dental that the Club is able to make an income on these ·few occasions which income i.s later utilised for the pur pose of fulfilling its other objects as incorporated in the Memorandum of Association".

facilities,

It was also sought to be contended that the Club was registered under the Indian Companies Act, 1913, unlike the Madras Gym khana Club and consequently the effect of this incorporation in law was that the Club became an entity separate and distinct from its Members, so· that, in providing catering the Club, as a separate legal entity, was entering into transactions with the Members who were distinct from the Club itself. This contention was not considered to be of importance even by the Tri bunal itself with which this Court agreed on the ground that, what has to be seen is the nature of the activity in fact and in In fact it was found that the club was not constitut substance. ed for the purposes of carrying on business; there are no share holders, no dividends are declared and no distribution of pro fits takes place. The admission to the Club is by payment of admission fee and not by purchase of shares. Even this admis sion is subject to balloting. The membership is not transferable like the tight of shareholders and the expulsion of the member under certain circumstances when he looses his right are features which never exist in the case of a shareholder holding shares in a Limited Company. In these circumstances the Club was not considered as a separate legal entity ·as a Limited Company carry ing in business.

G

H

In that case this Court was

The Madras Gy,mkhana Club(') as well as the Cricket Club(') cases were again considered by· a larger Bench of six Judges of this Court in Management of Safdarjung Hospital, New Delhi v. Ku/dip Singh Sethi('), when the previous case law was also reviewed. considering whether Safdarjung Hospital, the Tuberculosis Hospital and the Kurji Holy Family Hospital were industry for the purposes of reference under Sec. 10( l )(d) of the Act. - I ff[f968] I S.C.R. 742. (21 [1969] I S.C.R. 600. (3) 1971 (I) S.C.R. 177',

368

/

SUPREME COURT REPORTS

[1972] 2 S.C.R.

In the Safdarjung Hospital case the Hospital Mazdoor Sabha case again loomed large because on the facts and the circum stances of that case the principles stated therein would have been applicable, if it was considered to be good law. But as earlier stated certain criteria and tests which were laid down in the Gymkhana case were logically extended to this case and in doing so the extreme view taken in the Hospital case was held to be not justified. What was considered in the Safdarjung.case was "whet her a hospital can be considered to fall within the concept of industry in the Industrial Disputes Act and whether all Hospi tals "of whatever description can be covered by the concept cf only some Hospiotals under special .conditions"

We have earlier set out the relevant passages in the Gym khana case which laid down the criteria for determining the. various activities which would determine whether the undertakin~ is an industry within the meaning of Sec. 2(j). Hidayatullah: C.J., in the Gymkhana(') case after referring to the two notions of the definition-the first part dealing with what it means and the second part with what it includes, summed up the conclu sion in the following passage at page 753-754 :

"If the activity can be described as an industry with reference to the occupation of the employers, the ambit of the industry, under the force of the second part, the em takes in the different kinds of activity of ployees mentioned in the second part. But the second part standing alone cannot define 'industry' ...... By the inclusive part of the definition the labour force em the ployed in an industry is made an integral part of industry for purposes of industrial disputes although industry is ordinarily something which employers create or undertake".

The learned Chief Justice thought that the above observations in the Gymkhana club case needed to be somewhat qualified. It was pointed out by a reference to the definition of industry in Sec. 4 of the Commonwealth Conciliation and Arbitration Act of Australia that the two definitions were worded differently though the purport of both is the same. It was however thought that it was not necessary to view each definition in two parts. At page 184 it was observed:-

"The definition read as a whole denotes a collective enterprise in which employers and employees are asso It does not exist either by employers alone or ciated. there is a by employees alone. It exists only when relation,hip betwc:en employers aria employees, the

- - -(0 tl968J I S.C.R. 742.

