PHYSICAL RESEARCH LABORATORYversusK.G. SHARMA

               PHYSICAL RESEARCH LABORATORY                                      A
                                     v.
                              K.G. SHARMA

                              APRIL 8, 1997

           (K. RAMASWAMY AND G.T. NANAVATI, JJ.]                                 B

     Labour Law:

     Industlial Disputes Act, 1947: Section 2(j).

      "Industry''-Bangalore Water Supply Case-Principles laid down
                                                                                 c
in-Held : Not exhaustive-Circumstances under which the principles were
laid down, explained.

      Research Institutions--Run by Government-Physical Research
Laboratory--Held : Not an 'industry' because it was purely a research or-        D
ganisation-lt was more an institution discharging governmental functions
and a domestic enterprise than a commercial enterprise, though it was
canying on the activity of research with the }1e/p of its employees.

      Section 2(s)-'Workman'........Physical Research Laboratory (PRL)
employees-Held : Not 'workmen' because PRL not an 'industry'-Hence,              E
employees of PRL could not claim retirement at the age of 60 instead of at
the age of 58.

      Words and Phrases :

      'lndustry'-Meaning of-In the context of S. 2(j) of the Industrial          F
Disputes Act, 1947.

      The respondent "was an employee of Physical Research Laboratory
(PRL), an institution under the Government of India, Department of
Space. On attaining the age of 58 years the respondent was retired from G
service. Feeling aggrieved by his retirement at the age of 58 years and not
at the age of 60 years the respondent filed a petition before the Labour
Court.

     The Labour Court rejected the contention of the appellant that PRL
was not an 'industry' within the meaning of Section of 2 (j) of the Industrial   H
                                     733
    734                   SUPREME COURT REPORTS                  (1997] 3 S.C.R.

A Disputes Act, 1947. The Labour Court had recorded a finding that the
    research work carried on by the PRL was not connected with production,
    supply or distribution of material goods or services. The Labour Court,
    therefore, held that the respondent was entitled to continue in service upto
    the age of 60 years and the order retiring him earlier was declared as bad.
    Hence this appeal.
B
          Allowing the appeal, this Court

         HELD : 1.1. The <1uestion whether Physical Research Laboratory
  (PRL) is an 'industry' under the Industrial Disputes Act, 1947 will have
C have to be decided by applying the principles laid down in Bangalore Water
  Supply case. At the same time, it has to be kept in mind these principles
  were formulated as this court found the definition of the word 'industry'
  as vague and "rather clumsy, vaporous and tall-and-dwarf'. Therefore,
  while interpreting the words 'undertaking', 'calling' and 'service' which are
D of much wider import, the principles of 'noscitur a sociis' was applied and
  it was held that they would be 'industry' only if they are found to be
  analogous to trade or business. Furthermore, an activity undertaken by
  the Government cannot be regarded as 'industry' if it is done in discharge
  of its sovereign functions. One more aspect to be kept in mind is that the
  aforesaid principles are not exhaustive either as regards what can be said
E to be sovereign functions or as regards the other aspects dealt with by the
  court. [741-B-D]

        1.2. PRL is an institution under the Government of India's Depart-
  ment of Space. It is engaged in pore research in space science. The purpose
F of the research is to acquire knowledge about the formation and evolution
  of the universe but the knowledge thus acquired is not intended for sale.
  The Labour Court has recorded a categorical finding that the research
  work carried on by PRL is not connected with production, supply or
  distribution of material goods or services. The material on record further
  discloses that PRL is conducting research not for the benefit or use of
G others. TI10ugh the results of the research work done by it are occasionally
  published they have never been sold. There is no material to show that the
  knowledge so acquired by PRL is marketable or has any commercial value.
  It has not been pointed out how the knowledge acquired by PRL or the
  results of the research occasionally published by it will be useful to persons
H other than those engaged in such type of study. The material discloses that
        PHYSICAL REASEARCH LABO RATORY v. K.G. SHARMA                     735

the object with which the research activity is undertaken by PRL is to           A
obtain knowledge for the benefit of the Department of Space. Its object is
not to render services to others; nor in fact it does so except in an indirect
manner. [743-D-G]

