Holding

The Telecom Department is an industry under the Industrial Disputes Act, and a smaller bench cannot overrule a larger bench’s precedent.

Summary

The Department of Telecom (DoT) of the Union of India appealed a High Court order that held the DoT to be an "industry" under the Industrial Disputes Act, 1947. The Supreme Court examined whether the DoT, engaged in commercial telecommunications services and not performing sovereign functions, falls within the definition of "industry" in Section 2(j) of the Act. Relying on the seven‑judge precedent in Bangalore Water Supply & Sewerage Board v. A. Rajappa, the Court affirmed that the dominant‑nature test makes the DoT an industry. It also reiterated that a bench of lesser strength cannot overrule a larger bench’s binding decision, thereby overruling the contrary two‑judge rulings in Theyyam Joseph’s case and Bombay Telephone Canteen Employees’ Association case. Consequently, the appeal was dismissed and the DoT was confirmed as an industry for the purposes of the Act.

Issues considered

Whether the Telecom Department of the Union of India qualifies as an "industry" within the meaning of Section 2(j) of the Industrial Disputes Act, 1947.
Whether a smaller bench of the Supreme Court may depart from a binding decision of a larger bench.

Legislation cited

Industrial Disputes Act, 1947s. 20, s. 2(j)

Subjects

Industrial Disputes Actdefinition of industrytelecommunicationssovereign functionsprecedentbench hierarchycommercial activity

Judgment

A GENERAL MANAGER, TELECOM
•
.. S. SR IN IV ASA RAO AND ORS .

NOVEMBER 18, 1997

B [J.S. VERMA, CJ., B.N. KIRPAL AND V.N. KHARE, JJ.]

Industrial Disputes Act, 1947: Section 20)

Telecom Department of Union of India-Engaged in commercial
C activity-Not discharging any sovereign fi111clio11 of the Stale-Whether
industry-Held, yes.

Practice and Procedure

Seven Judge Bench decision defining "'industry-Two Judge Bench
D decision on the point without reference to the seven Judge Bench-Later Two
Judge Bench taking conflicting view-Validity of-Held, it is not permissible
for any smaller Bench lo take a view contrary to the view taken by a larger
Bench or to by-pass that decision so long as it holds the field

Appellant-Department of Telecom of Union of India has preferred the
E present appeal against High Court's decision holding that the appellant
Department was an "industry" within the meaning of definition of"industry"
in section 2(j) of the Industrial Disputes Act, 1947.
:
Dismissing the appeal, this Court

F HELD : I. Telecommunication Department of Union of India is an
"industry" within the definition of section 2(j) of Industrial Disputes Act,
1947 because it is engaged in commercial activity and the Department is not
discharging any of the sovereign function of the State. 1215-C(

G Bangalore Water Supply and Sewerage Board v. A. Rajappa & Ors.
1197812 sec 213, followed.

2. It is not permissible for any Bench of lesser strength to take a view
contrary to that of a larger Bench or to by pass that decision so long as it
holds the field. A two Judge Bench of this Court in Theyyam Joseph's case
H held that the functions of Postal Department are part of the sovereign
212
GEN. MANAGER TELECOM v. S.S. RAO [VERMA, CJ.] 213
functions of the State and it is therefore not an 'industry' within the definition A
of Section 2(j) of the Industrial Disputes Act, 1947. This decision was
rendered without any reference to the Seven Judge Bench decision in
Bangalore Water Supply case. Similarly in a later two Judge Bench decision
in Bombay Telephone Canteen Employees' Association case after referring
to the decision in Bangalore Water Supply case took a conflicting view. Thus B
the decision in Theyyam Joseph's case and Bombay Telephone Canteen
Employees case cannot be treated as laying down the correct law.
(215-G-H; 216-A(
•
Sub-Divisional Inspector of Post, Vaikam & Ors. v. Theyyam Joseph &
Ors., (1996) 8 SCC 489 and Bombay Telephone Canteen Employees' C
Association v. Union of India, AIR (1997) SC 2817, overruled.

Bangalore Water Supply and Sewerage Board v. A. Rajappa & Ors.,
(1978) 2 sec 213, referred to.

CIVIL APPELLATE JURISDICTION: CIVIL Appeal No. 7845of1997. D
From the Judgment and Order dated 2.9.96 of the Andhra Pradesh High
Court in W.A. No. 1025of1996.

N.N. Goswami, Arvind Kumar Sharma, Ms. Anubha Jain and Ms.
Kanupriya Mittal for the Appellant. E
Rakesh Luthra, Ms. Pooja Dua and L.R. Singh for the Respondents.

The Judgment of the Court was delivered by :

VERMA, C.J. Delay condoned. F
Leave granted.

This matter comes up before a three-Judge Bench because of a Reference
made by a two-Judge Bench which doubted the correctness of an earlier two-
Judge Bench decision of this Court in Sub-Divisional Inspector of Post, G
Vaikam & Ors. V. Theyyam Joseph & Ors., [1996) 8 sec 489. It was stated .
at the Bar that a later two-Judge Bench decision reported as Bombay Telephone
Canteen Employees' Association 'v. Union of India, AIR (1997) Supreme
Court 2817 also takes the same view as in the case of Theyyam Joseph.