A

B

c

D

E

F

G

H

A

B

c

D

E

F

G

H

MANAGEMENT F.J.C.C.J, V. WORKMAN

369

(Jaganmohan Reddy, J.)

former engaged in business, trade, undertaking, man~­ facture or calling of employers and the latter engaged m any calling, service, employment, handicraft or indus· trial occupation or avocation. There must therefore, be an enterprise in which the employers follow their avocations as detaikd in the definition and employ workmen who follow one of the avocations detailed for workmen. The definition no doubt seeks to define 'industry' with reference to employers' occLpation but includes the employees, for without. the two there can· be no indus1ry An industry is only to be found when there are employers and employees, the former relying upon the services of the their own occupations".

latter

fulfil

to

After setting out the passages to which references have been made while examining the Gymkhana case it was again pointed out th~t when Lord Wright said that 'trade' is a term of widest scope, 1t was true but "the word as used in the statement be distinguished from professions al1hough even professions have 'trade unions'. The word 'trade' includes persons in a line of business in which persons are employed as workmen". Similarly it was poinied out that "Business too is a word of wide import. In one sense it in cludes all occupations and professions. But in the collocation of the terms and their definitions ithese 1erms have a definite economic content of a particular type and on the authorities of this Court have been uniformly accepted as excluding professions and are only concerned with the production, di&tribu'tion and consumption of wealth and the production and availability of material services. Industry has thus been accepted to mean only trade and business, manufacture, or undertaking analogous to trade or business for the production of material goods or wealth and material services". What is meant by material services, was also explained thus at

page 187 : -

"Material services are not services which depend wholly or largely upon the contribution of professional knowledge, skill or dexterity for the production of a ~es~lt_. Such servic~ being given individually ·and by mdIVJduals are services no doubt but not material ser- vices ...... Maiterial services involve an activity carried on through cooperation between employers and em ployees to provide the community with the use of some- thing ........ but the emphasis is not on what these men do but upon the productivity of a service organised as an industry and commercially valuable. . . . . . It is the production of this something which is described as the production of material services".

370

SUPREME COURT REPORTS

[1972] 2 S.C.R.

A contention was however urged that the word

'trade' and 'workman' ought not to be given a narrow meaning _but it w~ pointed out that the reasons for some of the cases decided by this Court lay in the kind of establishment which were . sought to be explained and elucidated. At page 18 8 the followmg observa tions· are worthy of note :

"It therefor~, follows th3't before ah industri~I dis pute can be raised between employers and their em ployees or.between employers and employers or betw~en employees and employees in relation to the employment or non-employment or the terms of employment or with the conditions of labour of any person, there must be first eS'tablished a relationship of employers and em ployees associating together, following a trade, business; manufacture, undertaking or calling of employers in the production of material services and the lattet following any calling, service, employment, handi craft, or industrial occupation or avocation of workmen It is not necessary in aid of the employers' enterprize. that there must be a profit motive but the enterprise must be analogous to trade or business in a commercial sense".

the former

Though it was considered unnecessary to refer •to the ,e"arlier cases as they were all referred to in the Gymkhana Club case, the following pIOpos.itions which wern deduced from them have been summed up at page 189 : -

". . . . before the work engaged in can be described as an industry, it must bear the definite character of 'trade' or 'business' or 'manufacture' or 'calling' or must be capable of being described as an undertaking result ing in material goods or material services".

It becomes a business".

Thereafter the Hospital Mazdoor Sabha('1 ) case was closely con sidered and while doing so it was said that "if a hospital, nursing home or dispensary is run as a _busfoess in a commercial way there may be found elements of an industry there. Then the hospital is more than a place where persons can get treated for their ail It was further pointed out that ment. in the Hospital Mazdoor Sabha case, hospitals run by Govern ment and even by a private association, not on commercial Jines but on charitable lines or as part of the functions of Government the definition of Department of Health were held included in industry. The reason given was that 1he second part of the defi nition of industry contained an extension of the first part by includ ing other items of industry. But this, the learned Chief Justice said was not correct because '1the first and the second parts of the

m

[19501 2 s.c.R. 866.

