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PETITIONER: THE AHMEDABAD TEXTILE INDUSTRY’S RESEARCH ASSOCIATION

       Vs.

RESPONDENT: THE STATE OF BOMBAY AND OTHERS

DATE OF JUDGMENT: 17/11/1960

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. GAJENDRAGADKAR, P.B. SARKAR, A.K.

CITATION:  1961 AIR  484            1961 SCR  (2) 480  CITATOR INFO :  RF         1962 SC1340  (4)  D          1963 SC1873  (11)  R          1964 SC 903  (12)  E          1968 SC 554  (13)  R          1972 SC 763  (12,23)  F          1976 SC 145  (25,32)  E&R        1978 SC 548  (134,159)

ACT: Industrial  Dispute-Research  Institute,  if  an   industry- "Industry",  Meaning of-Test-Industrial Disputes  Act,  1947 (14 of 1947), S. 2(j).

HEADNOTE: The appellant association was founded in 1947 and the object of  the founders was to establish a textile research  insti- tute  for  the  purpose of carrying on  research  and  other scientific  work  in connection with the  textile  trade  or industry  and other trade and industry allied  therewith  or necessary thereto.  The cost of maintaining the  association was  met  partly  by  members  and  partly  by  grants  from Government and other sources. The  activity of the association was  systematically  under- taken; its object was to render material services to a  part of   the  community,  namely,  member-mills,  the   material services being the discovery of process of manufacture etc., with  a view to secure greater  efficiency,  rationalisation and  reduction  of costs of the member-mills; it  was  being carried  on  with the help of employees some  of  whom  were technical personnel on payment of remuneration, they had  no rights in the results of the research carried on by them  as employees of the Association which were the property of  the Association  and it was organised or arranged in the  manner in which a trade or business is generally organised. Disputes  arose between the appellant and its workmen  which related to wage-scale and dearness allowance and payment  of house-rent  allowance which was referred  for  adjudication. The  appellant questioned the reference on the  ground  that the appellant was not an industry and that the Tribunal  was wrong in holding that the appellant was included within  the definition  of  the  word  "Industry"  of  s.  2(j)  of  the

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Industrial  Disputes  Act,  and  contended  that  it  was  a research  centre in the nature of educational  activity  and therefore  had no analogy with activities in the  nature  of trade or business. The  question therefore was whether appellant was an  under- taking  within  the meaning of s. 2(j)  of  ’the  Industrial Disputes  Act  and its activities satisfied the  tests  laid down in State of Bombay v. Hospital Mazdoor Sabha. Held, that the manner in which the activity in question  was organised  or  arranged, the condition of  the  co-operation between employer and employee necessary for its success  and its object to 481 render  material service to the community could be  regarded as   some  of  the  features  which  would  be   distinctive activities to which S. 2 (j) of the Act could be applied. In the instant case, the manner in which the association was organised clearly shows that the undertaking as a whole  was in  the  nature  of business and trade  organised  with  the object of discovery of ways and means by which  member-mills may   obtain  larger  profits  in  connection   with   their industries.   The  activity of the association  was  clearly within  the definition of the word "Industry" in S. 2(j)  of the Industrial Disputes Act and could not be assimilated  to a purely educational institution and satisfies the test laid down in the State of Bombay v. Hospital Mazdoor Sabha.  Thus the  Association is an undertaking within the meaning of  S. 2(j) of the Act. When  this  dispute arose between the  Association  and  its employees it was an industrial dispute and could be properly referred for adjudication under the Act. The State of Bombay v. The Hospital Mazdoor Sabha, [1960]  2 S.C.R. 866 followed.  The Federated States School  Teachers’ Association  v. The State of Victoria, (1929) 41 C.L.R.  569 not applicable.

