Holding

The Irrigation Department is an ‘industry’ within the meaning of Section 2(j) of the Industrial Disputes Act, 1947, making its employees workmen and their disputes industrial disputes.

Summary

The Supreme Court examined three appeals filed by employees of the Irrigation Departments of Punjab and Haryana who sought relief under the Industrial Disputes Act, 1947, after their applications were rejected by the Labour Court on the ground that the employer was not an ‘industry’. The Court considered whether the Irrigation Department fell within the definition of ‘industry’ in Section 2(j) of the Act, taking into account the original statutory definition, the amendment of 1982 (which had not been brought into force), and a series of earlier Supreme Court and High Court decisions. Applying the dominant‑nature test and rejecting the argument that the department’s functions were purely sovereign, the Court held that the department’s systematic activities of water supply, canal construction, flood control and related services constitute an industry. Consequently, the employees are ‘workmen’ and their grievances are ‘industrial disputes’, and the Labour Court’s objection was untenable. The appeals were allowed and the awards set aside. The judgment also noted that any future legislative change to the definition could reopen the issue.

Issues considered

Whether the Irrigation Department of Punjab/Haryana qualifies as an ‘industry’ under Section 2(j) of the Industrial Disputes Act, 1947.
Whether the employees of the department are ‘workmen’ and their grievances constitute ‘industrial disputes’ within the meaning of the Act.
Effect of the 1982 amendment to the definition of ‘industry’ (Act 46 of 1982) not being in force on the applicable law.
Whether sovereign or regal functions of the State exclude the Irrigation Department from the definition of ‘industry’.
How the dominant‑nature test and earlier judicial pronouncements should be applied to determine the scope of ‘industry’.

Legislation cited

Industrial Disputes Act, 1947s. 2(j), s. 2(k), s. 2(s), s. 33C-2
Industrial Disputes (Amendment) Act, 1982 (Act 46 of 1982)s. 2(c)
Northern India Canal and Drainage Act, 1873

Subjects

Industrial Disputes Actdefinition of industryworkmanindustrial disputegovernment departmentdominant nature testlegislative amendmentPunjabHaryanairrigation department

Judgment

DES RAJ, ETC. ETC.
A
v.
STATE OF PUNJAB & ORS. ETC.

APRIL 20, 1988

B [RANGANAIB MISRA AND MURARI MOHON DUTT, JJ.)

Industrial Disputes Act, 1947-Whether Irrigation Department of
State Government of Punjab or Haryana is an 'industry' as defined in
I.
Section 2(1)-0f
1
Each of these appeals by special leave was directed against the
c award made by the Labour Court.

The appellant in Civil Appeal No. 5415 of 1985, a foreman in the
Mechanical Constrnction Division under the Irrigation Department,
had filed an application nnder Section 33C-2 of the Industrial Disputes
D Act, 1947 ('the Act') before the Labour Court for the recovery of
arrears of annual increments.

The appellant in Civil Appeal No. 2168 of 1987 was a T. Mate in
the P.W.D. Drainage Division. When his services were terminated
without complying with the requirements of the law, he challenged the
E termination before the Labour Court.

The appellant in the remaining appeal was an operator in the
Mechanical Division, under the Irrigation Department of Haryana
State. His services were terminated and thereupon he approached the
Labour Court challenging the order of termination.
F
In each of these cases, challenge was advanced by the Governmen-
tal authority to the maintainability of the application before the Labour
Court on the ground that the employer was not an 'industry' and the
Act did not apply. The Labour Court upheld the objection and declined
relief to the appellants.
G
Allowing the appeals with observations, the Court,

HELD: The common question in these appeals was whether the
Irrigation Department was an 'industry'. The definition of 'industry' is
given in Section 2(j) of the Act. By Section 2(c) of the Amending Act (46
H of 1982) this definition had been amended but the amendment has not
616
DES RAJ v. STATE OF PUNJAB 617

yet been brought into force. Since the amended statutory definition was
A
not yet in force, the parent definition and the judicial pronouncements
thereon had to be referred to for finding the law. The field is covered by
pronouncements of this Court and is not necessary to go beyond the
precedents such as decisions in D.N. Banerji v. P.R. Mukherjee &
Ors., [1953] SCR 302; State of Bombay and Ors. v. The Hospital
~· Mazdoor Sabha & Ors., [1960] 2 SCR 866; Corporation of the City of B
Nagpurv. Its Employees, [1960] 2 SCR 942; ManagementofSafdarjang
Hospital v. Ku/dip Singh Sethi, [1971] SCR 177; and the decision of a
seven-Judge Bench in Bangalore Water Supply and Sewerage Board v.
A. Rajappa & Ors., [1978] 2 SCC 213. [621F-G]

In case the Irrigation Department was accepted to be an
"industry", there was no dispute that each of the appellants would be c
a 'workman' and each of the claims would constitute an ''industrial
dispute" as defined in Section 2(s) and (k) of the Act, respec-
tively. [621G]

Judicial notice could be taken of the position that Haryana and D
Punjab originally constituted one State and Haryana became separate
from i966. The Irrigation Department of the erstwhile Punjab State
was discharging the State's obligations created under the Northern
India Canal and Drainage Act, 1873. The Administration Report of the
year 1981-82 of the Public Works Department, Irrigation Branch,
which really deals with the Irrigation Department, was produced before E
the Court. [634B-C]

Counsel for the appellants placed before the Court some cases of
different High Courts in support of his stand that the Irrigation Depart-
ment should be considered as an industry, i.e. Madhya Pradesh Irriga-
tion Karamchari Sangh v. State of Madhya Pradesh & Anr., [1972] LLJ F
374; State of Rajasthan v. The Industrial Tribunal, Rajasthan, [1970]
RLW 137; Dinesh Sharma & Ors. v. State of Bihar & Ors., [1983]
Bibar L.J.R. 207 and Chief Engineer, Irrigations Orissa v. Harihar
Patra & Anr., [1977] L.I.C. 1033. [638E-F]

On the tests, as already laid down in the judgments, the Court did G
not think the facts found in this case could take the Irrigation Depart-
ment outside the purview of the definition of 'Industry'. The main
functions of the Irrigation Department where subjected to the Domi-
nant Nature test evolved by Krishna Iyer J. in Bangalor Water Supply
and Sewerage Board v. A. Rajappa & Ors., [1978] 2 SCC 213, decided
by a seven-Judges Bench, clearly come within the ambit of industry. H
618 SUPREME COURT REPORTS [19881 3 S.C.R.