A

B

c

D

E

F

G

H

A

B

c

D

E

F

G

/

H

MANAGEMENT F.1.c.c.1. v. WORKMAN

371

(Jaganmohan Reddy, J.)

two

definition are not to be read in isolation as if they were difierenc industries but only as aspects of the occupation of employim> and employees in an industry. They are ~ounterparts in one industry. The case proceeds on ithe assumption that there need not be an economic activity since employment of capital and pro It is an erroneous assump fit motive were considered unessential. tion that an economic activity must be related to caprtal and pro the fit-making alone. An economic activity can exist without presence of both. Having rejected the itrue test applied in other cases before, the test applied was 'can such activity be carried on by private individuals or group of individuals' ? Holding that a hospital could be run as a business proposition and for profit, it was held that a hos;ii1al run by Government without profit must bear the same character. With respect, we do not consider this to be the right test. ·That test was employed to distinguish bet ween the administrative functions of Government but it cannot be used in this context.. When it was emphasised in the same case that the activity must be analogous to business and trade and that . it must be productive of goods or their distribution or for produc ing material services to the community at large or a part of it, there was no room for the other proposition that privately run hospitals may in certain circumstances be regarded as industries". It may be noticed that in the Safdarjung Hospital(') case, apart from the case of the Safdarjung Hospital two other appeals were being considered, namely one relating to Tuberculosis Hos pital and the other to Kurji Holy Family Hospital. far Safdarjung Hospital is concerned, it was held that it was "not em barked on an economic activity which can be said to be analogous to trade or business. There is no evidence that it is more than a place where persons can get treated. This is a part of ilie func tions of Government and the Hospital is run as a Department of Government. industry". The Tuberculosis Hospital was said to be wholly charitable and a research institute the dominant purpose of which was research and training but as research and training cannot be given without beds in a hospital, the hospital was being run. The treaiment was therefore, part of the research and trade. As such it was not the Kurji Holy considered to be an industry. The object of Family Hospital as found to be entirely charitable. It also carries on work of training, research and treatment and the distnbution of surplus profit if any was prohibited. That was also not con sidered to be an industry. We refer to these two cases particularly because a good d~a! of argument has been addressed to us in sup port of the propos1t10n that where the object of an institution is for a .ch.aritable purp?se tha•t w?uld exclude its activity from coming w1thm the defimhon of an mdustry under Sec. 2(j); that in the twoparticular instances th~_lfospitals were charitable institutions

It cannot therefore, be said to be an

In so

(!) [!971] ! S.C R. 177.

372

SUPREME COURT REPORTS

(1972] 2 S.C.R.

· and 'therefore it was contended that merely on that ground they In these three cases it was found that none were not an industry. of them carry on an economic activity analogous to trade or. busi ness. The criteria that in the two !alter hospitals the object was charitable does not appear 10 have been the sole test for conclud In one case the dominant acti ing that they were not industries. treat vity was research and training which necessarily involved In the other case though the activity it carried on ment also. was training, rese~rch and treatment, the distribution of surplus as profit was prohibited. The cumulative effect of these activities and the nature of such activities determined the question whether these institu~ions were an industry or not, not that because their respective objects were charitable, that alone was considered to be the criteria for not considering it as an industry.

The ~ases of charitable object which were referred to by the Iel\rned,Ailvocate for the Appellant w~re concerned with the direct application of Sec. 4, sub-sec. 3 (i) of the Income-true Act 1922 (hereinafter referred to as 'the Income-tax Act') which exempted legal income derived from property held under Trust or other obligation wholly for charitable purpose on the basis that chari- tab!e purpose included relief of the poor ...... and the advance- ment of any other object of the public utility. The definition had therefore to be satisfied by the character of the Association and its activities. No douM the words advancement of other purposes of general public utility in the definition of Section were very wide and were applied in Re. Trustees of Tribune Press, Lahore v. The Commissioner of Income-tax('), as their Lordships latter explained in All India Spinners' Association of Mirzapur, Ahme dabad v. Commissioner of Income-tax(2), "without any very precise definition to the production of the newspaper in question under the conditions fixed by the Testator's will". The Privy Council had in the Tribune case stated "that the object of ·1he paper may fairly be described as '!he object of supplying the pro vince with an organ of e4ucated public opinion' " and that "it should pirma fd~i.f be held to be an object of general public utility''. These words their Lordships thought in the All India Spinners' Association excluded the object of pri.vate gain, such as an undertaking for commercial profit, though all the same it would subserve l!'eneral public utility.