JUDGMENT: CIVIL APPELLATE JURISDICTION.  Civil Appeal No. 22 of 1959. Appeal  by  Special  Leave from the  Award  dated  the  31st October,  1957,  of  the  Industrial  Tribunal,  Bombay   in Reference (I. T.) No. 141 of 1957. M.   C.  Setalvad, Attorney-General for India, J.  B.  Mehta and I. N. Shroff for the Appellant. Vidya  Dhar  Mahajan,  K.  L. Hathi and  R.  H.  Dhebar  for Respondent No. 1. N.C.   Shah,  President,  Engineering  Mazdoor   Sabha   for Respondent No. 3. 1960.  November 17.  The Judgment of the Court was delivered by WANCHOO,  J.-This is an appeal by special leave against  the award  of  the  Industrial Tribunal, Bombay.   There  was  a dispute  between  the appellant and its workmen,  which  was referred  by the Government of Bombay for adjudication.   It related  to the wagescale and dearness allowance of  certain employees of the appellant and also to the payment of house- rent 61 482 allowance.   The main contention of the appellant     before the Tribunal was that the reference was not  competent under the  Industrial Disputes Act, No. XIV of  1947  (hereinafter called the Act), as the appellant was not an industry within the  meaning  of  the  Act.   The  Tribunal  rejected   this

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contention and held that  the reference was valid.  It  then went  into  the  merits of the dispute, with  which  we  are however not concerned in the present appeal.  The only point urged  before  us  on behalf of the appellant  is  that  the Tribunal  was  wrong in holding that the appellant  was  in- cluded  within  the definition of the  word  "industry"  and therefore the reference was competent. "Industry"  is defined in s. 2(j) of the Act as meaning  any business,  trade,  undertaking, manufacture  or  calling  of employers  and  includes any calling,  service,  employment, handicraft,   or  industrial  occupation  or  avocation   of workmen.   The main question canvassed before  the  Tribunal was  whether  the appellant was an  undertaking  within  the meaning  of  s.  2(j).   The  question  as  to  what  is  an undertaking  for  the  purpose of s. 2(j) has  come  up  for consideration  before this Court in a number of  cases,  the last of which is The State of Bombay v. The Hospital Mazdoor Sabha(1),  where a question arose whether a hospital run  by government was an undertaking within the meaning of s. 2(j). It  was  pointed out in that case that though s.  2(j)  used words of very wide denotation, a line would have to be drawn in  a fair and just manner so as to exclude  some  callings, services  or  undertakings.  If all the words  used  therein were  given  their  widest meaning,  all  services  and  all callings  would  come within the purview of  the  definition including  those services rendered by a servant purely in  a personal  or domestic matter and even in a casual  way.   It had  therefore  to be considered where the  line  should  be drawn  and what limitations should be reasonably implied  in interpreting  the wide words used in s. 2(j).  Further,  the contention  that  the  word "undertaking" used  in  s.  2(j) should  be  treated as analogous to trade  or  business  and therefore  the  undertaking  in  question  must  involve  an economic activity in which capital is invested (1)  [1960] 2 S.C.R. 866. 483 and which is carried on for profit or for the production  or sale  of goods by the employment of labour was not  accepted in  full and it was pointed out that an  activity  could and must be regarded as an industry even though in its  carrying on profit motive might be absent.  Further it was held  that absence  of investment of any capital would not  necessarily mean that an undertaking was not included within s. 2(j). That   case  then  proceeded  to  consider  what  kinds   of activities  could  be  excluded from  the  meaning  of  "un- dertaking" for purposes of s. 2(j).  It was pointed out that activities  of government which could be properly  described as  sovereign activities were outside the scope of s.  2(j), as  they  were functions which a  constitutional  government could and must undertake for governance and which no private citizen  could undertake.  These sovereign  activities  were defined  in  the words of Lord Watson as  "the  primary  and inalienable  functions of a constitutional  government"  but would  not  necessarily include an  activity  undertaken  by government in pursuit of its welfare policies.  It was  also pointed  that  though  in the absence of  profit  motive  an activity  might be regarded as an undertaking, the  presence of   such  motive  would  be  a  relevant  circumstance   in considering  whether the undertaking was an industry  within the meaning of s. 2(j). The  case  then  went  on to  consider  the  attributes  the presence  of  which would make an  activity  an  undertaking under  s. 2(j) on the ground that it was analogous to  trade or  business.  It was pointed out that it was  difficult  to state  these attributes definitely or exhaustively but as  a