A Perhaps keeping in view the observations of the learned Judges of the
seven-Judges Bench, the definition of industry as occurring in section
2Ul of the Act was amended by Act 46 of 1982. However, the Court
could not gather as to why even six years after the amendment to the
definition of industry in section 2(j) of the Act came on the statute book,
the same had not been brought into force. The court on more than one
B occasion had indicated that the position should be clarified by an
appropriate amendment, and, when keeping in view the opinion of this
Court, the law was sought to be amended, it was appropriate that the
same should be brought into force as such or with such further altera-
tions as might be considered necessary a'!d the legislative view of the
matter, made know.n and the confusion in the field, cleared up. Bare
C Acts and Commentaries on the Industrial Disputes Act had brought in
the new definition, deleting the old one with a note that the new provi-
sion had yet to come into force. This situation had further added to the
confusion. [639F-H; 640A-B]

The appeals succeeded. It was made clear that in the event of the
D definition of industry being changed either by enforcement of the new
definition of industry or by any other legislative change, it would always
be open to the aggrieved Irrigation Department to raise the issue again
and the present decision would not stand in the way of such an attempt
in view of the altered situation. [640B-C]

E D.N. Banerji v. P.R. Mukherjee & Ors., [1953] SCR 302; State of
Bombay & Ors. v. The Hospital Mazdoor Sabha & Ors., [1960] 2 SCR
365; Corporation of the City of Nagpur v. Its Employees, [1960] 2 SCR
942; Management of Safdarjang Hospital v. Ku/dip Singh Sethi, [1971]
1 SCR 177; Bangalore Water Supply and Sewerage Board v. A.
Rajappa & Ors., [1978] 2 SCC 213; Om Prakash v. M/s Executive
F Engineer, SYL, Kurukshetra & Ors., [1984] Current L.J. 349; State
of Punjab v. Ku/dip Singh & Anr., [1983] 1 L.L.J. 307; Madhya
Pradesh Irrigation Karamchari Sangh v. State of Madhya Pradesh &
Anr., [1972] LLJ 374; State of Rajasthan v. The Industrial Tribunal,
Rajasthan, [1970] RLW 137; Dinesh Sharma & Ors. v. State of Bihar &
Ors., [1983] Bihar L.J.R. 207 and Chief Engineer, Irrigation, Orissa v.
G Harihar Patra & Anr., [1977] L.I.C. 1033, referred to.

CIVIL APPELLA1E JURISDICTION: Civil Appeal No. 5415
of 1985 etc.

From the Order dated 7.1.1985 of the Presiding Officer, Labour
H Court, Amritsar in Application No. 547of1979.
DES RAJ v. STATE OF PUNJAB (MISRA, J. J 619

Jitendera Sharma, P. Gaur, D.K. Garg, K.K. Mohan and R.C.
A
Kaushik for the Appellants.

S.C. Mohanta, Mahabir Singh and C.M. Nayar for the Res-
pondents.

The Judgment of the Court was delivered by B
I

RANGANATH MISRA, J. Each of these appeals is by special
leave and is directed against the Award made in different disputes by
-"\
.r·· the Labour Court. The common justification for ignoring the High
Court and approaching this Court directly by way of special leave,
according to Mr. Jitendra Sharma for each of the appellant);, is that
J- there are a couple of Full Bench decisions of the Punjab and Haryana c
High Court holding that the Irrigation Department of the State
Governmei:t of Pun jab is not an 'industry' and no useful purpose
would have been served by routing the matters through the High
Court as the Full Bench decision would have been followed.
D
The appellant in Civil Appeal No. 5415 of 1985 was a Foreman in
the Mechanical Construction Division under the Irrigation Depart-
ment and had applied under Section 33 C-2 of the Industrial Disputes
Act, 1947, (hereinafter referred to as 'the Act') before the Labour
Court for recovery of arrears of annual increments.
E
The appellant in Civil Appeal No. 2168 of 1987 was a T. Mate in
the P. W.D. Drainage Division. When his services were terminated
without complying with the requirements of the law, he challenged the
termination before the Labour Court. The appellant in the remaining
appeal was an Operator in the Mechanical Division, Rohtak under the
Irrigation Department of Haryana State. His services were terminated F
and thereupon he approached the Labour Court disputing the validity
of the said order. In each of these cases challenge was advanced by the
governmental authority to the maintainability of the application
before the Labour Court on the ground that the employer was not an
'industry' and the Act did not apply. The Labour Court by different
orders made in each of these cases upheld the objection and declined G
relief to the employees. The common question in these appeals, there-
fore, is as to whether the Irrigation Department of either Government
is an 'industry'.

The definition of 'industry' occurring in Section 2 of the Act has
now to be seen. The Act defines 'industry' in Section 2(J) to mean: H
620 SUPREME COURT REPORTS [1988] 3 S.C.R.

"any business, trade undertaking, manufacturer or calling
A
of employers and includes any calling service, employment,
handicraft, or industrial occupation or avocation of
workmen."