       1.3. Neither from the nature of its organisation nor from the nature
and character of the activity carried on by PRL, can it be said to be an         B
'undertaking' analogous to business or trade. It is not engaged in a com-
mercial industrial activity and it cannot be described as an economic ven-
ture or a commercial enterprise as it is not its object to produce and
distribute services which would satisfy wants and needs of the consumer
community. It is more an institution discharging Governmental functions          C
and a domestic enterprise than a commercial enterprise. PRL, therefore, is
not an industry even though it is carrying on the activity of research in a
systematic manner with the help of its employees as it lacks that element
which would make it an organisation carrying on of a trade or business; it
is not producing and distributing services which are intended or meant for
satisfying human wants and needs, as ordinarily understood.                      D
                                                          [743-H; 744-A-C]
      Bangalore Water Supply & Sewerage Board v. A. Rajappa, [1978) 2
SCC 213; Chief Co11se1vatorof Forests &Anr. v.Jagannath Mamti Kondliare,
[1996) 2 SCC 293 and Sub-Divisional Inspector of Post, Vaikam & Ors.,
[19961 8 sec 489, relied on.                                                     E
     I.I. Shrimali v. District Development Officer, (1989) 1 GLR 396, ap-
proved.

      2. The employees working with PRL are not "workmen" within the
meaning of Section 2(s) of the Act because PRL is not an 'industry'. Hence,      F
the respondent who was an employee of PRL could not claim retirement
at the age of 60 years instead of at the age of 58 years.

      Physical Research Laboratory Employees' Union v. A.N. Ram, SCA
No. 1082 of 1979 (Guj.), overruled.
                                                                                 G
        CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2663 of
1997.

     From the Judgment and Order dated 7.5.92 of the Presiding Officer,
Labour Court, Ahmedabad in R. No. 105 of 1982.                                   H
        736                  SUPREME COURT REPORTS                   [1997) 3 S.C.R.

    A        Ashok Desai, Attorney General, Sanjanwalla, P.H. Parekh and Ms.
        Bina Madhavan for the Appellant.
..'
;
              Mrs. S. Bagga for the Respondent.

              The Judgment of the Court was delivered by
    B
              NANAVATI, J. Leave granted.

              The question that arises for consideration in this appeal is whether
        Physical Research Laboratory (for short 'PRL'), the appellant, is an
    C   'industry' within the meaning of Section 2(j) of the Industrial Disputes Act.

               The facts and circumstances which gave rise to this question are as
        follows. The respondent was appointed by PRL as Scientific Glass Blower
        on 25.10.48. He continued to work as such till 11.5.76 when he was
        transferred to Photography Documentation Services on a post which was
    D   non-technical and administrative. On 31.12.78 he attained the age of 58
        years. He was, therefore, retired from service with effect from 1.1.79
        Feeling aggrieved by his retirement at the age of 58 years and not at 60 he
        filed a writ petition in the High Court of Gujarat but it was withdrawn. He
        then filed a complaint before the Labour Commissioner who, on the basis
        thereof, made a reference to the Labour Court at Ahmcdabad.
    E
            The Labour Court rejected the contention of the appellant that it
      was not an 'industry' within the meaning of Section 2(j) of the AD. Act.
      Though it recorded a finding that PRL is purely a research institute and
      the research work carried on by it is not connected with production supply
    F or distribution of goods or services yet it took the aforesaid view following
      the decision of this Court in Bangalore Water Supply & Sewerage Board v.
      A. Rajappa, (1978] 2 SCC 213 as it further found that PRL is carrying on,
      in an organised and systematic manner, the activity of research in its
      laboratory hy active co-operation between itself and its employees and the
      discoveries and inventions made would be eligible for sale. In taking the
    G view that PRL is an 'industry' it also followed the decision of the Gujarat
      High Court in Pllysical Research Laboratory Employees Union v. A.N. Ram
      (Special Civil Application No. 1082 of 1979), a case under the Trade
      Unions Act, wherein it was observed that "In view of the decision of the
      Supreme Court in Bangalore Water Supply & Sewerage Board v. A. Rajappa
    H and Others, A.LR. (1978) S.C. 548, it is not open to doubt that the
  PHYSICAL REASEARCH LABO RA TORY v. K.G. SHARMA [NANAVAT!, J.] 737


employees working with the Physical Research Laboratory Ahmedabad,              A
would come within the definition of "workmen" under the Industrial Dis-
putes Act and other similar legislation in the field of relations between
employers and employees." On merits, it held that the respondent, having
worked for a long period from 1948 to 1976 on a technical post, could not
have been treated as a person working on the administrative side merely
because towards the fag end of his career he was transferred to a post on
                                                                                B
the administrative side and at the time of attaining the age of 58 years he
was working on such a post. The Labour Court held that the respondent
was entitled to continue in service upto the age of 60 years. Therefore, the
order, retiring him earlier, was declared as bad and it was held that he was
entitled to reinstatement with full back wages. As the respondent had           c
already completed the age of 60 years by them no order of reinstatement
was passed but only back wages for those two years were ordered to be
paid.