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working   principle   it   was   said   that   an   activity systematically  or habitually undertaken for the  production or  distribution of goods or for the rendering  of  material services  to  the  community  at large or  a  part  of  such community with the help of employees would be an undertaking within the meaning of the Act provided it was carried on  in an organised manner like trade or business." Thus the manner in which the activity in question is organised or  arranged, the  condition  of  the co-operation  between  employer  and employee necessary for its success 484 and  its object to render material service to the  community could  be  regarded as some of the features Which  would  be distinctive of activities to which s. 2(j) applied.  We have therefore to see whether the appellant’s activity  satisfies the tests laid down in this case and if it does, it would be an undertaking within the meaning of s. 2(j). It will be necessary for this purpose to examine the objects with  which  the appellant-association was founded  and  the activities which it is carrying on.  The main contention  of the   learned  Attorney-General  is  that   the   appellant- association  is  a research centre and is in the  nature  of educational  activity and therefore has no analogy  with  an activity  in the nature of trade or business.  He relies  in this connection on a decision of the Australian High  Court, The  Federated State School Teachers’ Assn. v. The State  of Victoria (1), where it was held that educational  activities of  the  State  carried on under  appropriate  statutes  and statutory regulations relating to education did not  consti- tute industry within the meaning of s. 4 of the Commonwealth Conciliation and Arbitration Act. The appellant-association was founded in 1947 and the object of  the  founders  was  to  establish  a  textile   research institute for the purpose of carrying on research and  other scientific  work  in connection with the  textile  trade  or industry and other trades and industries allied therewith or necessary thereto.  The research to be conducted was for the purpose of investigation into manufacture and improvement of materials  used in the textile industry, utilisation of  the products  of  the  industry, improvement  of  machinery  and appliances  used  by the industry,  improvement  of  various processes  of  manufacture  with a view  to  secure  greater efficiency,   rationalisation  and  reduction   of   costs., research  into  the  conditions of  work,  time  and  motion studies, fatigue and rest pauses, standardisation of methods of   work,  conditioning  of  factories  and  diseases   and accidents  arising out of employment in a textile mill.   In order to carry out these objects, the  appellant-association was to establish, equip and (1)  (1929) 41 C.L.R. 569. 485 maintain  laboratories, work-shops or factories and  conduct and carry on experiments; to prepare, edit, print,  publish, issue, acquire and circulate books, papers, periodicals etc. and  to establish, form and maintain museums, libraries  and collections  of literature, statistics, scientific data  and other   information   relating  to  the  industry   and   to disseminate the same by means of reading papers, delivery of lectures,  giving of advice and the appointment of  advisory officers;  to  employ  or retain  skilled,  professional  or technical advisers or workers in connection with the objects of  the association on payment of such fees or  remuneration as  might  be thought expedient; to found, aid  or  maintain schools   or  colleges  for  textile  research   and   endow scholarships  and bursaries, to support students engaged  in

