http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 17  

PETITIONER: SECRETARY, MADRAS GYMKHANA CLUB EMPLOYEES’UNION

       Vs.

RESPONDENT: MANAGEMENT OF THE GYMKHANA CLUB

DATE OF JUDGMENT: 03/10/1967

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. BHARGAVA, VISHISHTHA VAIDYIALINGAM, C.A.

CITATION:  1968 AIR  554            1968 SCR  (1) 742  CITATOR INFO :  F          1969 SC 276  (8,6)  F          1970 SC1407  (5,6,7,8,10,13,18,20)  F          1970 SC1626  (29)  RF         1971 SC1259  (2)  RF         1971 SC2422  (19,25)  R          1972 SC 763  (10,11,12,14,16,TO,20)  R          1975 SC1639  (8)  RF         1975 SC2032  (2,4)  RF         1975 SC2260  (22)  F          1976 SC 145  (3,5,9,26,29,31)  O          1978 SC 548  (100,101,141,142,143,146,156,1  R          1988 SC1182  (6,13)

ACT: Industrial  Disputes Act (14 of 1947),  s.  2(j)-’Industry’, what is Meaning of the word ’undertaking’ in the  definition of ’industry--’Members’ Club, if industry.

HEADNOTE: The  respondent is a non-proprietary members’ club.   It  is organised     on a vast scale  with  multifarious activities providing  a venue for sports and games, and facilities  for recreation,  entertainment  and  for catering  of  food  and refreshment.   Guests are admitted but on the invitation  of members.  It has 194 employees with a wage bill between  one lakh and two lakh rupees.  For the year 1962, the  employees claimed bonus but the Industrial Tribunal held that the club was  not an ’industry’ within the meaning of the  Industrial Disputes Act, 1947, and rejected the claim of the employees% In appeal to this Court. Held:     (1)   The   definitions  of   industrial   dispute ’employer’ and ’workman’ show that an industrial dispute can only arise in relation to an ’industry’.  The definition  of ’industry’  is  in two parts, the first, from the  point  of view  of  employers  and  the  second,  from  the  angle  of employees.  In its first part it means any ’trade, business, undertaking,  manufacture  or calling of  employers’.   This part  determines an industry by reference to  occupation  of employers  in respect of those activities specified  by  the five  words  and they determine what an ’industry’  is,  and what  the  cognate expression ’industrial’  is  intended  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 17  

convey.   But the second part standing alone  cannot  define ’industry’.  If the existence of an industry viewed from the angle of what the employer is doing is established, all  who render  service and fall within the definition of  ’workman’ come within the fold of industry’ irrespective of what  they do.  Thus, the cardinal test is to find out whether there is an  industry according to the denotation of the word in  the first part. [753 A-754 H]. Taking  the words in the definition of ’industry’  the  word ’trade’  means  exchange  of goods for goods  or  goods  for money,  or, any business carried on with a view  to  profit, whether  manual  or  mercantile as  distinguished  from  the liberal  arts or learned professions and  from  agriculture. The  word  ’business’  means  an  enterprise  which  is   an occupation as distinguished from pleasure. and ’manufacture’ is  a  kind of productive industry in which  the  making  of articles or material, often on a large scale, is by physical labour or mechanical power.  The word ’calling’ denotes  the following of a profession or trade. [756 F-H]. The  word  ’undertaking’ has figured in the  cases  of  this Court.  In D. N. Banerjee v. P. R. Mukherjee, [1953]  S.C.R. 302  it was observed that the word is not to be  interpreted by  association with the words that precede or follow it  in the definition of ’industry’.  But the settled view of  this Court is: that primarily industrial disputes occur, when the operation   undertaken   rests  upon   cooperation   between employers  and employees with a view to production and  dis- tribution  of  material goods, in other words,  wealth,  but they may 743 arise  also  in cages where the cooperation  is  to  produce material services.  For an ’undertaking’ to be an  industry, it is not necessary that it must be carried on with  capital by  private  enterprise  or that it must  be  commercial  or result  in profit but there must be systematic activity  and it  must  be  analogous to the carrying on  of  a  trade  or business  involving co-operation between employers  and  em- ployees.  But every human activity in which the relationship of  employers  and  employees  enters,  is  not  necessarily creative  of  an industry.  Personal  services  rendered  by domestic  and  other servants,  administrative  services  of public  officials-.  services  in  aid  of  occupations   of professional  men such as doctors and lawyers etc.,  employ- ment  of teachers and so on, may result in relationships  in which  there are employers on the one side and employees  on the  other, but they have been excluded because they do  not come  within the connotation of the term ’industry’  as  the service rendered is not a material service.  Therefore,  the word  ’undertaking’,  though elastic, must take  its  colour from other expressions used in the definition of ’industry’, and  must be defined as any business or any work or  project resulting  in material goods or material services and  which one  engages  in or attempts as an enterprise  analogous  to business  or trade.  L740 D; 756 D-F; 758 D-E; 757 B-C;  758 B-C]. In  the present case, the activity of the club is  conducted with the aid of employees who follow callings or avocations. But  taking  the  first  part  of  the  definition  and  the essential  character of the club, the activity of  the  club cannot  be described as a ’trade’ business  or  manufacture’ and the running of clubs is not the ’calling’ of the respon- dent club or its managing committee.  Also, the club has  no existence apart from its members.  It exists for its members though  occasionally  strangers also take benefit  from  its services.   Even  with  the admission of  guests,  the  club

