What is an Industry under Industrial Dispute Act 1947

Introduction: – The main objective of the Industrial dispute Act, 1947 is to investigate and settle industrial disputes. The act aims at, speedy resolution of the industrial disputes, smooth relation between the labour and the management and uninterrupted production of the industries.

Application of the Act: – The act applies to all the establishments which fall within the definition of “Industry” as defined under the Industrial Dispute act.


Industry is defined in section 2(j) of the Industrial Dispute Act, 1947, and defines it as any business, trade, undertaking, manufacture, or calling of employers and includes any calling, service, employment, handicraft or industrial occupation or avocation of workmen”.

The definition of Industry was amended by the government in the year 1982 (act no. 46 of 1982), but till today the new definition has not been implemented because the amendment did not have notified any specific from which the new definition will be implemented (the date is still not is not notified today)

The industry in simple language is systematic and organised cooperation between the employee and the employer for the purpose of production.

The Supreme Court laid down guiding principles in its judgement in Bangalore Water Supply’s case AIR 1978 SC 548, to known whether a particular establishment is an “industry” for the purpose of industrial dispute resolution. The following are the principles laid down by the court: –

  1. Triple Test Formulae- An enterprise is prime facie “industry if it is:
    1. Systematic activity.
    1. Organised by cooperation between Employers and employees.
    1. For the production and distribution of good and services, calculated to satisfy human wants and wishes (not spiritual or religious).
  2. It is immaterial whether or not there is profit motive or whether or not there is capital, i.e. absence of profit motive or gainful objective is irrelevant.
  3. The true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer-employee relations.
  4. If the organization is a trade or business, it does not cease to be one because of philanthropy animating the undertaking
  5.  All departments integrated with industry will also be industry.
  6. Sovereign functions of the government (strictly understood, alone qualify as exemption) are exempted from the definition of the industry.

By applying the triple test formulae, industries are: –

  1. Hospitals and Educational institutions (as they have systematic activity, are organised by cooperation between employee and employer and are for production of services, calculated to satisfy human wants and wishes)


Management of Safdarjung Hospital v. Kuldip Singh AIR 1970 SC 1406, it was held that a place where patients are treated by department of the government was not an industry because it was a part of the functions of the government. Charitable hospitals run by Government or even private associations cannot be included in the definition of industry because they were not analogous to trade or business. If hospitals, nursing home or a dispensary is run as a business in a commercial way, there may be elements of industry.

In Dhanraj Girls Hospital v. Workmen AIR 1975 SC 2032, it was held not to be an industry, as it was not carrying on any economic activity in the nature of trade or business.

While holding hospital an industry in Bangalore Water Supply v A. Rajappa AIR 1978 SC 548, the Supreme Court overruled the decisions of Safdarjung Hospital and Dhanraj Girl Hospital case, and approved the law laid down in Hospital Mazdoor Sabha case AIR 1960 SC 610. It was held that hospital facilities are surely services and hence industries.

Therefore, a government as well as a charitable hospital run by a private trust, offering free services and employing a permanent staff is an industry.

Educational Institutions: –

In Bangalore Water Supply Case AIR 1978 SC 548 the Supreme Court while holding the educational institutions as industry overruled the its earlier decision in University of Delhi v. RamNath AIR 1963 SC 1873, in which the court held that the university is not an industry.

  • Clubs and Cooperative societies

In case of clubs, it depends upon the working and nature of club and obviously the triple test formulae which will lead to a conclusion that whether a club is an industry or not.

In Madras Gymkhana Club employee’s union v. Management 1968 AIR 554, the club has 1200 members. The club used to provide venue for sports and also runs a small catering service. The club was self-serving institute. The court held that the club doesn’t fall within the definition of Industry.

In Ratilal B. Ravji v. Tata Sports Club AIR 1998 Lab IC 325 (Bom), the court held that the club satisfies the triple test formulae and therefore is an “industry”.

In case of cooperative societies, the employer-employee relation is the basis to determine whether it is an industry or not.

Mahila Griha Udyog (Lijjat Papad Kendra), Amravati v. Ratanamala D. Keken 1996 Lab IC 644 (Bom), the petitioner contended that the establishment in question is not an industry as it is not a commercial establishment but a society registered under the Societies Regulation Act as a trust to hep the needy women and the women who are involved in the papad making process are not the workmen but the members of the society.