In the Tribune case the printing and publication of the news paper which was not carried on for private profit to any person was held by the Privy Council to be a charitable object of general public utility although the newspaper charged its readers and ad verfacrs at the ordinary commercial rates. It would therefore

-·--·-·----·-·········------~

(l) [19391L.R.65 I.A. 241.

(2) 71 Indian Appeals 159.

A

B

c

D

E

F

G

H

.-

MANAGEMENT F.1.c.c.1. v. WORKMAN

373

(Jaganmohan Reddy, J.)

appear that a commercial organisation run for profit is not neces sariiy excluded from the exemption under the Income-tax Act if it> object was the accomplishment of a charitable purpose. In the All India Spinners' Association(') case Lord Wright ex piained the difference between the English Jaw of charity which was largdy influenced by Lord Macnaghten's definition in Com missioners for Special Purposes of Income-tax v. Pemsel(°) and Sec. 4(3)(i) of the Income-tax Act. Under the English Jaw decisions on "the law of charities are not based on definite and precise stal\1tory provisions" but were spelled from a list of chari table objects contained in the preamble of Act of 43 Elizabeth (1601) and in doing so they made liberal use of analogies, so that the modern English law can only be ascertained by consider in.g a mass of particular decisions often difficult to reconcile. The difference in language of the definition given by Lord Macnaghten of ooUier purposes beneficial to the community' and the inclusion in the Indian Act of the word 'public' gives a wider scop~ to the Indian Act. The Indian Act i1 was said gives a clear and succinct definition which must be construed according to its actual langu age and meaning and consequently English decisions have no bind ing authority on its construction and though •they may sometimes alford help or guidano~ cannot relieve the Indian Courts from the responsibility of applying the Act; in the particular circumstance that emerge_ under conditions of Indian life. In the All India Spinners' Association('1) case also the activity was a commercial activity from which profits were derived, and since the primary ob ject was charitable namely relief to the poor that was considered It was also held that there was prima facie to sa'tisfy the statute. good ground for holding that the purpose of the Association in cluded the advancement of other general public utility which words thou~h wider were left by their Lordships for consideration on other occasions.

A

B

c

D

E

F

It is true that in the Commissioner of Income-tax, Madras, v. Andhra Chamber of Commerce("), this Court held that the main object of the Chamber qf promotion of trade and commerce was an object of general public u'tility, as not only the trading class but the 'Whole country would benefit by it. What was sought to be contended ther.e was that the benefit must include all mankind which was not considered to be necessary for satisfying •the defini tion in Sec. 4(3)(i) of the Income-tax Act. But it was sufficknt if the intention was to benefit a section of the public as dis'. tinguished from specified individuals. This case is not an autho rity for {he proposition· that if the activity is commercial though the object charitable, it does not satisfy the definition under Sec. 4 ( 3) ( i) of •the Act. Even the decision of the Andhra Pradesh

G

H

\I) 'H 'Indian Appeals 159.

(2) [1891] A.C. 531, 583.

(3) [1965[ [1 S.C.R. 565.

374

SUPREME COURT REPORTS

(1972) 2 S.C.R.

