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PETITIONER: PHYSICAL RESEARCH LABORATORY

       Vs.

RESPONDENT: K.G. SHARMA

DATE OF JUDGMENT:       08/04/1997

BENCH: K. RAMASWAMY, G.T. NANAVATI

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T 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 ’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 word as such  till 11.5.76 when he was transferred to photography Documentation services on a post which was non-technical and administrative. On 31.12.78 he attained the age of 58 years. He was,  therefore. retired  from service  with effect  form 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 by it was with   He then filed a complaint before the  Labour commissioner  who, on  the basis thereof, made a reference to the Labour court at Ahmedabad.      The  Labour   Court  rejected  the  contention  of  the appellant that  it was  not an ’industry’ within the meaning of Section  2(j) of  the I.D.  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 or distribution of goos or services yet it took the aforesaid view following the decision of this court in Bangalore  Water Supply  & Sewerage  Board Vs. 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  by active  co-operation between itself and  its employees  and the discoveries and invention made would be eligible for sale. in taking the view that PRL is an  ’industry’ it  also  followed  the  decision  of  the Gujarat High court in physical Research Laboratory Employees Union vs.  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 and others A.I.R.  1978 S.C.  548, it  is not open to doubt that the employees  working with the physical Research Laboratory

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Ahmedabad, would  come within  the definition  of " workmen" under  the   Industrial  Disputes   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   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 up to  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 already completed the age of 60 years by then 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 of  the Labour court as the Gujarat  High court has  already taken the views that PRL is an ’industry’ and  different  High  court  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 2(j)  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 counsel  for the appellant that irrespective of the  decision on  merits this court should decide whether research institute  of the  type of  PRL can  be said  to be ’industry’. This  court passed  an order  for issuing notice indicating that  the matter  will be  finally disposed of at the notice stage itself.      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  bu Dr.  Vikram Sarabhai  for research in  space and allied science. It is financed mainly by the central Government by making provision in that behalf in the  Union Budget  and nominally  by  the  Government  of Gujarat, Karmakshetra  Education  Foundation  and  Ahmedabad Eduction 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 science 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  scientists   who  engage  themselves  in  resolving problems of  fundamental sciences  on their  own. It  is not directly of indirectly carrying on any trade or business and its activities do not result into production or distribution of 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,  submitted  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  atmosphere of  the earth  is  not  an ’industry’ as  defined by section 2(j). He further submitted that the  activity of  research is  carried on mainly by the scientists engaged  for that  purpose and  incidentally with the help  of a  few other employees. He also submit that the research work carried on by the PRL is more in the nature of

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venture and,  therefore, also  it would  not fall within the purview of section 2(j) 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 :      "I      140.  ’Industry’,   as  defined  in      Section  2(j)   and  explained   in      Banerji  (supra)   ,  has   a  wide      import.       (a) Where (i) systematic activity,      (ii)  organized   by   co-operation      between employer  and employee (the      direct and  substantial element  is      chimerical) (ii) for the production      and/or distribution  of  goods  and      services  calculated   to   satisfy      human   wants   and   wishes   (not      spiritual    or    religious    but      inclusive  of  material  things  or      services geared  to celestial bliss      e.g.  making,   on  a  large  scale      prasad or  food) ,  prima  facie  ,      there  is  an  ’industry’  in  that      enterprise.      (b) absence  of  profit  motive  or      gainful objective is irrelevant, 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   speical      emphasis on  the  employer-employee      relations.      (d) If  the organization is a trade      or business  it does not case to be      one   because    of    philanthropy      animating the undertaking. II      141.  Although  section  2(j)  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      shrinkage a  explained  in  Banerji      (supra) and  in this  judgment;  so      also, service calling and the like.      This yields  the inference that all      organized in  I (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 the fold      of  ’industry’   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  employee, may be      dissimilar. It  does not matter, if      on the  employment terms  there  is      analogy.

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III      142.    Application     of    these      guidelines should not stop short 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 pease,      regulation and  workmen, the  range      of this  statutory must inform  the      reach of  the statutory definition.      Nothing less, nothing more      (a)  The   consequences  are    (i)      professions,  (ii)   clubs,   (iii)      educational instituions,  (vi)  co-      operative (v)  research institutes,      (vi) charitable  projects and (vii)      other kindred  adventures, if  they      fulfil the  triple tests  listed in      I(supra), cannot  be exempted  from      the scope of section 2(j).      (b)  A   restricted   category   of      professions clubs, co-operative and      even gurukulas  and little research      labs, may  substantially and, going      by the  dominant nature criterion ,      substantively,  no   employees  are      entertained but in minimal matters.      marginal   employees    are   hired      without destroying  the non-employe      character of the unit.      (c) If  in a  pious  or  altruistic      mission  many   employ  themselves,      free or for small honoraria or like      return, drawn  by  sharing  in  the      purpose or  cause, such  as lawyers      volunteering to  run a  free  legal      services clinic  or doctors serving      in  their   spare  hours   in  free      medical   centre    or   ashramites      working  at   the  bidding  of  the      holiness, divinity  or like central      personality, and  the services  are      supplied free  or at  nominal  cost      and those who serve are not engaged      for remuneration or on the basis of      master and  servants  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  IV      143. The dominant nature test :      (a) Where  a complex  of activities      some   of    which   qualify    for      exemption,  others   not,  involves      employees     on      the     total      undertakings, some  of whom are not      ’workmen’  as   the  University  of      Delhi   case    (supra)   or   some      departments are  not productive  of

