The Ahmedabad Textile Industry's
Research Association Vs. The State of Bombay & Ors [1960] INSC 201 (17
November 1960)
WANCHOO, K.N.
GAJENDRAGADKAR, P.B.
SARKAR, A.K.
CITATION: 1961 AIR 484 1961 SCR (2) 480
CITATOR INFO :
RF 1962 SC1340 (4) D 1963 SC1873 (11) R 1964
SC 903 (12) E 1968 SC 554 (13) R 1972 SC 763 (12,23) F 1976 SC 145 (25,32)
E&R 1978 SC 548 (134,159)
ACT:
Industrial Dispute-Research Institute, if an
industry"Industry", Meaning of-Test-Industrial Disputes Act, 1947 (14
of 1947), S. 2(j).
HEADNOTE:
The appellant association was founded in 1947
and the object of the founders was to establish a textile research institute
for the purpose of carrying on research and other scientific work in connection
with the textile trade or industry and other trade and industry allied
therewith or necessary thereto. The cost of maintaining the association was met
partly by members and partly by grants from Government and other sources.
The activity of the association was systematically
undertaken; its object was to render material services to a part of the
community, namely, member-mills, the material services being the discovery of
process of manufacture etc., with a view to secure greater efficiency,
rationalisation and reduction of costs of the member-mills; it was being
carried on with the help of employees some of whom were technical personnel on
payment of remuneration, they had no rights in the results of the research
carried on by them as employees of the Association which were the property of
the Association and it was organised or arranged in the manner in which a trade
or business is generally organised.
Disputes arose between the appellant and its
workmen which related to wage-scale and dearness allowance and payment of
house-rent allowance which was referred for adjudication.
The appellant questioned the reference on the
ground that the appellant was not an industry and that the Tribunal was wrong
in holding that the appellant was included within the definition of the word
"Industry" of s. 2(j) of the Industrial Disputes Act, and contended
that it was a research centre in the nature of educational activity and
therefore had no analogy with activities in the nature of trade or business.
The question therefore was whether appellant
was an undertaking within the meaning of s. 2(j) of 'the Industrial Disputes
Act and its activities satisfied the tests laid down in State of Bombay v.
Hospital Mazdoor Sabha.
Held, that the manner in which the activity
in question was organised or arranged, the condition of the co-operation
between employer and employee necessary for its success and its object to 481
render material service to the community could be regarded as some of the
features which would be distinctive activities to which S. 2 (j) of the Act
could be applied.
In the instant case, the manner in which the
association was organised clearly shows that the undertaking as a whole was in
the nature of business and trade organised with the object of discovery of ways
and means by which member-mills may obtain larger profits in connection with
their industries. The activity of the association was clearly within the
definition of the word "Industry" in S. 2(j) of the Industrial
Disputes Act and could not be assimilated to a purely educational institution
and satisfies the test laid down in the State of Bombay v. Hospital Mazdoor
Sabha. Thus the Association is an undertaking within the meaning of S. 2(j) of
the Act.
When this dispute arose between the
Association and its employees it was an industrial dispute and could be
properly referred for adjudication under the Act.
The State of Bombay v. The Hospital Mazdoor
Sabha, [1960] 2 S.C.R. 866 followed. The Federated States School Teachers'
Association v. The State of Victoria, (1929) 41 C.L.R. 569 not applicable.
CIVIL APPELLATE JURISDICTION. Civil Appeal
No. 22 of 1959.
Appeal by Special Leave from the Award dated
the 31st October, 1957, of the Industrial Tribunal, Bombay in Reference (I. T.)
No. 141 of 1957.
M. C. Setalvad, Attorney-General for India,
J. B. Mehta and I. N. Shroff for the Appellant.
Vidya Dhar Mahajan, K. L. Hathi and R. H.
Dhebar for Respondent No. 1.
N.C. Shah, President, Engineering Mazdoor
Sabha for Respondent No. 3.
1960. November 17. The Judgment of the Court
was delivered by WANCHOO, J.-This is an appeal by special leave against the
award of the Industrial Tribunal, Bombay. There was a dispute between the
appellant and its workmen, which was referred by the Government of Bombay for
adjudication. It related to the wagescale and dearness allowance of certain
employees of the appellant and also to the payment of houserent 61 482
allowance. The main contention of the appellant before the Tribunal was that
the reference was not competent under the Industrial Disputes Act, No. XIV of
1947 (hereinafter called the Act), as the appellant was not an industry within
the meaning of the Act. The Tribunal rejected this contention and held that the
reference was valid. It then went into the merits of the dispute, with which we
are however not concerned in the present appeal. The only point urged before us
on behalf of the appellant is that the Tribunal was wrong in holding that the
appellant was included within the definition of the word "industry"
and therefore the reference was competent.