By Section 2(c) of the Amending Act (46 of 1982), thls definition has >

B been amended but the amendment has not yet been brought into A
force. The amended definition of "industry" is as follows:

"Industry means any systematic activity carried on by co-
operation between an employer and his workmen (whether
such workmen are employed by such employer directly or
by or through any agency, including a contractor) for the
c production, supply or distribution of goods or services with
a view to satisfy human wants or wishes (not being wants or
wishes which are merely spiritual or religious in nature),
whether or not, -

D (i) any capital has been invested for the purpose of carry-
ing on such activity; or

(ii) such activity is carried on with a motive to make any
gain or profit,

E and includes-

(a) any activity of the Dock Labour Board established
under Section 5A of the Dock Workers (Regulation of
Employment) Act, 1948;

F (b) any activity relating to the promotion of sales or busi-
ness or both carried on by an establishment,

but does not include-

(1) any agricultural operation except where such agricul-
tural operation is carried on in an integrated manner with
G
any other activity (being any such activity as is referred to ,._
(

in the foregoing provisions of this clause) and such other
activity is the predominant one,

Explanation:-For the puposes of this sub-clause, 'agricul-
H tural operation' does not include any activity carried on in a
DES RAJ v. STATE OF PUNJAB [MISRA, J.J 621

plantation as defined in clause (f) of Section 2 of the Plan- A
tationsLabour Act, 1951; or

(2) hospitals or dispensaries; or

(3) educational, scientific, research or training institu-
tions; or B

(4) institutions owned or managed by organisation wholly
or substantially engaged in any charitable, social or
philanthropic service; or

(5) khadi or village industries; or
c
(6) any activity of the Government relatable to the
sovereign functions of the Government including all the
activities carried on by the departments of the Central
Government dealing with defence research, atomic energy
and space; or D

(7) any domestic service; or

(8) any activity, being a profession practised by an indi-
vidual or body of individuals, if the number of persons
employed by the individual or body of individuals in rela- E
tion to such profession is less than ten; or

(9) any activity, being an activity carried on by a co-
operative society or a club or any other like body of
individuals, if the number of persons employed by the co-
operative society, club or other like body of individuals in F
relation to such activity is less than ten;"

Since the amended statutory definition is not yet in force, the parent
definition and judicial pronouncements have to be referred to for find-
ing the law. The field is covered by pronouncements of this Conrt and
it is not necessary to go beyond these precedents. In case the Irrigation G
Department is accepted to be "industry", there is no dispute that each
J of the appellants would be a ''workman" and each of the claims would
constitute an "industrial dispute" as defined in Section 2(s) and (k)
respectively.

A five-Judge Bench in D.N. Banerji v. P.R. Mukherjee & Ors., H
622 SUPREME COURT REPORTS [1988] 3 S.C.R. ~

I1953] SCR 302 considered the scope of the definition of industry.
A
Chandrashekhara Aiyer, J. speaking for the Court stated:

"It is therefore incumbent on us to ascertain what the
statute means by industry and industrial dispute, leaving
aside the original meaning attributed to the words in a
B simpler state of society, when we had only one employer ._,.'
perhaps, doing a particular trade or carrying on a particular
business with the help of his own tools, material and skill
and employing a few workmen in the process of production
or manufacture, and when such disputes that occurred did
not go behind individual levels into acute fights between
rival organisations of workmen and employers, and when
c !arge scale strikes and lock-outs throwing society into chaos
and confusion were practically unknown. Legislation had
to keep pace with the march of times and to provide for
new situations. Social evolution is a process of constant
growth, and the State cannot afford to stand still without
D taking adequate measures by means of legislation to solve
large and momentous problems that arise in the industrial
field from day to day almost ..... When our Act came to
be passed, labour disputes had already assulljed big pro-
portions, and. there were clashes between workmen and
·employers in several instances. We can assume therefore ~
E that it was to meet such a situation that the Act was
enacted, and it is consequently necessary to give the terms
employed in the Act referring to such disputes as wide an
import as reasonably possible. Do the definitions of
industry, industrial dispute and workman take in the
extended significance or exclude it? Though the word
F undertaking in the definition of industry is wedged in bet-
ween business and trade on the one hand and manufacture
on the other, and though therefore it might mean only a
business or trade undertaking, still it must be remembered
that if that were so, there was no need to use the word
separately from business or trade. The wider import is
G attracted even more clearly when we look at the latter part
of the definition which refers to calling, service, employ-
ment or industrial occupation or avocation of workmen.
Undertaking in the first part of the definition and industrial
occupation or avocation in the second part obviously mean
much more than what is ordinarily understood by trade or
H business. The definition was appparently intended to
DES RAJ v. STATE OF PUNJAB [MISRA, J.I 623

include within its scope what might not strictly be called a

~~
A
trade or business venture."

The ratio in Mukherjee's case was relied upon by a three-Judge Bench
~) in State of Bombay & Ors. v. The Hospital Mazdoor Sabha & Ors.,
I 1960] 2 SCR 866 and Gajendragadkar, J. who spoke for the Bench
·~ observed: B

"There is another point which cannot be ignored.
Section 2(j) does not define industry in the usual manner by
prescribing what it means: the first clause of the definition
gives the statutory meaning of industry and the second
· clause deliberately refers to several other items of industry
-~
, and brings them in the definition in an inclusive way. It is c
obvious that the words used in an inclusive definition
denote extension and cannot be treated as restricted in any
sense. Where we are dealing with an inclusive definition it
would be inappropriate to put a restrictive interpretation
upon terms of wider denotation." D

"Besides, it would be relevant to point out that too
much reliance cannot be placed on what are described as
the essential attributes or features of trade or business ·as
conventionally understood. The conventional meaning
attributed to the words trade and business has lost some of E
its validity for the purpose of industrial adjudication.
- Industrial adjudication has necessarily to be aware of the
current of socio-economic thought around; it must recog-
nise that in the modem welfare State healthy industrial
.. ~ relations are a matter of paramount importance and its
essential function is to assist the State by helping a F
solution of industrial disputes which constitute a distinct
and persistent phenomenon of modern industrialised States
in attempting to solve industrial disputes, industrial adjudi-
cation does not and should not adopt a doctrinaire
approach. It must evolve some working principles and
should generally avoid formulating or adopting abstract G
generalisations. Nevertheless it can't harp back to old age
notions about the relations between employer and the emp-
loyee or to the doctrine of laissez faire which then governed
the regulation of the said relations. That is why, we think,
in construing the wide words used in section 2(j) it would
be erroneous to attach undue importance to the attributes H
624 SUPREME COURT REPORTS [1988] 3 S.C.R.
~.
associated with business or trade in the popular mind in
A
days gone by."
'
The Bench thereafter adverted to the negative side and stated:

"It would be possible to exclude some activities from
B section 2(j) without any difficulty. Negatively stated the
~
activities of the Government which can be properly des-
cribed as regal or soveriegn activities are outside the scope
of section 2(j). These are functions which a constitutional
government can and must undertake for governance and ,..,
which no private citizen can undertake. This position is not
in dispute. An attempt is, however, made by the appellant
c to suggest that in view of the Directive Principles enun- -....
ciated in Part IV of the Constitution and in view of the
ideal of a welfare state which has been placed before the
')
country, Governments, both at the level of States as well as \.-
at the Centre undertake several welfare activities; and the
D argument is that the field of governmental or regal acti-
vities which are excluded from the operation of section 2(j)
should be extended to cover other activities undertaken by
the Governments in pursuit of their welfare policies. In our
opinion, this contention cannot be accepted. The activities
which do not fall within section 2(j) and which are des- r\
E cribed as governmental or regal or soveriegn have been
pithily described by Lord Watson as 'the primary and
inalienable functions of a contitutional Government'; and
it is only these activities that are outside the scope of
section 2(j). It sounds incongruous and self-contradictory
to suggest that activities undertaken by the Government in
..__
F the interests of socio-economic progress of the country as
beneficial measures should be exempted from the opera-
lion of the Act which in substance is a very important bene-
ficial measure itself."

Applying the stated principles, this Court in that case held that the J.J.
G Group of Hospitals came within the definition of industry.
,,,..._
Within a couple of weeks from the Hospital Mazdoor Sabha's
case (supra), the same Bench in the case of Corporation of the City of
Nagpurv. Its Employees, [1960] 2 SCR 942, this time Subba Rao, J., as
he then was, speaking for the Court examined the self-same question.
H Before the Court were available two precedents-Mukherjee's case
DES RAJ v. STATE OF PUNJAB [MISRA, J. [ 625

>-- (supra) and Hospital Mazdoor Sabha's case (supra) and_ it was stated:
A

"Before considering the positive aspects of the defini-
tion, what is not an industry may be considered. However
wide the definition of industry may be, it cannot include the
regal or soveriegn functions of State .. This is the agreed
basis of the arguments at the Bar though the learned B
F counsel differed on the ambit of such functions. While the
learned counsel for the Corporation would like to enlarge
the scope of these functions so as to comprehend all the
welfare activities of a modem State, theleamed counsel for
-~ the respondents would seek to confine them to what are
aptly termed the primary and inalienable functions of a
constitutional Government.''
c
),.
The Court analysed the activities of the various departments of the
Corporation and observed:

"We can also visualize different situations. A parti- D
cular activity of a municipality may be covered by the
definition of industry. If the financial and administrative
departments are slowly in charge of that activity, there can
be no difficulty in treating those two departments also as
part of the industry. But there may be cases where the said
"}. two departments may not only be in charge of a particular E
activity or service covered by the definition of industry but
also in charge of other activity or activities falling outside
the defintion of industry. In such cases a working rule may
be evolved to advance social justice consistent with the
principles of equity. In such cases the solution to the
..../- problem depends upon the answer to the question whether F
such a department is primarily and predominantly con-
cemed with industrial activity or incidentially connected
therewith."

"The result of the discussion may be summarised thus: ( l)
the definition of industry in the Act is very comprehensive. G
It is in two parts one part defines it from the stand point of
). the employer and the other from the stand point of the
employee. Ifan activity falls under either part of the defini-
tion it will be an industry within the meaning of the Act. (2)
The history of industrial disputes and the legislation recog-
nises the basic concept that the activity shall be an orga- H
626 SUPREME COURT REPORTS [1988] 3 S.C.R.

nised one and not that which pertains to private or personal
A
employment. (3) The regal functions prescribed as primary
and inalienable functions of State though statutorily
delegated to a corporation or necessarily excluded from the
purview of the definition. Such regal functions shall be
confined to legislative power, administration of law and
B judicial power. (4) If a service rendered by an individual or
a private person would be an industry, it would equally be
an industry in the hands of a corporation. (5) If a service
rendered by a corporation is an industry, the employees in
the department connected with that service, whether finan-
cial, administrative or executive, would be entitled to .the
benefits of the Act. (6) If a department of a municipality
c discharges many functions some pertaining to industry as
defined in the Act and the other non-industrial activities,
the predominant functions of the department shall be the
criterion for the purposes of the Act."

D Applying these tests, this Court examined as to whether the various
departments of the Corporation came within the definiton or not.
Then came the decision of a Constitution Bench in the case of Manage-
ment of Safdarjung Hospital v. Ku/dip Singh Sethi, [1971] I SCR 177
where Chief Justice Hidayatullah spoke for the Court. Referring to the
definition of industry, the learned Chief Justice observed: r\
E
"This definition is in two parts. The first part says
that it means any business, trade, undertaking, manufac-
ture or calling of employers and then goes on to say that
includes any calling, service, employment, handicraft or
industrial occupation or avocation of workmen ..... ".
F
"Therefore, an industry is to be found when the emp-
loyers are carrying on any business, trade, undertaking,
manufacture or calling of employers. If they are not, there
is no industry as such. What is meant by these expressions
was discussed in a large number of cases which have been
G considered elaborately in the Gymkhana Club case [1968] 1
SCR 742. The conclusions in that case may be stated:

'Primarily, therefore, industrial disputes occur when
operation undertaken rests upon cooperation
between employer and employees with a view to pro-
H duction and distribution of material goods, in other
DES RAJ v. STATE OF PUNJAB [MISRA, J.[ 627

'!-· words, wealth, but they may arise also in cases ·where
A
the cooperation is to produce material services. Tho
normal cases are those in which the production or
distribution is of material goods or wealth and they
will fall within the expressions trade, business or
manufacture.' "
B
)..- In Safdarjung Hospital's case the-decision in Hospital Mazdoor Sabha
case was analysed and the Court came to the following conclusion:

"In our judgment, the Hospital Mazdoor Sabha's
case took the extreme view of the matter which was not
justified:"
c
Then came the case of Bangalore Water Supply and Sewerage Board v.
A. Rajappa & Ors., 11978) 2 SCC 213. This time the same point was
before a seven-Judge Bench of this Court. This judgment undertood a
review of the entire law. Krishna Iyer, J. spoke for himself, Bhagwati
and Desai, JJ. In paragraph 139 of the judgment it was stated: D