       The appellant has approached this Court directly against the award       D
of the Labour Court as the Gujarat High Court has already taken the view
that PRL is an 'industry' and different High Courts and Tribunals have
expressed conflicting views on the question whether research institutes run
by the Government can be said to be 'industry' as defined by Section 2G)
of the I.D. Act. On 1.2.93, when Special Leave Petition, out of which this
appeal arises, was listed for hearing a statement was made by the learned       E
counsel for the appellant that irrespective of the decision on merits this
Court should decide whether research instiiute of the type of PRL can be
said to be 'industry'. This Court passed an order for issuing notice indicat-
ing that the matter will be finally disposed of at the notice stage itself.
                                                                                F
       Our attention was first drawn by the learned Attorney General who
appeared for the appellant to the facts which are not in dispute. PRL is a
public trust registered under the Bombay Public Trust Act, 1950. It is a
research institute and was established by Dr. Vikram Sarabhai for research
in space and allied sciences. It is finance mainly by the Central Government
by making provision in that behalf in the Union Budget and nominally by G
the Government of Gujarat, Karmakshetra Education Foundation and
Ahmcdabad Education Society. It is virtually an institute falling under
Government of India's Department of Space. Its object is to conduct and
is, therefore, engaged in conducting advance research in (1) astronomy and
astrophysics, (2) planetary atmosphere and aeronomy, (3) earth sciences H
    738                   SUPREME COURT REPORTS                     [1997) 3 S.C.R.

A and solar system studies and (4) theoretical physics. It is the case of the
    appellant that the research work is done in the institute by eminent




B
    scientists who engage themselves in resolving problems of fundamental
    sciences on their own. It is not directly or indirectly carrying on any trade
    or business and its activities do not result into production or distribution
    or goods or services calculated to satisfy human wants and wishes. The
                                                                                        -
    knowledge acquired as a result of the research carried on by it is not sold
    but is utilised for the benefit of the Government. It was, therefore, sub-
    mitted by the learned Attorney General that PRL being a purely research
    institute of the Central Government engaged in carrying on fundamental
    research regarding the origin and evolution of the Universe and the atmos-
C   phere of the earth is not an 'industry' as defined by Section 2(j). He further
    submitted that the activity of m.earch is carried on mainly by the scientists
    engaged for that purpose and incidentally with the help of a few other
    employees. He also submitted that the research work carried on by the
    PRL is more in the nature of governmental or sovereign function than a
D   commercial venture and, therefore, also it would not fall within the purview
    of Section 2 (i) of the I.D. Act.

          The question : What is an 'industry' under the Industrial Disputes
    Act? has been answered by this Court in Bangalore Water Supply case
    (supra) as under :
E
             "I

                140. 'Industry', as defined in Section 2(j) and explained in
             Banerji (supra), has a wide import.

F               (a) Where (i) systematic activity, (ii) organized by co-operation
             between employcr and employee (the direct and substantial ele-
             ment is chimcrcial) (ii) for the production and/or distribution of
             goods and services calculated to satisly human wants and wishes
             (not spiritual or religious but inclusive of material things or services
             geared to celestial bfas e.g. making , on a large scale prasad or
G
             food), plima facie, there is an 'industry' in that enterprise.

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

H                 ( c) The true focus is functional and the decisive test is the
PHYSICAL REASEARCII LABO RATORY v. K.G. SHARMA (NANAVAT!, J.] 739


     nature of the activity with special emphasis on the employer-             A
     employee relations.

         (d) If the organization is a trade or business it does not cease
     to be one because of philanthropy animating the undertaking.

     II                                                                        B
         141. Although Section 20) uses words of the widest amplitude
     in its two limbs, their meaning cannot be magnified to overreach
     itself.

         (a) 'Undertaking' must suffer a contextual and associational          C
     shrinkage as explained in Banerji (supra) and in this judgment; so
     also, service, calling and the like. This yields the inference that all
     organized activity possessing the triple elements in l (supra),
     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         D
     the fold of 'industry' undertakings, callings and services, adventures
     'analogous to the carrying on the trade or business'. All features,
     other than the methodology of carrying on the activity viz. in
     organizing the co-operation between employer and employee, may
     be dissimilar. It does not matter, if on the employment terms there       E
     is analogy.

     III

         142. A µplication of these guidelines should not stop short of
     their logical reach by invocation of creeds, cults or inner sen5e of      F
     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 range of this statutory ideology must
     inform the reach of the statutory definition. Nothing less, nothing       G
     more.