they

High Court in the Hyderabad Stock Exchange Ltd. v. Commis sioner of Income-tax, A.P.('), to which one of us (Jaganmohan It was held Reddy, J.) was a party took the matter no further. there following the Andhra Chamber of Commerce case that the Hyderabad Stock Exchange(') served an object of general public utility which was not only to further the interests both of the bro kers and dea1ers but also of the public interested in securities to assist, regulate and control the trade in securities, to maintain high standards of commercial honour and integrity, to promote and incuicate honourable practices, trade and business etc. In the Commissioner of liicome-tax, West Bengal v. Bengal Home In dustries Association(") Mitter and Ray, JJ. as then were referred to the three principles deduced in Commissioner of Inland Revenue v. City of Glasgow Police Atheletical 'Association(') by Lord Cohen from English cases and applied them to the facts of that case to ascertain whether any Association formed to pro mote and develop Homo~ Industries, arts and crafts in the Presi dency of Bengal was a public charitable institution and as such en titled to exemption under Sec. 4(3)(i) of.the Income-tax Act. It is contended by the learned Advocate for the Appellant that the Andhra Chamber of Commerce(') first principle, the Bombay Panirapo/e v. The Workmen and Anr.('), illustrates the second principle and the Ahmedabad Textile Re search Association (6 ) case, the third principle. What the House of Lords were considering in the case of City of Glasgow Police Atheletica/ Association(') was where an Association has two parµoses one charitable and the other not and if the two purposes are such. and so related that the non charitable purpose cannot be reg~rded as incidental to the other, the Association is not a body established for charitable purposes only.

illustrates

case

the

We had occasion to point out during the course of the argu ment of the learned Advocate for the Appellant that ithe cases under the Income-fax Act are of little assistance in determining whether an organisation, assocjation or undertaking is an industry notwithstanding the fact that its main object is charitable. There is no doubt and it has not been denied by the learned Advocate for th.~ Respondent that the object of the Federation and even for that matter if it is the main object, subserves general public utility and therefore charitable. But nevertheless its activity may be commercial so as to satisfy the definition of an 'industry' as ex plained and elucidated in the latter cases of this Court particularly that ·in the Safdarjung Hospital case. We could therefore envi sage an institution having its aims and objects charitable, and yet (2) [1963] 48 I.T.R. 181. (I) [1967) l.T.R. (66) 195. (3) (1953) 34 T.C. 76. (4l [196511 S.C.R. 565. (5) Civil Apo01J No.1331 ofl966(dedded on 16-8-71). (6 [l96t] 2 S.C.R. 480.

A

B

c

D

E

F

G

H

A

B

c

D

E

F

G

H

MANAGEMENT F.I.c.c.r. v. WORKMAN (Jaganmohan Reddy, J.)

375

industry

its activities could bring it within the definition of in 2(i). The Tribune and the All India Spinners' Association cases would haV>~ illustrated this if a question had arisen under the Act. In so far as a decision under the Act is concerned that is illustrated by the case recently decided in the Bombay Panjrapole(1) case w which one of us (Jaganmohan Reddy, J.) was a party. In that case the Bombay Panjrapo/e was undoubtedly brought into exis· tence for charitable purposes namely for establishing a Panjrapole for keeping of stray, sick and infirm cattle and other animals and for protecting their lives. This endowment had been made as Jong ago as 18th October 1834 to put a stop to the practice of killing of stray dogs by the sepoys of the East India Company and subsequ•wtly several deeds were executed one in 1850, another in 1871 and ultimately it was declared an infirmary under the Pre vention of Cruelty to Animals Act (IX of 1890). The actiyities of the Panjrapole expanded considerably over the years and it had branches, apart from Bombay at three other places. The expan sion of 'these activities resulted in its selling milk on a large scale and earning huge profits. While no doubt none of the cattle was sold and except perhaps a s1ud bull o~ two, none were purchased. Nevertheless it was held that the Managing Committee of the Trustees had decided sometime early ito upgrade the infirm cattle and rear them into good animals so as to ge1 good and pure· milk In fact the upgrading was to for the inmates of the Panjrapole. such an extent that the milk yielded was far in excess for the in· ma'tes of the Panjrapole. Although 1he sale proceeds of the milk were never utilised nor meant for the benefit of the donors or trustees, the vety production of it in such large bulk wholly un related to the needs of the sick caMle showed that 'the institution was pursuing an activity with the central idea of ob1aining a steady income therefrom. Mitter, J. who spoke for •the Court obserYed :

"In our view, the facts justifiably lead to the con clusion that the institution deliberately diversified its ob jects from only tending to the sick, infirm or unwanted cattle by adopting the policy of keeping cattle not merely for their own sake but for the sake of improving the cattle population committed to its care with an eye to serYe hun;ian beings by making large quantities of good milk available to them and thereby getting an income wliiclr would augment its resources. It pursued its policj just as any diary owner would by having a few good quality bulls to impre~nate the. cows and thereby ensuring a steady production of milk and also improve •the quality of progeny'!.