· "Banerjee (supra) amplified by Corporation of
Nagpur (supra), in effect met with its waterloo in Safdar-
jung (supra). But in this latter case two voices could be
herard and subsequent rulings zigzagged and conflicted
precisely because of this built-in ambivalence. It behoves E
us, therefore, hopefully to abolish blurred edges, illumine
penumbra! areas and overrule what we regard as wrong.
Hesistency, half-tones and hunting with the hounds and
running with the hare can claim heavy penalty in the shape
) of industrial confusion, adjudicatory quandary and
administrative perplexity at a time when the nation is striv- F
ing ·to promote employment through diverse strategies
which need, for their smooth fulfilnient, less stress and
distress, more mutual understanding and trust based on a
dynamic rule of law which speaks clearly, firmly and
) humanely. If the salt of law lose its savour of progressive
certainty where with small it be stalled? So we proceed to G
(
formulate the principles, deducible from our discussion
J, which are decisive, positively and negatively, of the
identity ofindustry under the Act. We speak, not exhaus-
tively, but to the extent covered by the debate ~t the bar
and, to that extent, authoritatively, until overruled by a
larger bench or superseded by the legislative branch." H
628 SUPREME COURT REPORTS [1988] 3 S.C.R.

A "Industry as defined in section 2(j) and explained in ,.....('
Banerjee (supra) has a wide import.

(a) Where (i) systematic activity, (ii) organised by
cooperation between employer and employee (the direct
and substantial element is chimerical) (iii) for the produc-
B
tion 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 celes-
tial bliss e.g. making, on a large scale prasad or food),
prima facie, there is an industry in that enterprise.

c (b) Absence of profit motive or gainful objective is
irrelevant, be the venture in the public, joint, private or ~
other sector.

(c) The true focus is functional and the decisive test
is the nature of the activity with special emphasis on the
D 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.
E Although section 2(j) uses words of the widest amp-
litude in its two limbs, their meaning cannot be magnified
to over-reach itself.

Undenaking must suffer a contextual and associa-
tional shrinkage as explained in Banerjee and in this judg-
F ment; so also, service, calling and the like. This yields the
inference that all organized activities possessing the triple
elements in I, although not trade or business, may still be
industry provided the nature of the activity, viz. the
employer-employee basis, bears resemblance to what we
find in trade or business. This takes into the fold of industry
G undertakings, callings and services, adventures 'analogous
to the carrying on of the trade or business'. All features,
other than the methodology of carrying on the activity viz.
in organizing the cooperation between employer and emp-
loyee, may be dissimilar. It does not matter, if on the
employment terms there is analogy.
H
DES RAJ v. STATE OF PUNJAB !MISRA, J.I 629

Application of these guidelines should not stop short A
of their logical reach by invocation of creeds, cults or inner
sense of incongruity or outer sense of motivation for or
resultant of the economic operations. The ideology of the
Act being industrial peace, regulation and resolution of
industrial disputes between employer and workmen, the
k range of this statutory ideology
. must inform
. the reach of B
the statutory definition. Nothing less, nothing more.

-~. (a) The consequences are (i) professions, (ii) clubs,
(iii) educational institutions, (iv) cooperatives, (v) research
institutes, (vi) charitable projects and (vii) other kindred
.:l adventures, if they fulfil the triple tests listed in I cannot be
c
exempted from the scope of section 2(j).

(b) A restricted category of professions, clubs, co-
operatives and even gurukulas and little research lab.s, may
qualify for exemption if, in simple ventures, substantial
and, going by the dominant nature criterion, substantively, D
no employees are entertained but in minimal matters,
marginal employees are hired without destroying the non-
employee character of the unit.

(c) If, in a pious or altruistic mission many employ
themselves, free or for small honoraria or like return, E
mainly drawn by sharing in the purpose or case, 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, divin-
ity or like central personality, and the services are supplied
free or at nominal cost and those who seive ·are not F
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
eleemosynary or like undertakings alone are exempt-not
other generosity, compassion, developmental passion or
project. G
).
The dominant nature test:

(a) Where a complex of activities, some of which
qualify for exemption others not, involves employees on
the total undertaking, some of whom are not workmen as in H
630 SUPREME COURT REPORTS 11988) 3 S.C.R. -'.

the University of Delhi v. Ram Nath, 11964) 2 SCR 703 or
A
some departments are not productive of goods and services
if isolated, even then, the predominant nature of the
services and the integrated nature of the departments as
explained in the Corporation of Nagpur, will be the true
test. The whole undertaking will be industry although those
who are not workmen by definition may not benefit by the --4,
B
status. ·-
(b) Notwithstanding the previous clauses, sovereign
functions, strictly understood, (alone) qualify for exemp·
tion, not the welfare activities or economic adventures
undertaken by government or statutory bodies.
c
(c) Even in departments discharging sovereign func·
tions, if there are units which are industries and they are
substantially severable, then they can be considered to
come within section 2(j).
D
(d) Constitutional and competently enacted legisla·
tive provisions may well remove from the scope of the Act
categories which otherwise may be covered thereby."

Beg, 0., wrote a separate judgment and prefaced it by saying:
E
"I am in general agreement with the line of thinking
adopted and the conclusions reached by my learned
brother Krishna Iyer."

In paragraph 149 of the judgment, the learned Chief Justice observed:
F
"In his heroic efforts, my learned brother Krishna
Iyer, if I may say so with great respect, has not discarded
the tests of industry formulated in the past. Indeed, he has
actually restored the tests laid down by this Court in D. N.
Banerjee's case, and, after that, in Corporation of the City
G of Nagpur v. Its Employees, and State of Bombay v. The
Hospital Mazdoor Sabha to their pristine glory." r'-
The learned Chief Justice again stated:

"Each of us is likely to have a subjective notion about
H industry. For objectivity, we have to look first to the words
)-. DES RAJ v. STATE OF PUNJAB [MISRA, J.] 631

used in the statutory provision defining industry in an .A
attempt to find the meaning. If that meaning is clear, we
need proceed no further. But, the trouble here is that the
words found there do not yield a meaning so readily. They
refer to what employers or workers may do as parts of their
ordinary avocation or business in life ..... "
~ B
"Thus, in order to draw the circle of industry, to use

- r· the expression of my learned brother Iyer, we do not find
even the term workman illuminating. The definition only
enables us to see that certain classes of persons employed
in the service of the State are excluded from the purview of
;l industrial dispute which the Act seeks to provide for in the
interests of industrial peace and harmony between the em- c
ployers and employees so that the welfare of the nation is
secured. The result is that we have then to tum to the
preamble to find the object of the Act itself, to the legisla-
tive history of the Act, and to the socio-economic ethos and
aspirations and needs of the times in which the Act was D
passed."