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 17  

remains  a  members’ self-serving institution.   Though  the material  needs  or wants of a section of the  community  is catered  for it is not done as part of trade or business  or as   an   undertaking  analogous  to  trade   or   business. Therefore,  the  Tribunal  was right  in  holding  that  the respondent club was not an industry. [760 A-H]. Baroda  Borough Municipality v. Workmen (1957) 1  L.L.J.  8, referred to Observations contra in Bengal Club Ltd. v. Shantiranjan Som- maddar & Anr.  A.I.R. 1956 Cal. 545 and Royal Calcutta  Golf Mazdoor Union v. State of West Bengal, A.I.R. 1956 Cal. 550, disapproved. (2)  The case of State of Bombay v. Hospital Mazdoor  Sabha, [1960]  2  S.C.R. 866--in so far as it relied on  the  test, namely;  could  the  activity be carried  on  by  a  private individual  or  group  of individuals  for  the  purpose  of holding that running a Government hospital was an  industry- must  be held. to have taken an extreme view of what  is  an industry.   This test is not enlightening because, there  is hardly  any activity which private enterprise  cannot  carry on. [751 D-E; 761 A; 750 E-F]. (3)  In Corporation of City of Nagpur v. Employees.  [1960], 2  S.C.R. 942 this Court relied upon the same test  with  an unfortunate  result.   The  Court held  that  the  municipal functions  of the Corporation, including running  a  primary school,  were covered by the words ’trade and  business’  in C.P.  &  Berar Industrial Disputer.  Settlement  Act,  1947, since  those  functions  were not regal,  the  activity  was organised, service was rendered, and the functions could not be  performed  by an individual or  firm  for  remuneration, while,  in  University of Delhi v. Ramnath [1964]  2  S.C.R. 703, this Court held that educational institutions were  not ’industry’. [750 B-G; 758 A-B]. 744 (4)  The fresh test laid down in Ahmedabad Textile  Industry Research Association v. State of Bombay, [1961] 2 S.C.R. 480 that,  to be an ’industry’, the employees therein  must  not share  in the product of their labour cannot be regarded  as universal,  because,  there are occasions when  the  workmen receive a share of the produce as part of their wages or  as bonus or as a benefit. [759 C]. (5)  The  additional  test laid down in  National  Union  of Commercial  Employees v. Meher (The Solicitor  case)  [1962] Supp.   3  S.C.R.  157,  that,  to  be  an  ’industry’   the association  of  capital  and  labour  must  be  direct  and essential cannot also be regarded as universal because, what partnership  can exist between the Board of Directors  of  a Company  on  the one hand and the menial staff  employed  to sweep floors on the other? [753 A]. (6)  In  Harinagar  Cane Farm v. State of  Bihar,  [1964]  2 S.C.R  458  and in the University case this  Court  observed that  it  must  refrain from laying  down  unduly  broad  or categorical   propositions.   But  the  attempt   to   avoid generalizations  his one disadvantage, because, taking  each operation  by itself and determining on the basis  of  facts whether  it is an industry without attempting to  pin  point whether it is a ’business, or a trade, or an undertaking  or manufacture,  or  calling  of employers’ is  to  ignore  the guidance afforded by the sta tute through its dictionary and to  rely upon decisions dealing with the problem  without  a definition. [755 H; 756 A-C].