The Court rejected this contention and held that, the objective and the motive of the society in the case is irrelevant and surely the papad making process is a commercial process i.e. an activity of trade and business, and the women involved in the process are not members but workmen because of the relation between the employer and the employee ( they were paid wages, and changing the name to member doesn’t change the nature of the relationship of employer and employee) and moreover the production of the said establishment is supervised and is in control of the society. All this led to an irresistible conclusion that the society is an industry and the member are workmen. 

  • Legal Firm

In National Union of Commercial Employees v. M.R. Meher AIR 1962 SC 1080 it was held that a solicitor’s firm is not an industry, although specifically considered, it is organized as an industrial concern. The court held that a person following a liberal profession does not carry on his profession in any intelligible sense with the active co-operation of his employees, and the principal/sole capital which he brings into his profession is his special and peculiar intellectual and educational equipment.

Subsidiary work which is purely to assist the solicitor in doing his job has no direct relation to the professional service ultimately rendered by the solicitor to his client.

In Bangalore Water Supply case AIR 1978 SC 548, the Supreme Court overruled the previous judgement and held that in view of the infrastructure of the offices of professional persons, the contribution to the success of the institution comes not merely from the professional or sole intellect of the professional person but from all those whose excellence in their respective spheres makes for total proficiency. Cooperation between employer and employees is essential for the total quality of service.

Hence a legal firm employing two law graduates stenographer and a peon is an industry. But in the categories of the professions when such co-operation is missing, they are not industries.

  • Municipality

In the Budge Budge Case (1969) ILLJ 812 Cal, two employees get dismissed for negotiations. The industrial tribunal ruled that the employees must be reinstated. The Municipality challenged the ruling and contended that municipality is not an industry, hence its employees cannot be treated as Industrial Employee.

But the Supreme Court held that the municipality is an industry. It performs two functions

Sovereign functions: – Assessment of property tax etc (these functions are exempted from industrial function)

Non-Sovereign functions: – Sewerage department, PWD, Education, Water works, Fire brigade etc (these functions are part of the industry i.e. they can be carried out by private companies). Hence depending upon the nature of the work it is to be decided that the municipality is falls under industry or not.

  1. Enterprises which are not ‘Industry’

A restricted category of professions, clubs, cooperatives which are not based on employer-employee relationship are not ‘industry’ u/s 2(j) of the Industrial Disputes Act, 1947.

In the landmark judgement of Bangalore Water Supply’s case made the following observation: –

“A restricted category of professions, clubs. Co-operatives and even gurukulas and little research labs, may qualify for exemption if, in simple ventures, substantially and, going by the dominant nature criterion, substantially, no employees are entertained but in minimal matters, marginal employees are hired without destroying the non-employee character of the unit”


As formulated by triple test in the Bangalore Water supply case, and by the rulings of the other cases, it is apparent that only those establishments which are organized, systematic, and works for the production and services by a systematic relation between an employer and an employee, to fulfil the wants of the human, and are of commercial nature and non-sovereign i.e. does it for trade and business, falls under the definition of ‘industry’ under section 2(j) of The Industrial Disputes Act, 1947, unless the amendment of 1982 is implemented in the future, then the definition will be according to the new amendment.

Reference: –

  1. The Industrial Dispute Act, 1947.
  2. Labour and Industrial Laws – Meenu Paul
  3. Lawoctopus

Case Referred: –

  1. Bangalore Water Supply’s case AIR 1978 SC 548.
  2. Management of Safdarjung Hospital v. Kuldip Singh AIR 1970 SC 1406.
  3. Dhanraj Girls Hospital v. Workmen AIR 1975 SC 2032.
  4. Hospital Mazdoor Sabha case AIR 1960 SC 610.
  5. University of Delhi v. RamNath AIR 1963 SC 1873.
  6. Madras Gymkhana Club employee’s union v. Management 1968 AIR 554.
  7. Ratilal B. Ravji v. Tata Sports Club AIR 1998 Lab IC 325 (Bom).
  8. Mahila Griha Udyog (Lijjat Papad Kendra), Amravati v. Ratanamala D. Keken 1996 Lab IC 644 (Bom).
  9. National Union of Commercial Employees v. M.R. Meher AIR 1962 SC 1080.
  10. Budge Budge Case (1969) ILLJ 812 Cal.

Aishwarya Says:

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