(ll C. A. No. 1331of1966 decided on 16-8-71.

376

SUPREME COURT REPORTS

[1972] 2 S.C.R.

On these facts and after considering

the several decisions referred to by a earlier as also the cases of La/it Hari Ayurvedic College Pharmacy v. Its Workers Union('), The Workmen employed in the Madras. Pinjrapole v. Madras Pinjrapole('), it was held that it was an industry, having regard to the various activi'ties which it carried out particularly having regard to the fact (a) that the value of the milk supplied to the sick and infirm cattle was infinitesimal compared to that sold in the market. ( b) The expenses incurred in connection with 1he 1treatment of sick and infirm animals_ was also negligible compared to the total ex ( c) The number of men employed fur penses of the institution. such treatment was very small at all therefore times. The fact lha1 the Pinjrapole newr purchased milch cows and never pur chased stud bulls except for one made no difference to the ques tion as to whether their activity of maintaining cows and bulb could only be considered as an investme~t.

A reference was also given to Sec. 32(5) of the Payment of Bonus Act in which Chambers of Commerce and certain other showir;g organisations with charitable purpos·~ were excluded as that the legislature wanted to exempt them and this indicated that they are not industries. We do not think any such inference wouid arise nor can this provision be of help in the construction of Sec. 2 (i) of the Act. There is in our view force in the contention o[ the learned Advocate for the Respondent that the exclusion of certain undertakings was a legislative policy either because they would have been included otherwise by the application of that Act to them or by way of abundant caution.

It appears to us that the tests for determining whe1her a dis pute is an industrial dispute, or not have been enunciated and the principles .crystallised as a result of the several decisions of this Court which is what are applicable to this case. There is th·~re­ the to fore no warrant to allow any other element to be added criteria laid down for determining what an industry is. In our view the Jinch-pin of the definition of industry is to ascertain 'lhe systematic activity which the organisation is discharging namely whether it part-takes the nature of a business or trade, or is an If it is that undertaking or manufacture or calling of employers. and there is cooperation of the employer and the employee result ing in the production of ma:terial services, it is an industry notwith standing that its objects are charitable or that it does not make profit or even where profits are made, they are not distributed among, 1the members.

. It now remams to be seen whether the Federation is an industry within the meaning of Sec. 2 (j). The objects of the Federation

(I) A.LR. 1960 $.C. 1261.

(2) [1962] 2 LLJ ~72.

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MANAGEMENT F.!.C.C.I. v. WORKMAN (Jaganmohan Reddy, J.)