JUDGMENT:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 17  

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 572 of 1966. Appeal by special leave from the Award dated September 2,  1964  of the Industrial Tribunal, Madras  in  industrial Dispute No. 19 of 1964. B.   R.  Dolai,  E. C. Agarwala, Champat Rai,  Kartar  Singh Suri, Ambrish Kumar and P.C. Agrawala, for the appellant. H.   R.  Gokhale, M.R. Narayanaswamy Iyer and  R.  Ganapathy Iyer, for the respondent. The Judgment of the Court was delivered by Hidayatullah,  J.-The  Industrial Tribunal,  Madras  by  its award,  September 2, 1964, has held that the  management  of the Gymkhana Club, Madras is not liable to pay bonus to  its workmen for the year 1962 as the Club is not ’an  industry’. The Madras Gymkhana Club Employees Union now appeals to this Court by special leave. The  Madras Gymkhana Club is admittedly a members’ club  and not a proprietary club, On December 31, 1962 its  membership was  about 1200 with 800 active members.  The object of  the club  is  to  provide  a venue  for  sports  and  games  and facilities  for  recreation  and  entertainment.   For   the former, it maintains a golf course, tennis courts, rugby and football  grounds  and has made arrangement  for  billiards, pingpong  and  other indoor games.  As part  of  the  latter activities  it arranges dance, dinner and other parties  and runs a catering department, which provides and  refreshments not 745 only  generally but also for dinners and parties on  special occasions.   The club employs six officers (a  Secretary,  a Superintendent  and four Accountants and  Cashiers),  twenty clerks and a large number of peons, stewards, butlers, gate- attendants,  etc.   Its catering department has  a  separate managerial, clerical and other staff.  Altogether there  are 194  employees.   The affairs of the club are managed  by  a Committee,elected  annually.   Two  of the  members  of  the Committee work as Hony.  Secretary and Hony.  Treasurer res- pectively. The  membership of the club is varied.  There  are  resident members,  non-resident members, temporary members,  garrison members,  independent  lady  members,  etc.   The   resident members pay an entrance fee of Rs. 300 and Rs. 20 per  month as  subscription.   Garrison members  and  independent  lady members  do not pay any entrance fee and their  subscription is  Rs. 10 per month.  Guests, both local and from  outside, are  admitted  ’subject to certain restrictions  as  to  the number  of days on which they can, be invited to  the  club. The club runs tournaments for the benefit of members and for exhibition  to non-members.  The income and  expenditure  of the club are of the order of four and a quarter lakh rupees, its movable and immovable properties are worth several  lakh rupees and its wage bill is between one and two lakh rupees. The  question in this appeal is whether the respondent  club can  be  said to be an industry for the application  of  the Industrial   Disputes  Act,  1947.   The   Tribunal,   after considering  many decisions rendered by this Court and  also by the High Courts in India, came to the conclusion that the club  was not an industry and the claim for bonus on  behalf of its employees was therefore unsustainable.  The appellant union  contends  that the decision of the  Tribunal  is  not correct and that the club must be treated as an industry for the application of the Act. As we are concerned primarily with the question whether  the club  comes within the definition of ’industry’ as given  in the  Industrial Disputes Act, we may begin by  reading  that definition  and other provisions which have a  bearing  upon