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research  work;  and  to encourage  the  discovery  of,  and investigate  and  make  known  the  nature  and  merits   of inventions,  improvements, processes, materials and  designs which  may  be  capable  of being used  by  members  of  the association  for any of the purposes of the  said  industry. It  will  thus  be  seen  that  though  the  object  of  the association  was research, that research was  directed  with the  idea of helping the member mills to improve methods  of production   in   order  to   secure   greater   efficiency, rationalisation and reduction of costs.  The basis therefore of the research carried on by the appellant was to help  the textile industry and particularly the member mills in making larger  profits  and this was to be done  primarily  by  the employment   of   technical   personnel   on   payment    of remuneration.   Reference in this connection may be made  to r.  13  of  the  Rules and  Regulations  of  the  appellant- association,  which  lays  down  that  any  member  of   the association   who   considers   that   its   interests   are prejudicially  affected  by  any  research  proposed  to  be undertaken  by  the  association may  object  to  government against  the undertaking of the proposed research.  Rule  13 read with r. 45 also envisages that if such an objection  is taken the proposed research will not be carried on till  the objection  is  decided  by  the  government,  though  it  is provided  that the government may direct the research to  be carried 486 on during the time the objection is pending consideration of government.  The administration of the appellant-association is vested in a council in which the majority consists of the representatives  of the textile industry.  The  research  is carried on, as already indicated, under the supervision of a Director  of  Research,  by  technical  personnel,  who  are generally  paid employees of the appellant-association;  but all  such  technical personnel employed by  the  association have  to  give an undertaking to observe strict  secrecy  in respect of all researches undertaken.  They are also to give an undertaking not to use or take advantage in their private capacity  of  special  knowledge so  obtained  or  put  into operation any invention or process of which they might  have obtained  knowledge as aforesaid.  It is also provided  that any  invention or process can be put into operation  to  the extent  to which, and as and when it may be permitted to  be so  done  in common with all members of the  association  in strict accordance with the Rules and Regulations made by the council.  The effect of this provision in r. 42 of the Rules and  Regulations  is  that the result  of  research  is  the property  not of the person making the research but  of  the association,  to be used by its members in  accordance  with the  Rules and Regulations made by the Council.  Then r.  44 provides  that every employee of the association engaged  on research   shall  contract  in  writing  that  he  will   in consideration  of  his employment hold exclusively  for  the benefit  of and assigned to the association at the  cost  of the association all rights and ownership in any discoveries, inventions,  designs or other results arising in the  course of  such  employment upon such research.   These  provisions make  it  clear that though the appellant  association.  has been  established for purposes of research, the main  object of  the  research  is  the benefit of  the  members  of  the association.  The cost of maintaining the association is met partly  by members and partly by grants from government  and other  sources.   It will thus be clear that in  effect  the association  has been established to carry on research  with respect  to textile industry jointly for the benefit of  its

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members; 487 but  for this, each member-mill might have had to  establish its  own research department, which would be a part  of  its activity.   Can  it be said under these  circumstances  that this  is  an  undertaking which  is  purely  of  educational character  and  therefore  covered by  the  Australian  case mentioned above?  We are of opinion, considering the objects and the Rules and Regulations of the  appellant-association, that it answers the tests laid down in the Hospital case (1) and must be held to be an undertaking within the meaning  of s.  2(j).  It is an activity systematically undertaken;  its object  is  to  render material services to a  part  of  the community (namely, member-mills)-the material services being the  discovery of processes of manufacture etc. with a  view to secure greater efficiency, rationalisation and  reduction of  costs of the member-mills; it is being carried  on  with the help of employees (namely, technical personnel) who have no rights in the results of the research carried on by  them as employees of the association; it is organised or arranged in  a  manner  in which a trade  or  business  is  generally organised;  it  postulates  co-operation  between  employers (namely,  the  association) and the employees  (namely,  the technical  personnel and others) which is necessary for  its success,  for the employers provide monies for  carrying  on the activities of the association and its object clearly  is to  render  material service to a part of the  community  by discovery  of processes of manufacture etc. with a  view  to secure greater efficiency, rationalisation and reduction  of costs.  The activities of this association therefore have in our opinion little in common with the activities of what may be called a purely educational institution.  It is true that the employees who have raised the present industrial dispute do not actually contribute to the research, which is carried on under the appellant-association; but the manner in  which the association is organised and the fact that the technical personnel  who carry on the research are also employees  who have  no  rights in the results of their  research,  clearly show that the undertaking as a whole is in the nature of (1)  [1960] 2 S.C.R. 866. 488 business and trade organised with the object of  discovering ways  and means by which the member-mills may obtain  larger profits  in  connection  with their  industries.   In  these circumstances  we  have  no  hesitation  in  coming  to  the conclusion that the appellant-association is carrying on  an activity  which clearly comes within the definition  of  the word  "industry" in s. 2(j) and which cannot be  assimilated to  a purely educational institution.  In this view  of  the matter, when a dispute arose between the appellant and  some of its employees, it was an industrial dispute and could  be properly referred for adjudication under the Act. The  appeal  fails and is hereby dismissed with one  set  of costs.                                       Appeal dismissed.