After quoting the definition of industry, the learned Chief Justice pro-
·}- ceeded to say in paragraph 158 of the judgment:

"It seems to me that the definition was not meant to E
provide more than a guide. It raises doubts as to what could
be meant by the calling of employers even if business, trade,
undertaking or manufacture could be found capable of
_J being more clearly delineated. It is clear that there is
no mention here of any profit motive. Obviously, the work
manufacture of employers could not be interpreted lite- F
rally. It merely means a process of manufacture in which
the employers may be engaged. It is, however, evident that
the term employer necessarily postulates employees with-
out whom there can be no employers ..... "

In paragraph 165 of the judgment, the learned Chief Justice added: G
).
"I have contended myself with a very brief and
hurried outline of my line of thinking partly because I am in
agr<.ement with the conclusions of my learned brother
Krishna Iyer and I also endorse his reasoning almost
,wholly, but even more because the opinion I have dictated H
632 SUPREME COURT REPORTS [1988] 3 S.C.R. ~

just now must be given today if I have to deliver it at all.
A
From tomorrow I cease to have any authority as a Judge to
deliver it. Therefore, I have really no time to discuss the
large numbner of cases cited before us, including those
what are known as sovereign functions."

B Chandrachud, J., as he then was, on behalf of himself Jaswant Singh
and Tulzapurkar, JJ. added a note by saying:

"We are in respectful agreement with the view expre-
ssed by Krishna Iyer, J. that the appeal should be dismis-
sed. We will give our reasons later indicating the area of
concurrence and divergence, (underlining is ours) if any, on
c the various points in controversy on which our learned
Brother has dwelt."

On 7th of April, the reasonings were delivered by Chief Justice
Chandrachud for himself as by theri Jaswant Singh, J. delivered a
D separate set of reasonings for himself and Tulzapurkar, J. The learned
Chief Justice (because by then he had assumed that office) referred to
several authorities and tests and in paragraph 181 of the judgment
stated:

" ......... These refinments are, with respect, are
E not warranted by the words of the definition, apart from
the consideration that in practice they make the application
of the definition to concrete cases dependent upon a factual
assessment so highly subjective as to lead to confusion and
uncertainty in the understanding of the true legal position.
Granting that the language of the definition is so wide that
F some limitation ought to be read into it, one must step at a
point beyond which the definition will skid into a domain
too rarefied to be realistic. Whether the cooperation bet-
ween the employer and the employee is the proximate
cause of the ultimate product and bears direct nexus with it
is a test which is almost impossible of application with any
G degree of assurance or certitude. It will be as much true to
say that the solicitor's assistant, managing clerk, librarian
and the typist do not directly contribute to the intellectual
end product which is a creation of his personal professional
skill as that, without their active assistance and cooperation
it will be impossible for him to function effectively. The
H unhappy state of affairs in which the law is marooned will
DES RAJ v. STATE OF PUNJAB [MISRA, J. [ 633

continue to baffle the skilled professional and his
A
employees alike as also the Judge who has to perform the
unenviable task of sitting in judgment over the directness
of the cooperation between the employer and the
employee, untill such time as the legislature decides to
manifest its intention by the use of clear and indubious
language. Besides the fact that this Court has so held in B
N(ltional Union of Commercial Employees v. M.R. Meher,
Industrial Tribunal, Bombay, [1962] Supp. 3 SCR 157 the
legislature will find a plausible case for exempting the
learned and liberal professions of lawyers, solicitors,
doctors, engineers, chartered accountants and the like
from the operation of industrial laws. But until that hap- C
pens, I consider that in the presen~·state of the law it is
difficult by judicial interpretation to create exemptions in
favour of any particular class."

The remaining two learned Judges added their separate opinion and in
the concluding part stated: D

"In view of the difficulty experienced by all of us in
defining the true denotation of the term industry and
divergence of opinion in regard thereto- as has been the
case with this Bench also-we think, it is high.time that the
Legislature steps in with a comprehensive bill to clear up E
the fog and remove the doubts and set at rest once for all
the controversy which crops up from time to time in rela-
tion to the ·meaning of the aforesaid term rendering it
necessary for larger Benches of this Court to be constituted
J_ which are driven to the necessity of evolving a working
formula to cover particular cases." F

The ultimate·position available from the seven-Judge Bench decision,
therefore, is that while three learned Judges delivered their view
through Krishna Iyer, J., Beg CJ spoke somewhat differently, yet
agreed with the conclusion· reached by Krishna Iyer J. Chandrachud,
CJ. also agreed with the majority while the remaining two learned G
Judges looked for legislative clarification to meet the situation.
_J
Perhaps keeping in view the observations of the learned Judges
constituting the seven-Judge Bench, the definition of industry as oc-
curing in· section 2(j) of the Act. was amended by Act 46 of 1982.
Though almost six years have elapsed since the amendment came on to H
634 SUPREME COURT REPORTS (1988] 3 S.C.R.

the Statute Book, it has not been enforced yet. Bare Acts and Com-
A
mentaries on the Industrial Disputes Act have, however. brought in
the new definition by deleting the old one with a ncro <hat tk n:w
. ·.provision has yet to come into force. This situation has further added
· to the confusion.