"Industry" is defined in s. 2(j) of
the Act as meaning any business, trade, undertaking, manufacture or calling of
employers and includes any calling, service, employment, handicraft, or
industrial occupation or avocation of workmen. The main question canvassed
before the Tribunal was whether the appellant was an undertaking within the
meaning of s. 2(j). The question as to what is an undertaking for the purpose
of s. 2(j) has come up for consideration before this Court in a number of
cases, the last of which is The State of Bombay v. The Hospital Mazdoor
Sabha(1), where a question arose whether a hospital run by government was an
undertaking within the meaning of s. 2(j).
It was pointed out in that case that though
s. 2(j) used words of very wide denotation, a line would have to be drawn in a
fair and just manner so as to exclude some callings, services or undertakings.
If all the words used therein were given their widest meaning, all services and
all callings would come within the purview of the definition including those
services rendered by a servant purely in a personal or domestic matter and even
in a casual way. It had therefore to be considered where the line should be
drawn and what limitations should be reasonably implied in interpreting the
wide words used in s. 2(j). Further, the contention that the word
"undertaking" used in s. 2(j) should be treated as analogous to trade
or business and therefore the undertaking in question must involve an economic
activity in which capital is invested (1) [1960] 2 S.C.R. 866.
483 and which is carried on for profit or for
the production or sale of goods by the employment of labour was not accepted in
full and it was pointed out that an activity could and must be regarded as an
industry even though in its carrying on profit motive might be absent. Further
it was held that absence of investment of any capital would not necessarily
mean that an undertaking was not included within s. 2(j).
That case then proceeded to consider what kinds
of activities could be excluded from the meaning of "undertaking" for
purposes of s. 2(j). It was pointed out that activities of government which
could be properly described as sovereign activities were outside the scope of
s. 2(j), as they were functions which a constitutional government could and
must undertake for governance and which no private citizen could undertake.
These sovereign activities were defined in the words of Lord Watson as
"the primary and inalienable functions of a constitutional government"
but would not necessarily include an activity undertaken by government in
pursuit of its welfare policies. It was also pointed that though in the absence
of profit motive an activity might be regarded as an undertaking, the presence
of such motive would be a relevant circumstance in considering whether the
undertaking was an industry within the meaning of s. 2(j).
The case then went on to consider the
attributes the presence of which would make an activity an undertaking under s.
2(j) on the ground that it was analogous to trade or business. It was pointed
out that it was difficult to state these attributes definitely or exhaustively
but as a working principle it was said that 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 such
community with the help of employees would be an undertaking within the meaning
of the Act provided it was carried on in an organised manner like trade or
business." Thus the manner in which the activity in question is organised
or arranged, the condition of the co-operation between employer and employee
necessary for its success 484 and its object to render material service to the
community could be regarded as some of the features Which would be distinctive
of activities to which s. 2(j) applied. We have therefore to see whether the
appellant's activity satisfies the tests laid down in this case and if it does,
it would be an undertaking within the meaning of s. 2(j).
It will be necessary for this purpose to
examine the objects with which the appellant-association was founded and the
activities which it is carrying on. The main contention of the learned
Attorney-General is that the appellant association is a research centre and is
in the nature of educational activity and therefore has no analogy with an
activity in the nature of trade or business. He relies in this connection on a
decision of the Australian High Court, The Federated State School Teachers'
Assn. v. The State of Victoria (1), where it was held that educational
activities of the State carried on under appropriate statutes and statutory
regulations relating to education did not constitute industry within the
meaning of s. 4 of the Commonwealth Conciliation and Arbitration Act.
The appellant-association was founded in 1947
and the object of the founders was to establish a textile research institute
for the purpose of carrying on research and other scientific work in connection
with the textile trade or industry and other trades and industries allied
therewith or necessary thereto. The research to be conducted was for the
purpose of investigation into manufacture and improvement of materials used in
the textile industry, utilisation of the products of the industry, improvement
of machinery and appliances used by the industry, improvement of various
processes of manufacture with a view to secure greater efficiency,
rationalisation and reduction of costs., research into the conditions of work,
time and motion studies, fatigue and rest pauses, standardisation of methods of
work, conditioning of factories and diseases and accidents arising out of
employment in a textile mill. In order to carry out these objects, the
appellant-association was to establish, equip and (1) (1929) 41 C.L.R. 569.
485 maintain laboratories, work-shops or
factories and conduct and carry on experiments; to prepare, edit, print,
publish, issue, acquire and circulate books, papers, periodicals etc.
and to establish, form and maintain museums,
libraries and collections of literature, statistics, scientific data and other
information relating to the industry and to disseminate the same by means of
reading papers, delivery of lectures, giving of advice and the appointment of
advisory officers; to employ or retain skilled, professional or technical
advisers or workers in connection with the objects of the association on
payment of such fees or remuneration as might be thought expedient; to found,
aid or maintain schools or colleges for textile research and endow scholarships
and bursaries, to support students engaged in research work; and to encourage
the discovery of, and investigate and make known the nature and merits of
inventions, improvements, processes, materials and designs which may be capable
of being used by members of the association for any of the purposes of the said
industry.