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    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  for      Nagpur (supra), will be, ’industry’      although those are not ’workmen’ by      definition may  not benefit  by the      status.      (b)  Notwithstanding  the  previous      clauses,    sovereign     function,      strictly    understood,     (alone)      qualify  for   exemption,  not  the      welfare  activities    or  economic      adventures      undertaking      by      government or statutory bodies.      (c) Even in departments discharging      sovereign function,  if  there  are      units which are industries and they      are substantially  severable,  then      they  can  be  considered  to  come      within section 2(j)      (d) Constitutional  and competently      enacted legislative  provisions may      well remove  from the  scope of the      Act. categories which otherwise may      be covered thereby."      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  interpreting  the  words  ’undertaking’  calling  and ’service’ which  are of  much wider import, the principle 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  of business. Furthermore an activity undertaken by the Government  cannot be  regarded as  ’industry’ if  it is done in discharge of its sovereign function. 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 function  or as  regards the  other aspects  dealt with by the court.      In this  context, it  is useful to chief Conservator of Forests and  another    vs.  Jagannath  Maruthi  Kondhare  , 1969(2) SCC  293 wherein  this 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 talking of such a view would erode the  ratio in  Bangalore water  supply, case. Observed that "the  dichotomy of sovereign and non-sovereign function does not  really exit - it would all depend on the nature or the power and manner of its exercise" After referring to the three  traditional  sovereign  function  namely  legislative power the  administration of  laws and  the exercise  of the judicial power  and also the decision of the exercise of the judicial power  and also  the decision  of the  Gujarat High court in  J.J. Shrimali  vs.  District  Development  Officer 1989(1) GLR  396, wherein  famine and  drought relier  works undertaken by  the state  Government were  held not  to  and ’industry’ this  court observed  that "what  really  follows from this  judgment is  that apart  from the aforesaid three functions there  may be some others functions also regarding which a view could be taken that the same too is a sovereign

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function".      In sub-Divisional  Inspector of Post, Vaikam and others vs. Theyyam  Joseph and others, 1996 (8) SCC 489, this court had to  sub-Divisional Inspector  of post  at Vaikam  is  an ’industry’. Therein this court has observed that "India as a sovereign, socialist,  secular, democratic  republic has  to establish an egalitarian social order under rule of law. The welfare  measures   partake  the   character  of   sovereign function and  the traditional duty to maintain law and order is 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 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  the  Extra-Departmental Agents employed  said establishment  are   governed  by  the statutory rules and 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 function the change  in   the  concept   of  sovereign   function  of   a constitutional government  has to  be kept  in mind. Relying upon these two in chief conservator of Forests vs. Jagannath Maruthi Kondhare  (supra )  and sub-Divisional  Inspector of post vs. Theyyam Joseph and others (supra), it was contended by the  learned 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 :      "     Does     research     involve      collaboration between  employer and      employee ? It does. The employer is      the institution  the  employee  are      the scientists,  para -  scientists      and other  personnel. Is scientific      research service  ? Undoubtedly. It      is. Its  discoveries  are  valuable      contributions to  the wealth of the      nations, such  discoveries  may  be      sold  for  a  heavy  price  in  the      industrial   of    other   markets.      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      services       than      discoveries . it has been said that      his  brain  had  the  highest  cash      value in  history for  he made  the      word vibrate  with  the  miraculous      discovery of recorded sound. unlike      most inventors  he did  not have he      received it  munificently  on  this      gratified and grateful earth thanks      to conversion  of    his inventions      into   money    aplenty.   Research      benefits  industry  even  though  a      research   institute   may   be   a      separate entity  disconnected  from

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    the many  industries  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  inventions and useful      solutions which  benefit individual      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 institution  under the Government of India‘s Department of  Space. It is engaged in pure 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  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 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  other than  discloses that  the object  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 services  to others nor in fact it does so expect in an indirect manner.      It is nobody‘s 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 by it, it can 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 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  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 no  order as  to costs.