B It is now time to tum to the facts of the case. Judicial notice can 1.
be taken of the position that Haryana an(! Pun jab originally consti-
tuted· one State and Haryana has become separate from 1966. The
Irrigation Department of the erstwhile Punjab State was discharging
the State's obligations created undi:r the Northern India Canal and \.1
Drainage Act; 1873. The Administration Report of the year 1981-82 of ?'
the Public Works Department, Irrigation Branch, which really deals \_
c with the irrigation department has been produced before us with r
notice thereof to the appellants' learned counsel. We may extract a
·part of the Report:
."
''The irrigation department which was set-up more
D ( ·than 100 years ago is mainly responsible to provide water
supplies for the substance and development of agriculture
in the 30.36 hectare cultivable area of the State covered by
canal command. This requires harnessing of the surface
and grounds water resources of the State and their equit-
able distribution to the beneficiaries, within Canal
E Command area. This task involves construction· of mult-
' ipurposes, major, medium and minor irrigation projects,
maintenance of net work of channels, regulation of canal
supplies, enforcement of water laws etc. and levying of
crop-wise water supply rates on the irrigators for recovery
through! the state Revenue Department. Extension,
improvement and modernisation of the age old canal
system is also continued to be done simultaneously by the
Department. Besides the irrigation the department also
provides water for drinking purposes to villages and towns
in the State. The canal water supplies are also being made
available for the industrial development in areas where no
G other source for water supplies exists".

''The State of Punjab was reorganised in the year
1966 and a number of disputes on the sharing of water/
powers with successor States croped up. The issues regard-
ing apportionment of Ravi Beas Waters over the prepara-
H tion uses falling to the share of erstwhile Punjab,
DES RAJ v. STAlE OF PUNJAB (MISRA, J.I 635

·apportionment of rights and liabilities of Bhakra Nangal A
Project, retention of control of Irrigation Head Works of
Harike, Ropar and Ferozepur by Punjab; restoration of
J3hakra Nangal Project and Beas Project to Punjab etc. etc.
are also dealt with by the Department." .

''The Irrigation Department is also responsible to
B
provide protection to the· valuable irrigated lands and
public property from flooding, river action and water
logging. This requires construction of flood protection,
river training, drainage and anti·waterlogging works and
their maintenance."
c
''The Department has also to plan· ahead for irriga·
tion development in the State for which purpose proposal
of irrigation schemes are investigated, surveyed and
prepared in advance. Feasibility of irrigation schemes for
hydropower generation from the existing and proposed
irrigation schemes is also investigated by the Department D
and their execution undertaken. The execution of new irri·
gation schemes, extention and improvement of existing
schemes requires preparation of detailed designs of chan·
nels and their necessary works. This work is also done by
the Department."
E
"During designs, e'xecution and maintenance of the
- irrigation, flood control and drainage projects, field prob·
!ems arise for the solution of which research, model studies
and laboratory experiments have to be conducted. The
._ i
Department undertakes this work as well."
F
"Having shared with the neighbouring States almost
entire water resources of the rivers flowing through the
Pun jab water has now become a constraint to keep the
tempo of the development of irrigated agriculture in the
State. For this purpose it has not only become necessary to G
evaluate the total water resources of the State but also plan
conjunctive use of surface and ground water for the
optimum development of this precious resource. Further it
has become necessary to conserve irrigation supplies and
propogate their use economically through innovative water '
distribution system like sprinklers, drip system, etc."
H
636 SUPREME COURT REPORTS [19881 3 S.C.R. ~

A "The Irrigation Department plans and execute reclamation
of salt or thur affected areas within cannal command. Mea-
surements of discharges in the Ravi, the Beas and the
Sutlej desides the beings and drains in the State is also
carried out by the irrigation department. These observa-
tions which are being made for the last over 60 years have
B provided basic data to the design of multipurposes Bhakhra '""'
Nangal, Beas and Beas Sutlej Link projects which have
transformed economies not only of the State of Punjab but
also of the State of Haryana and Rajasthan.
...... -
The fact extracted from the Report apparently give a picture of the I
c activities of the Irrigation Department. There is a full-Bench judgment
of the Punjab and Haryana High Court in the case of Om Prakash v.
Mis Executive Er.gineers, SYL, Kurukshetra & Ors., [19841 Current
L.J. 349 where the question that came up for consideration before the
full Bench was thus stated; whether the irrigation department of the
State (of Punjab) comes within the ambit of industry in section 2(j) of
D the Industrial disputes Act, 1947? The Court took into account the
judgment of another full-Bench decision of the same Court in the case
of State of Punjab v. Ku/dip Singh & Anr., I1983 I 1 L.L.J. 307 where
the question for consideration was whether the Public Works Depart-
ment of the State Government was an industry. In Om Prakash's case
(supra), the full Bench-barely took note of the decision of this Court in
E Bangalore Water Supply case (supra) but did not deal with it. It also
took into account the position of the Irrigation Department in Punjab
keeping in the background the provisions of the Northern India Canal
and Drainage Act of 1873 and stated:

"The irrigation department is a branch of the public
F works department. It provides a reasonably assured source
of water for crops through the net work of canals. The
irrigation department also carries out schemes and takes
measures for protecting crops from the menace of floods
during the times of abnormal rainfall. In the olden times
when there was no canals, agriculture was very limited and
G cultivators depended solely on rainfall. By the passage of
time it was thought necessary to build irrigation and drain-
age works for the pupose of providing better water facilities
to the· farmers on whom depends the economy of this
country. These works could only be built by the
Government.
H
DES RAJ v. STATE OF PUNJAB [MISRA, J.[ 637
,k
The western Jamuna canal which serves the State of
A
Haryana was the first major irrigation work which was initi-
aly constructed by Feroze Shah Tuglaq in 1351. It was
reconditioned by Akbar in 1568 and was extended in 1626
in the reign of Shahjahan. The canal was constructed in a
reasonably serviceable form by the British during 1817-
,..' .. 1823. Then the Upper Bari doab canal, Sirhind canal, B
Lower Chinah canal and Lower Jhelum canal etc., were
constructed. Thereafter, many other projects have come