         (a) The consequences are (i) professions, (ii) clubs, (iii) educa-
     tional institutions, (iv) co-operatives, (v) research institutes, (vi)
     charitable projects and (vii) other ki~dred adventures, if they fulfil
     the triple tests listed in I (supra), cannot be exempted from the         H
    740                SUPREME COURT REPORTS                     [1997) 3 S.C.R.

A         scope of Section 20).



                                                                                    -
              (b) A restricted category of professions, clubs, co-operatives
          and even gurukulas and little research labs, may qualify for exemp-
          tion if, in simple ventures, substantially and, going by the dominant
          nature criterion, substantively, no employees are entertained but
B         in minimal matters, marginal employees are hired without destroy-
          ing the non-employee character of the unit.

              (c) If, in a pious or alturistic mission many employ themselves,
          free or for small honoraria or like return, mainly drawn by sharing
          in the purpose or cause, such as lawyers volunteering to run a free
c         legal services clinic or doctors serving in their spare hours in a free
          medical centre or ashramites working at the bidding of the holi-
          ness, 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
D         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, com-
          passion, developmental passion or project.

          IV
E
                       143. The dominant nature test :

              (a) Where a complex of activities, some of which qualify for
          exemption, others not, involves employees on the total undertak-
F         ings, some of whom are not 'workmen' as the University of Delhi
          case (supra) or 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 (supra), will be the true test. The
          whole undertaking will be 'industry' although those are not
G         'workmen' by definition may not benefit by the status.

              (b) Notwithstanding the previous clauses, sovereign functions,
          strictly understood, (alone) quality for exemption, not the welfare
          activities or economic adventures undertaken by government or
H         statutory bodies.
      PHYSICAL REASEARCH LABORATORY"· K.G. SHARMA [NANAVAT!, J.] 741


             (c) Even in departments discharging sovereign functions, if there          A


-            are units which are industries and they are substantially severable,
             then they can be considered to come within Section 20).

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

          Therefore, the question whether PRL is an 'industry' under the I.D.
    Act will have to be decided by applying the above principles : but, at the
    same time it has to be kept in mind that these principles were formulated
    as this Court found the definition of the word 'industry' as vague and
    "rather clumsy, vapourous and tall-and-dwarf'. Therefore, while interpret-
                                                                                        c
    ing the words 'undertaking', 'calling' and 'service' which are of much wider
    import, the principle of 'noscitur <: sociis' was applied and it was held that
    they would be 'industry' only if they are found to be analogous to trade or
    business. Furthermore, an activity undertaken by the Government cannot
    be regarded as 'industry' if it is done in discharge of its sovereign functions.    D
    One more aspect to be kept in mind is that the aforesaid principles are not
    exhaustive either as regards what can be said to be sovereign functions or
    as regards the other aspects dealt with by the court.

           In this context, it is useful to refer to Chief Conservator of Forests and
    Another v. Jagannath Maruti Kondhare, (1996) 2 SCC 293, wherein this
                                                                                        E
    Court, while rejecting the contention that as sovereignty vests in the people
    the concept of sovereign functions would include all welfare activities, on
    the ground that taking of such a view would erode the ratio in Bangalore
    Water Supply case, observed that "the dichotomy of sovereign and non-
    sovereign functions does not really exist - it would all depend on the nature       F
    of the power and manner of its exercise". After referring to the three
    traditional sovereign functions namely legislative power, the administration
    of laws and the exercise of the judicial power and also the decision of the
    Gujarat High Court in J.J. Shrimali v. Distlict Development Officer, (1989)
    1 GLR 396, wherein famine and drought relief works undertaken by the                G
    Sfate Government were held not to be an 'industry', this Court observed
    that "What really follows from this judgment is that apart from the
    aforesaid three functions, there may be some other functions also regarding
    which a view could be taken that the same too is a sovereign function".

           fn Sub-Divisio11al Inspector of Post, Vaikam a11d Others v. 771eyya111       H
    742                   SUPREME COURT REPORTS                     [1997] 3 S. C.R.

