Case Analysis of Bangalore Water Supply Case

Industry means any business, trade, undertaking, manufacture or calling of employers and
includes any calling e employment, handicraft, or industrial occupation or avocation of
workmen. [Section 20) Supreme Court carried out an in depth study of the definition of the
term industry in a comprehensive manner in the case of Bangalore Water Supply and
Sewerage Board v. A Rajiappa AIR 1978 SC 548
popularly known as Bangalore Water
Supply case
, after considering various previous judicial decisions on the subject and in the
process, it rejected some of them, while evolving a new concept of the term “industry.
Tests for determination of “industry”
After discussing the definition from various angles, in the above case, the Supreme Court,
laid down the following sets to determine whether an activity is covered by the definition
of “industry” or not. It’s also referred to as the triple test.
I.(a) Where there is systematic activity, organised by co-operation between employer and
employee, for the production and/or distribution of goods and services calculated to satisfy
human wants and wishes (not spiritual or religious but inclusive of material things or
services geared to celestial bliss e.g. making, on a large scale, prasad or food) prima facie,
there is an “industry” in that enterprise.
(b) Absence of profit motive or gainful objective is irrelevant wherever the-undertaking is
whether in the public, joint, private or other sector. triple test
(c) The true focus is functional and the decisive test is the nature of the activity with
special emphasis on the employer-employee relations.
(d) If the organisation is a trade or business, it does not cease to be one because of
philanthropy animating the undertaking. .
II. Although Section 2(i) uses words of the widest amplitude in its two limbs, their
meaning cannot be magnified to over-stretch itself. Undertaking must suffer a contextual
and associational shrinkage, so also, service, calling and the like. This yields the inference
that, all organised activity possessing triple elements in (1) although not trade of business,
may still be “industry”, provided the nature This takes into the fold of “industry”,
undertaking, callings and services, adventures analogous to carrying on of trade or
business. All features, other than the methodology of carrying on the active in organizing
the co-operation between employer and employee, may be dissimilar. It does not mu if on
the employment terms, there is analogy.
III. Application of these guidelines should not stop short of their logical reach by
invocation of creeds co or inner sense of incongruity or outer sense of motivation for or
resultant of the economic operations. The ideology of the Act being industrial disputes
between employer and workmen, the range of statutory ideology must inform the reach of
the statutory definition, nothing less, nothing more.
Hence, the Supreme Court observed that professions, clubs, educational institutions.
cooperatives, research institutes, charitable projects and other kindred adventures, if they
fulfil the triple tests listed in
(1), cannot he exempted from the scope of Section 2(j), A restricted category of
professions, clubs, co-operatives and gurukulas and little research labs, may qualify for
exemption if, in simple ventures, substantially and going by the dominant nature criterion,
substantively, no employees are entertained but in minimal matters, marginal employees
are hired without destroying the non-employee character of the unit.
If in a pious or altruistic mission many employ themselves, free or for small honoranum or
like return; mainly drawn by sharing in the purpose or cause, such as lawyers volunteering
to run a free legal services clinic or doctors serving in their spare hours in a free medical
centre or ashramites working at the bidding of the holiness, divinity or like central
personality and the services are supplied free or at nominal cost and those who serve are
not engaged for remuneration or on the basis of master and servant relationship, then the
institution is not an industry even if stray servants, manual or technical, are hired. Such
undertakings alone are exempt – not other generosity compassion, developmental
compassion or project.
Criteria for determining dominant nature of undertaking
The Supreme Court in Bangalore Water-Supply case laid down the following

guidelines for deciding the dominant nature of an undertaking:
(a) Where a complex of activities, some of which qualify for exemption, others not,
involves the employee on the total undertaking. Some of whom are not “workmen” or
some departments are not productive of goods and services if isolated, nature of the
department will be the true test. The whole undertaking be “industry although those who
are not workmen” definition may not be benefit by the status.
(b) Notwithstanding with previous clause, sovereign functions strictly understood alone
qualify for exemption and not the welfare activities or economic adventures undertaken by
Government or statutory bodies.
(c) Even in departments discharging sovereign functions, if there are units which are
industries and they are substantially severable, then they can be considered to come within
Section 2(j).
(d) Constitutional and competently enacted legislative provisions may well remove an
undertaking from the scope of the Act.

The above decision of the Supreme Court has a wide sweep. The triple test along with
dominant nature will cover almost the entire labor force in the country. The charitable or
missionary institutions, hospitals, educational and other research institutions. Municipal
corporations, firms of chartered accountants solicitors firms, etc., which were not held to
be “industry” earlier will now are covered by the definition of “industry”.


The Industrial Labour and General Laws by The Institute Of Company Secretaries of India.

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