- y- up and the ones which need mention are Bhakra Nangal
project with its network of Bhakra System and the Beas
project. All these projects have been carried out by the
state at the state expense. It is understandable that such
~-. projects could not at all be undertaken by private enter-
c
preneurs or could be left in their hands for execution.
Further, water is a state subject as per entry 17 in List II of
Seventh Schedule of the Constitution. Even before coming
into force of the Constitution, water of rivers and streams
was considered to be belonging to the State ..... Thus it D
would be evident that the water has at all times been a State
subject and the State can exercise full executive powers in
all matters connected with the water. The State supplies
water to the farmers through the network of canals. It is
correct that water rates are realised from the farmers but
they are not realised for the cost of the water. In other E
words, the State does not sell water to the farmers. As
contended justifiably by the learned Advocate General,
the water charges are not even sufficient to meet the
establishment and maintenance expenses of the depart-
.
).' ment. Moreover, the water rates have never been realised
on the basis of the quantity of the water supplied. These F
rates are dependant upon the class of crops raised by the
farmers and have been fixed in terms of per acre. It may be
noted that rates for crops, such as wheat, sugarcane,
cotton, rice are higher than the other crops such as gram,
oil seeds, bajra and maize etc. In other words, the water
charges have been linked on the principle of bearability, G
that is, paying capacity of the farmer dependant upon his
,J.. income from the kind of crop raised by him. The water is
supplied on the basis of the holding of each farmer in terms
of cultivable commanded area, that is, on the basis of
uniform and equitable yardstick. Again, the water charges
are remitted when the crops are damaged by natural H
638 SUPREME COURT REPORTS (1988] 3 S.C.R.

calamities such as locust, hailstroms, floods or drought etc.
A
Further, the construction of canals, dams, batrag:!3, and
other projects cannot be entrusted to some pri-1ate ~3nds.
The construction of these works involves cur~··•---·
acquisition of land which can also be done by the State.
Merely this fact that water is supplied by charging certain
B rates cannot warrant a finding that the state is indulging in
trade or business activity or an activity which is analogous
to trade, business or economic venture. From what has
been stated above, there can be gainsaying that the func-
' tions of the irrigation department cannot at all be left to
private enterprise. The facts which weighed in holding that
·the construction and maintenance of national and state
c . highways by the State does not come within the ambit of
. : : industry in Ku/dip Singh's case (supra) are present so far as
the irrigation department is concerned ...... In this view
of the matter, I hold that the functions of the irrigation
.. departments are essentially government functions and that
D . ( these functions neither partake of the nature of trade and
business ·nor are even remotely analogous thereto and that
this department does not come within the ambit of industry
as defined in section 2(j) of the Act."
• I
Mr. Shatma for the appellants placed before us some cases of -y·
E different High Courts in support of his stand that the Irrigation
Department should be considered as industry. The first of these cases
is.that of Madhya Pradesh Irrigation Karamchari Sangh v. State of
Madhya Pradesh & Anr., (1972( LU 374 where the Madhya Pradesh
High Court found the Chambal Hyde! Irrigation Project to be an
industry'. .The facts of that case reveal that the Project therein was a l
F 'multy-purpose one which was used for generating electricity as also for )
imgation purposes. On the facts found therein, the High Court came
to the conclusion that it came within the definition under section 2(j)
of the Act. ' .
/·
In State of Rajasthan v. The Industrial Tribunal, Rajasthan,
G (1970] RLW 137 the question for consideration before the Rajasthan
High Court was whether the Survey and Investigation Division of Irri- )--
.. gation Department was an industry. In paragraph 26, the learned
Judge came to the conclusion by saying:

"In view of the aforesaid decisions of the Supreme
H Court, I find it difficult to hold that the activities of the
DES RAJ v. STATE OF PUNJAB [MISRA, J.J 639

State Government by organising its Survey and Investiga- A
tion .Division in the Irrigation Department through which
the State Government rendered services in the matter of
supplying water by constructing canals and dams does not
fall within the ambit of the sovereign or regal functions of
the State. Such service to the people at large, in my opi-
nion, comes within the ambit of the expression industry as B
defined in section 2(j) of the Act."

The finding runs contrary to the conclusion. If in the opinion of the
learned Judge, it was difficult to hold that the activities did not fall
within the ambit of the sovereign or regal functions, then the conclu-
sion should have been different.
c
In Dinesh Sharma & Ors. v. State of Bihar & Ors., [19831 Bihar
L.J.R. 207, a Division Bench of the Patna High Court was considering
if the Public Health Engineering Department of the State of Bihar was
an industry. In paragraph 8 of the judgment, reliance was placed on
the Bangalore Water Supply case (supra) and the Nagpur Corporation D
case (supra) and it was held that the said department of the State
Government of Bihar was an industry. In Chief Engineer, Irrigation,
Orissa v. Harihar Patra & Anr., [1977] L.I.C. 1033 a Division Bench of
l' -~ the Orissa High Court was considering whether the Salandi Irrigation
Project in that State was an industry. The High Court relied upon the
earlier full-Bench decision of its own Court and soine of the decisions E

L of this Court which we have referred to above, and came to hold that
the irrigation project was an industry.

The Administrative Report of the facts found by the High Court
in the instant case have attempted to draw out certain special features.
The legal position has been indicated in the earlier part of our judg- F
ment. On the tests, as already laid down in the judgments, we do not
think these facts found in this case can take out the Irrigation Depart-
ment outside the purview of the definition of 'industry'. We have
already referred to the Dominant Nature test evolved by Krishna Iyer,
J. The main functions of the Irrigation Department where subjected to
the Dominant Nature test clearly come within the ambit of industry. G
We have not been able to gather as to why even six years after the
amendment has been brought to the definition of industry in section
2(j) of the Act the same has not been brought into force. This Court on
more than one occasion has indicated that the position should be
clarified by an appropriate amendment and when keeping in view the
opinion of this Court, the law was sought to be amended, it is H
640 SUPREME COURT REPORTS [1988] 3 S.C.R.

A appropriate that the same should be brought into force as such or with
such further alterations as may be considered necessary, and the
legislative view of the matter is made known and the confusion in the
field is cleared up.

For the reasons we have indicated above, these appeals succeed.
B
We make it clear that in the event of the definition of industry being
changed either by enforcement of the new definition of industry or by
any other legislative change, it would always be open to the aggrieved
Irrigation Department to raise the issue again and the present decision
would not stand in the way of such an attempt in view of the altered ~-
situation. The appeals are allowed without costs.
c
S.L. Appeals allowed.