It will thus be seen that though the object
of the association was research, that research was directed with the idea of
helping the member mills to improve methods of production in order to secure
greater efficiency, rationalisation and reduction of costs. The basis therefore
of the research carried on by the appellant was to help the textile industry
and particularly the member mills in making larger profits and this was to be
done primarily by the employment of technical personnel on payment of
remuneration. Reference in this connection may be made to r. 13 of the Rules
and Regulations of the appellant association, which lays down that any member
of the association who considers that its interests are prejudicially affected
by any research proposed to be undertaken by the association may object to
government against the undertaking of the proposed research. Rule 13 read with
r. 45 also envisages that if such an objection is taken the proposed research
will not be carried on till the objection is decided by the government, though
it is provided that the government may direct the research to be carried 486 on
during the time the objection is pending consideration of government. The
administration of the appellant-association is vested in a council in which the
majority consists of the representatives of the textile industry. The research
is carried on, as already indicated, under the supervision of a Director of
Research, by technical personnel, who are generally paid employees of the
appellant-association; but all such technical personnel employed by the
association have to give an undertaking to observe strict secrecy in respect of
all researches undertaken. They are also to give an undertaking not to use or
take advantage in their private capacity of special knowledge so obtained or
put into operation any invention or process of which they might have obtained
knowledge as aforesaid. It is also provided that any invention or process can
be put into operation to the extent to which, and as and when it may be
permitted to be so done in common with all members of the association in strict
accordance with the Rules and Regulations made by the council. The effect of
this provision in r. 42 of the Rules and Regulations is that the result of
research is the property not of the person making the research but of the
association, to be used by its members in accordance with the Rules and
Regulations made by the Council. Then r. 44 provides that every employee of the
association engaged on research shall contract in writing that he will in
consideration of his employment hold exclusively for the benefit of and
assigned to the association at the cost of the association all rights and
ownership in any discoveries, inventions, designs or other results arising in
the course of such employment upon such research. These provisions make it
clear that though the appellant association. has been established for purposes
of research, the main object of the research is the benefit of the members of
the association. The cost of maintaining the association is met partly by
members and partly by grants from government and other sources. It will thus be
clear that in effect the association has been established to carry on research
with respect to textile industry jointly for the benefit of its members;
487 but for this, each member-mill might have
had to establish its own research department, which would be a part of its activity.
Can it be said under these circumstances that this is an undertaking which is
purely of educational character and therefore covered by the Australian case
mentioned above? We are of opinion, considering the objects and the Rules and
Regulations of the appellant-association, that it answers the tests laid down
in the Hospital case (1) and must be held to be an undertaking within the
meaning of s. 2(j). It is an activity systematically undertaken; its object is
to render material services to a part of the community (namely,
member-mills)-the material services being the discovery of processes of
manufacture etc. with a view to secure greater efficiency, rationalisation and
reduction of costs of the member-mills; it is being carried on with the help of
employees (namely, technical personnel) who have no rights in the results of
the research carried on by them as employees of the association; it is
organised or arranged in a manner in which a trade or business is generally
organised; it postulates co-operation between employers (namely, the
association) and the employees (namely, the technical personnel and others)
which is necessary for its success, for the employers provide monies for
carrying on the activities of the association and its object clearly is to
render material service to a part of the community by discovery of processes of
manufacture etc. with a view to secure greater efficiency, rationalisation and
reduction of costs. The activities of this association therefore have in our
opinion little in common with the activities of what may be called a purely
educational institution. It is true that the employees who have raised the
present industrial dispute do not actually contribute to the research, which is
carried on under the appellant-association; but the manner in which the
association is organised and the fact that the technical personnel who carry on
the research are also employees who have no rights in the results of their
research, clearly show that the undertaking as a whole is in the nature of (1)
[1960] 2 S.C.R. 866.
488 business and trade organised with the
object of discovering ways and means by which the member-mills may obtain
larger profits in connection with their industries. In these circumstances we
have no hesitation in coming to the conclusion that the appellant-association
is carrying on an activity which clearly comes within the definition of the
word "industry" in s. 2(j) and which cannot be assimilated to a
purely educational institution. In this view of the matter, when a dispute
arose between the appellant and some of its employees, it was an industrial
dispute and could be properly referred for adjudication under the Act.
The appeal fails and is hereby dismissed with
one set of costs.
Appeal dismissed.
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