A Joseph and Others, (1996] 8 sec 489, this Court had to consider whether
    the establishment of Sub-Divisional Inspector of Post at Vaikam is an
    'industry'. Therein this Court has observed that "India as a sovereign,
    socialist, secular, democractic republic has to establish an egalitarian social
    order under rule of law. The welfare measures partake the character of
    sovereign functions and the traditional duty to maintain law and order is
B   no longer the concept of the State. Directive Principles of State Policy
    enjoin on the State diverse duties under Part IV of the Constitution and
    the performance of the duties are constitutional functions. One of the
    duties of the State is to provide telecommunication service to the general
    public and an amenity and so is an essential part of the sovereign functions
C   of the State as a welfare State. It is not, therefore, an industry". While
    taking this view this Court was also influenced by the fact that, the method
    of recruitment, the conditions of service, the scale of pay and the conduct
    rules regulating the service conditions of the Extra-Departmental Agents
    employed by the. said establishment are governed by the statutory rules and
D   regulations and that those employees are civil servants. Therefore, while
    applying the traditional test, approved by this Court in Bangalore Water
    Supply case to determine what can be regarded as sovereign functions, the
    change in the concept of sovereign functions of a constitutional government
    has to be kept in mind. Relying upon these two in Chief Conse1vator of
    Forests v. Jagannath Marnti Kondhare (supra) and Sub-Divisional Inspector
E   of Post v. T71eyyam Joseph and Others (supra), it was contended by the
    learned Attorney General that the research work carried on by PRL should
    be regarded as a sovereign or governmental function.

         With respect to research institutes this Court in Bangalore Water
    Supply has observed as under :
F
                "Does research involve collaboration between employer and
             employee? It does. The employer is the institution, the employees
             are the scientists, para-scientists and other pers_onnel. Is scientific
             research service? Undoubtedly it is. Its discoveries are valuable
G            contributions to the wealth of the nation. Such discoveries may be
             sold for a heavy price in the industrial or other market. Technology
             has to be paid for any technological inventions and innovations
             may be patented and sold. In our scientific and technological age
             nothing has more case value, as intangible goods and invaluable
H            services, than discoveries. For instance, the discoveries of Thomas
  PHYSICAL REASEARCH LABORATORY v. K.G. SHARMA [NANAVAT!, J.] 743


        Alva Edison made him fabulously rich. It has been said that his A
        brain had the highest cash value in history for he made the world
        vibrate with the miraculous discovery of recorded sound. Unlike
        most inventors, he did not have to wait to get his reward in heaven;
        he received it munificently on this gratified and grateful earth,
        thanks to conversion of his inventions into money aplenty. Re-
        search benefits industry. Even though a research institute may be
                                                                             B
        a separate entity disconnected from the many indnstries which
        funded the institute may be a separate entity disconnected from
        the many industries which funded the institute itself, it can be
        regarded as an organisation, propelled by systematic activity
        modelled on co-operation between employer and employee and C
        calculated to throw up discoveries and inventions and useful solu-
        tions which benefit individnal industries and the nation in terms of
        goods and services and wealth. It follows that research institutes,
        albeit run without profit-motive, are industries."

       PRL is an institntion under the Government of India's Department
                                                                                D
of Space. It is engaged in pure research in space science. What is the nature
of its research work is already stated earlier. The purpose of the research
is to acquire knowledge about the formation and evolution of the universe
but the knowledge thus acquired is not intended for sale. The Labour
Court has recorded a categorical finding that the research work carried on      E
by PRL is not connected with production supply or distribution of material
goods or services. The material on record further discloses that PRL is
conducting research not for the benefit or use of others. Though the results
of the research work done by it are occasionally published they have never
been sold. There is no material to show that the knowledge so acquired
                                                                                F
PRL is marketable or has any commercial value. It has not been pointed
out how the knowledge acquired by PRL or the results of the research
occasionally published by it will be useful to persons other than those
engaged in such type of study. The material discloses that the object with
which the research activity is undertaken by PRL is to obtain knowledge
for the benefit of the Department of Space. Its object is not to render         G
services to others nor in fact it does so except in an indirect manner.

      It is nobody's case that PRL is engaged in an activity which can be
called business trade or manufacture. Neither from the nature of its
organisation nor from the nature and character of the activity carried on H
    744                   SUPREME COURT REPORTS                  [1997) 3 S.C.R.

A by it, can it be said to be an 'undertaking' analogous to business or trade.
    It is not engaged in a commercial industrial activity and it cannot be
    described as an economic venture or a commercial enterprise as it is not
    its object to produce and distribute services which would satisfy wants and
    needs of the consumer community. It is more an institution discharging
    Governmental functions and a domestic enterprise than a commercial
B   enterprise. We are, therefore, of the opinion that PRL is not an industry
    even though it is carrying on the activity of research in a systematic manner
    with the help of its employees as it lacks that element which would make
    it an organisation carrying on an activity which can be said to be analogous
    to the carrying on of a trade or business because it is not producing and
C   distributing services which are intended or meant for satisfying human
    wants and needs, as ordinarily understood.

         We, therefore, allow this appeal and set aside the award passed by
    the Labour Court at Ahmedabad in Reference No. LCA 105 of 1982.
    However, in view of the facts and circumstances of the case there shall be
D   no order as to costs.

    v.s.s.                                                      Appeal allowed.