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 17  

the  question.   The Industrial Disputes Act was  passed  to make  provision  for  the investigation  and  settlement  of industrial disputes and for certain other purposes appearing in  the  Act.The emphasis in the Act is primarily  upon  the investigation  and settlement of industrial  disputes.   The expression  "industrial  despute" is defined by s.  2(k)  as follows:               "industrial  dispute"  means  any  dispute  or               difference between employers and employers or,               between  employers  and  workmen,  or  between               workmen  and workmen, which is connected  with               the employment or non-employment or the  terms               of  employment  or  with  the  conditions   of               labour, of any person".               746               A   "Industry"  is  defined  in  cl.  (j)   as               follows:-               "industry"   means   any   business,    trade,               undertaking,   manufacture   or   calling   of               employers  and includes any calling,               service, employment, handicraft, or industrial               occupation or avocation of workmen".               The  word "employer" is defined by cl. (g)  of               the section as:               "employer means-               (i)   in relation to an industry carried on by               or  under the authority of any  department  of               the Central Government or a State  Government,               the  authority prescribed in this  behalf,  or               where no authority is prescribed, the head  of               the department-,               (ii)  in  relation to any industry carried  on               by  or  on behalf of a  local  authority,  the               chief executive officer ’of that authority;"               "Workman" is defined by cl. (s) of the section               and                "  means any person (including an apprentice)               employed in any industry to do any skilled  or               unskilled  manual  supervisory,  technical  or               clerical, work for hire Cr reward. whether the               terms  of employment be expressed or  implied,               and  for the purpose of any  proceeding  under               this Act in relation to an industrial dispute,               includes  any person who has  been  dismissed,               discharged  Or retrenched in connection  with,               or as a consequence of, that dispute, or whose               dismissal,  discharge or retrenchment has  led               to that dispute, but does not include any such               person-               (i)   who is subject to the Army Act 1950,  or               the   Air  Force  Act,  1950,  or   the   Navy               (Discipline) Act, 1934: or               (ii)  who is employed in the police service or               as  an officer or other employee of a  prison;               or               (iii) who  is employed mainly in a  managerial               or administrative capacity; or               (iv)  who,  being employed in  a  supervisor--               capacity,  draws wages exceeding five  hundred               rupees per mensem or exercises, either by  the               nature of the duties attached to the office or               by  reason  of  the  powers  vested  in   him,               functions mainly of a managerial nature." These definitions have been before this Court on many  occa- sions  and we have reached a point when one can say that  at

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 17  

least   some  attributes  of  "industry"   and   "industrial disputes"  may  be taken as well-established.   These  cases concerned  such diverse institutions and  establishments  as municipalities, hospitals, solicitor’s                             747 firm   and  university.   Any  enquiry  to   determine   the application of the definitions to new establishments  cannot overlook  the settled view.  We find it convenient to say  a few words about the earlier decisions of this Court,  before embarking upon an analysis of the definitions in relation to a members’ club. The earliest case in this Court involved a dispute between a Municipality  and  its  employees  (D.N.  Banerjee  v.  P.R. Mukherjee  &  Ors.)(1). The Municipality wag held to  be  an industry  and  the  dispute was held  to  be  an  industrial dispute.   This  Court observes that  the  non-technical  or ordinary  meaning  of ’industry’ is  "an  undertaking  where capital  and  labour  co-operate with  each  other  for  the purpose of producing wealth in the shape of goods, machines, tools, etc." and for making profits, and an industry in this sense  includes  agriculture, horticulture etc.   The  Court points  out that this is too wide and that every  aspect  of employer-employee connection does not result in an industry. Holding,  however, that municipal activity cannot  be  truly regarded as business or trade, this Court considers  whether it  can be an ’undertaking’.  The suggestion that  the  word ’undertaking’ takes its colour from the other four words  in the  first  part of the definition is not accepted.   It  is said  that this interpretation renders the word  superfluous and   the  latter  part  of  the   definition   unnecessary. Therefore,  this Court includes non-profit  undertakings  in the  concept  of  industry  even  if  there  is  no  private enterprise.   Referring to the inclusion of  public  utility services in the scheme of the Act it is held that a  dispute in  a public utility service is an industrial  dispute,  and the fact that the enterprise is financed by taxation and not by  capital is considered irrelevant.  In formulating  these dicta  the Court is obviously influenced by the analysis  of an industrial dispute by Isaacs and Rich.  JJ. in  Federated Municipal   &  Shire  Council  Employees  of  Australia   v. Melbourne Corporation(2).               "Industrial  disputes occur when, in  relation               to operations in which capital and labour  ate               contributed    in   co-operation    for    the               satisfaction of human wants and desires, those               engaged in cooperation dispute as to the basis               to  be  observed,  by  the  parties   engaged,               respecting  either a share of  the produce  or               any  other  terms  and  conditions  of   their               cooperation. The question of profit making may               be important from an income-tax point of view,               as  in many municipal cases in  England;  but.               from  an industrial dispute point of view,  it               cannot  matter whether the expenditure is  met               by fares from passengers or from rates." In  the  second case (Baroda Borough Municipality  v.  Work- men(3) a claim for bonus by municipal employees was rejected on (1)  [1953] S.C R. 302. (2) 26 C.L.R. 508. (3) [1957] 1 L.L.J. 8. 748 the  ground  that the bonus formula was  inapplicable.   The Court, however, went on to observe:               "It is now finally settled by the decision  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 17  