The only point for decision in this appeal is whether the Telecom H
214 SUPREME COURT REPORTS [1997) SUPP. 5 S.C.R.

A Department of the Union of India is an industry within the meaning of the
definition of 'industry' in Section 20) of the Industrial Disputes Act, 1947. It
may here be observed that the amendment made in that definition in 1982 has
not been brought into force by the Central Government by issuance of
. '-
notification required for the purpose. It is, therefore not necessary for us to
B consider whether the Telecommunication Department of the Union of India
would be an 'industry' within the meaning thereof in the amended provision
which is not yet brought into force. We are, in this matter, concerned with
the earlier definition of 'industry' which continues to be in force and which
was,subject of consideration by a seven Judge Bench in Bangalore Water
Supply and Sewerage Board v. A. Rajappa & Ors., [1978] 2 SCC 213.
c
The above point arises for consideration out of a Reference made under
Section JOA of the Industrial Disputes Act, 1947, which matter is now pending
in the High Court. The contention of the appellant throughout has been that
the Reference was incompetent since the Telecommunication Department of
D the Union of India is not an 'industry' within the meaning of its definition
contained in the existing un-amended Section 20) of the Industrial Disputes
Act, 1947. Admittedly, this question has to be answered according to the
decision of this Court in Bangalore Water Supply (supra) which is a binding
precedent. The dominant nature test for deciding whether the establishment
E is an 'industry' or not is summarised in para 143 of the judgment of Justice
Krishna Iyer in Bangalore Water Supply case (supra) which is as under :

143. The dominant nature test :

(a) Where a complex of activities, some of which qualify for
F exemption, others not, involves employees on the total undertaking,
some of whom are not 'workmen' as in the University of Delhi case
(supra) or some departments are not productive of goods and services
of isolated, even then, the predominant nature of the services and the
integrated nature of the departments as explained in the Corporation
if Nagpur (supra), will be the true test. The whole undertaking will be
G
'industry' although those who are not 'workmen' by definition may
not benefit by the status.

(b) Notwithstanding the previous clauses, sovereign functions,
strictly understood, (alone) qualif:f for exemption, not the welfare
H activities or economic adventures undertaken by government or
GEN. MANAGER TELECOM v. S.S. RAO [VERMA, CJI.] 215
statutory bodies. A
(c) Even in departments discharging sovereign functions, ifthere
are units which are industries and they a~e ...substantially severable,
then they can be considered to come within Section 20).

(d) Constitutional and competently enacted legislative provisions B
may well remove from the scope of the Act categories which otherwise
may be covered thereby."

It is rightly not disputed by the learned counsel for the appellant that
according to this test the Telecommunication Department of the Union of C
India is an 'industry' within that definition because it is engaged in a
commercial activity and the Department is not engaged in discharging any of
the sovereign functions of the State.

A two-Judge Bench of this Court in Theyyam Joseph's, case [1996] 8
sec 489 (supra) held that the functions of the postal Department are part of D
the sovereign functions of the State and it is, therefore, not an 'industry'
within the definition of Section 20) of the Industrial disputes Act, 194 7.
Incic' ntly, this decision was rendered without any reference to the seven-
0

Judge Bench decision in Bangalore Water supply (supra). In a later two-Judge
Bench decision in Bombay Telephone Canteen Employees 'Association, case- E
AIR (1997) SC 2817, this decision was followed for taking the view that the
Telephone Nigam is not an 'industry'. Reliance was placed in Theyyam Josephs,
case [1996] 8 SCC 489 (supra) for that view.' However, in Bombay Telephone
Canteen Employees' Association case (i.e. the latter decision), we find a
reference to the Bangalore Water Supply case. After referring to the decision F
in Bangalore Water Supply, it was observed that if the doctrine enunciated
in Bangalore Water Supply is strictly applied, the consequence is 'catastrophic'.
,. With respect, we are unable to subscribe to this view for the obvious reason
that it is in direct conflict with the seven Judge Bench decision in Bangalore
Water Supply case (supra) by which we are bound. It is needless to add that
it is not permissible for us, or for that matter any Bench of lesser strength, G
to take a view contrary to that in Bangalore Water Supply (supra) or to by
pass that decision so long as it holds the field. Moreover, that decision was
rendered long back - nearly two decades earlier and we find no reason to think
otherwise. Judicial discipline requires us to follow the decision in Bangalore
Water Supply, case [1978] 2 sec 213. We must, therefore, add that the H
216 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A decisions in Theyyam Joseph, (1996] 8 sec 489 and Bombay Telephone
Canteen Employees' Association, AIR (1997) Supreme Court 2817 cannot be
treated as laying down the con·ect law. This being the only point for decision
in this appeal, it must fail.

Accordingly, the appeal is dismissed. No costs.
B
S.V.K.I. Appeal dismissed. ·