377

are set out inter-alia in clauses 3 (a) to (k) of the Memorandum of Association of which the more significant are Cl. 3 (a) and ( e) to ( k). These are to promore Indian business in matters of in industry and manufactu.re, land and foreign trade, transport, finance and all other economic subjects and to encourage Indian Banking shipping and insurance; to promofe support or oppose Jegisla'tion or other action effecting economic interests and in general to take the initiative to assist and promote trade, com merce and industry, to provide for arbitration in respect of dis putes arising in the course of trade, industry, or itransport and to secure the services of trained technical and other men to that end. if necessary or desirable to conduct, undertake the conduct of and to set up participate in national and international exhibitions, museums or show rooms, ,to exhibit products of India in other countries and to participate in such activities. and to attain those advantages by united action which each member may not be able to accomplish in its separate capacity. In furtlr~rance of thes~ objects the 'Federation publishes a Fortnightly Review, organised two exhibitions in which huge profits were made, though no doubt It has constituted Tribu in collaboration with the Government. nals for Arbitration. It is claimed in the Brochure issued by the Federation under the tide 'Organisation and Fu~ctions' that the membership of Federation confers certain rights and privileges, such as for instance it "endeavours to take up with the concerned authorities the specific difficulties experienced by members in their day to day business". It has ·~ntered into arbitration agree ment with America, Russia. German Democratic Republic. Poland and Hungary for the purposes of having the disputes or claims arising out of or relating to contracts between nationals of India and the country concerned for being settled by arbitration. It promotes India's exports and economic dev.elopment. It under takes publication of periodicals for the b~nefit of the businessmen. big or small; it brings out Fortnightly Review in which there is a Section for Trade enquiries of special interest to importers and exporters. This facility is also thrown open to the non-members who can subscribe to the Bulletin though it is sent free to all the constitutents of the Federation. A cyclostyled publication entitled "~xport News" is also issued every fortnight and gives general hints to the exports as to how to promote their exports. It appears from the report of Proceedings of !he Executive Committee for the year 1965, that more specific issues were taken up direct with the Department of Government concerned relating to export per· formance .and shortages of imported raw materials, components and machinery with a view to alleviate difficulties in the case of specific products. It 'also takes up matters relating to the grant

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378

SUPREME COURT REPORTS

[1972] 2 S.C.R.

A

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for more facilities abroad, introduction of concessions such as Railway freights etc. Among important ad-hoc matters taken up were Cargo seized by Pakistan in the course of hostilities during 1965. It also facilitates the resolution of various difficulties in respect of foreign exchange and export promotion which are being experienced by the trade in respect of foreign exchange allocat10n for export promotion purposes and made several suggestions re garding granting of foreign exchange for business facili1ies abroad and the need to avoid delay in sanctioning foreign: exchange, in crease in existing scales of allowances, liberal allocation of the after It took up the case of 'the established exporters sales service. other than manufacturers who were barred trom emenng in10 It sponsored the cause of export trade in ground-nut oil cakes. the exporters of precious stones to allow reasonable time for sub mission of their reports and calling back the consignments if, there was no sale. In Company Law matters also it sponsored the cause of the various Companies and the difficulties thiit they were encountering. It would' appear that on the request of Goa Mine ral Ore Exporters' Association, the Committee requested the Gov ernment to give the matter sympathetic consideration. It also took up cases of the contractors bills where there was inordinate In the delay in payment of contractors bills for lack of funds. report for 1964 it was stated that where in certain cases import licences iwre issued subject to the condition that the validity of the licences depend on the production of the Income-tax clearance certificate in spite of the fac1 that the applicant had quoted the registered number in his income-tax verification, the Federation requested the Chief Controller of Imports & Exports to discontinue the practice in future. Where the import policy the year 1964-65 allowed 5% quota for silk bolting cloth to established importers, representation to the Chief Controller of Imports & Exports was made for this cloth to be granted to flour millers direct whenever they apply for it, if necessary on- an ad hoc basis. The case for freight concession for iron ore exported from Rajasthan for extending it to high grade ore as well, was also taken up. It was further poill'led out that the Company management and other concerned with the Company law have frequently complained of many practical difficulties in complyin1t with the provisions of the In order to help the Federation consti · Company Act rules etc. tuents in such mal'lers -and provide necessary service to them the Federation has b:len maintaining a separate division namely the Company Division to which members were requested to forward their problems and difficulties. Principal bodies were also re quested to advise their constituents in regard 'lo the services olfered by the Federation.

for

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These extracts have been given in some extenso to show that the Federation carries on systematic activities to assist its members

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MANAGEMENT F.1.c.c.1. V. WORKMAN (Jaganmohan Reddy, J.)