             this   Court  in  1953  S.C.R.  302,  that   a               municipal  undertaking of the nature  we  have               under  consideration is an  "industry"  within               the  meaning  of the word in S.  2(j)  of  the               Industrial   Disputes   Act   and   that   the               expression  "industrial dispute" in  that  Act               includes disputes between the municipality and               their  employees in branches of work that  can               be regarded as analogous’to the carrying on of               a trade or business."                             (emphasis added). These  two cases lay down that for an activity to be an  in- dustry  it  is not necessary that it must be carried  on  by private  enterprise  or  must be  commercial  or  result  in profit.   It is sufficient if the activity is  analogous  to the  carrying  on  of  a  trade  or  business  and  involves cooperation between employers and employees.  This result is reached  by extending the meaning of ’undertaking’ to  cover adventures, not strictly trade or business but objects  very similar. The definition of ’employer’ in our Act clearly shows that a local  authority may become an employer if it carries on  an industry.   This means that a municipality, ’if it  indulges in an activity which may be properly described as  industry, may be involved in an industrial dispute.  Local bodies  are primarily  subordinate  branches of  governmental  activity. They  function  for  public  purposes  but  some  of   their activities may come within the calling of employers although the  municipalities may not be trading corporations.   Local authorities  take away part of the affairs of Government  in local  areas and they exercise the powers of regulation  and subordinate taxation.  They are’ political sub-divisions and agencies for the exercise of governmental functions.  But if they  indulge  in municipal trading or business or  have  to assume  the calling of employers they are employers  whether they  carry on or not business commercially for purposes  of gain or profit. The activity of the municipality in the first two cases  was not attempted to be brought within the expressions  business and trade.  The term ’undertaking’ was held to cover it.  In the third case (Corporation of City of Nagpur v.  Employees (1)  the    need  to consider ’trade  and,  business’  arose directly.  The question then was whether and to what  extent the  Corporation of Nagpur was an industry under the C.P.  & Berar  Industrial  Disputes Settlement Act,  1947  That  Act included  a definition of industry which was different.   It included "(a) any business, trade manufacturing or mining undertaking or calling of employers (1)  [1960] 2 S.C.R. 942.                             749 (b)  any calling, service, employment, handicraft or  indus- trial occupation or avocation of employees and (c)  any branch of an industry or a group of industries." In  this definition the qualifying words  ’manufacturing  or mining’  limited the word ’undertaking’ and it could not  be given  the wide meaning given earlier.  This Court  did  not attempt   to  bring  municipal  activity  within  the   word ’undertaking’  but brought it within the  expression  ’trade and business’.  The Court observed that there was nothing in the earlier cases to show that a municipal activity was held excluded, from those words.  As a matter of fact it did (see p.  308).   Of course, there was nothing to show  that  this Court on the earlier two occasions thought it even  remotely possible.   In  the Nagpur Corporation’s(1) case  the  Court