379

and other businessmen and industrialists and even to non-mem bers as for instance in giving them the right to subscribe to their bulletin; in taking up their cases and solving their difficulties and in obtaining concessions and facilities for them from the Govern ment. These activities are business activities and material ser vices which are not necessarily confined to the illustrations g;ven by Hidayatullah, C.J., in the Gymkhana(') case by way of illus tration only, rendered to businessmen, traders and industrialists who are members of the constituents of the Federation. There can in our view be no doubt 'that the Federation is an industry within the meaning of Sec. 2 ( j) of the Act.

to

to

Now coming to the merits of the case we find little substance in the contention of the Federation 'that the Respondent had issued legal notices to the International Chamber of Commerce with a view to bring discredit to the Federation-its employer. The charge of misconduct that was framed against the Respondent was that he having acted in a manner inconsistent with his duties and obligation as an employee of the Federation he caused to be addressed without any justification copies of the letters the International Chamber of Commerce "with a view to bring and or capable of bringing disrepute to the Federation in the eyes of the International Chamber of Commerce. The Enquiry Officer in the domestic enquiry held that having regard the emphatic assertion of the Respondent that he had no intention to bring dis repute to the Federation in any way and that he was only trying to get his legitimate dues "it is not necessary to analyse the exact intention, but the effect has been to convey to the International Chamber of Conunerce a low impression about the Federation and thereby to bring down the prestige of the Federation in the ey~s of the International Chamber of Commerce". In spite of this finding the Enquiry Officer found that the Respondent's action was -::leariy subversiw of discipline and in his opinion deserved to be so treated. The Tribunal as we have noticed earlier found that this did not amount to misconduct which finding in our view is justi It appears from the statement of G.C. Das, fied on the evidence. the Accountant of the Federation that it was the President of Indian National Committee who was incharge of organising the I.C.C. Congress and that all payments were made from the special account of '20th Congress of the l.C.C., F.I.C.C.I.' It is, there fore. clear that it is not the Federation that condu~ted the Congress but another organisation which was brought into being for that It is this Committee namely the Indian National Com purpose. mittee which employed the Respondent and in the circumstances there is little justification for taking umbrage when the Respon dent in spite of his demand to settle his claim was not given satis faction if he issued a notice to all the 3 organisations namely the

(!) [I 968! I S.C. R. 742.

1l'--L500 SupCl/72

380

SUPREME c;:<>URT REPORTS

[1972] 2 S.C.R.

In

Federation, the Indian National Committee and the International Chamber of Commerce and Industry. At any rate the fact that the Respondent did not intend to cast any aspersion against the Federation became also evident from the manner in which he tlln dered his apology and said that he never had any such intention. Notwithstanding this apology the punishment of discharge for a workman who has served the Federa'tion for 12 years without any cause for complaint and had worked for 40 days receiving over time payment for only seven days was far in excess of what he deserved-even if he was considered to be guilty of any miscon duct. It is not denied that there are no s1anding orders specifying the misconduct which would justify dismissal and what miscon duct would justify other disciplinary action. these circum stances it is open to the Tribunal to go into the question whether the misconduct com 'the "Punishment was disproportionate to In W. M. Agnani v. plained of as to amount to victimisation. Badri Dass & Ors. ( 1 It was also held in Hind Construction & Engineering Co. Ltd. v. Their Work men('), that although it is a settled rule that the award of punish ment for misconduct is a matter for the management to decide and if there is justifica1ion for punishment the Tribunal should not interfere; but where the punishment is so dispropor tionate that no reasonable employer would ever have impo~ed it in like circumstance, the Tribunal may treat the imposition of such punishment as itself showing victimisation or unfair labour prac tice. In view of the fact 'that the domestic tribunal acted on no evidence at all because it was found that the intention with which the Respondent had issued the noitces to. the Internati"na 1 Cham ber of Commerce and InduS'!ry could not be ascertained, the Tr:bJ nal was justified in allowing evidence to be led and on tha• evi· dence to come to the conclusion that the termination of service was wrong. We cannot heln feeling that the Federation had made a mountain out of a mole hill and made a trivial matter into one involving loss of its prestiee and reputation. Tn this view the appeal is dismissed with costs.

), it was so held by this Court.

imposed,

G.C.

Appeal dismissed.

m [1963] (t) LU 684. (2) 1965] (2) S.C.R. SS.

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