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 17  

proceeded  to  consider  whether  a  corporation  could   be legitimately  said  to be carrying on business or  trade  or calling.   It  found the definition to be "very  clear"  and "not  susceptible of any ambiguity", and observed  that  all the words were very wide and that even if the meaning  could be cut down by the aims and objects of the C.P. & Berar  Act as  disclosed  in  the preamble, the  main  object,  namely, social   justice  demanded  a  wide  meaning.    The   Court distinguished between (a) regal and (b) municipal  functions of  the  corporation  and  found  the  latter  analogous  to business  or  trade  because they were  not  regal  and  the activity  was  organised  and  service  was  rendered.    To distinguish  between  a  regal  function  and  a,  municipal function the test applied was: Can the service be  performed by  an individual or firm for remuneration?  This  test  was not  applied  in  one later case  but  is  not  enlightening because   there  is  hardly  any  activity   which   private enterprise cannot carry on.  As Mr. Gomme in his  Principles of Local Government (1897) observes: "Any municipal  service can be made to pay dividends on private capital if only  the means  of levying a revenue are granted to private  owners." Even  war  can be financed and waged by  commercial  houses. They manufacture ammunition and war equipment and can  carry on war with mercenaries.  Even the infra-structures of  Adam Smith can be provided by private enterprise.  The East India Company did both.  It is not a little surprising that except in one case in which there is a passing reference to it, the Corporation of City of Nagpur case(1) has not been  referred to in the later cases of this Court. The  later  cases  of this Court view the  matter  a  little differently and formulate further tests.  Of the tests,  the first is that the activity must be organised as business  or trade is ordinarily organised.  This is to be taken with the earlier  test  that  ’undertaking’  must  be  analogous   to business,  trade or calling.  It will be seen that these  do not  widen the meaning of ’undertaking’ but tend  to  narrow it.  The second is that the activity need not necessarily be preceded by procurement of capital in the business sense nor must (1)  [1960] 2 S.C.R. 942. 750 profit be a motive.  So long as relationship of employer and workmen is established with a view to production of material goods or material services, the activity must be regarded as an undertaking analogous to trade or business.  We shall now review the cases in which these tests are established’. In  the State of Bombay v. Hospital Mazdoor Sabha(1)  it  is held  that a hospital run by government is included  in  the definition  of ’industry’.  It is recognised that the  first part  of the definition contains the statutory  meaning  and the  second  part means "an enlargement of it  by  including other items of industry".  As a matter of fact these are not other  items  of  industry  but  aspects  of  occupation  of employees  which are intended to be an integral part  of  an industry  for  purposes  of  industrial  disputes.   It  is, however, recognised in the case that a line must be drawn to exclude  some  callings, services and undertakings.   It  is hold  that  domestic, personal or casual  services  are  not included  and  examples  are given of  such  services.   The meaning  of industry a,,, ‘ an economic activity’  involving investment  of  capital and systematically  carried  on  for profit for the production or sale of goods by the employment of  labour  is  again discarded because  profit  motive  and investment  of capital are considered unessential.   Another test reaffirmed is to enquire ’can such activity be  carried

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 17  

on by private individual or group of individuals?  Answering that a hospital can be run by a private party for profit, it is held that a hospital is an industry even if it is run  by Government  without  profit.  Who conducts the  activity  or whether   it  is  for  profit,  are  considered   irrelevant questions.  It is, however, again emphasised that an  under- taking  to  be  an industry must be analogous  to  trade  or business.   It  is, therefore, laid down  that  an  activity systematically  or habitually undertaken for the  production or distribution of goods or for rendering material  services to  the community at large or a part of such community  with the-help  of employees is an undertaking.  In this way,  the connection  between trade and business on the one  hand  and undertaking  on  the  other is established  which  seems  to indicate  that  the expression ’undertaking’ must  take  its colour from the other expressions.  An industry is thus said to  involve cooperation between employer and  employees  for the  object of satisfying material human needs but  not  for oneself nor for pleasure nor necessarily for profit.   These dicta  are  based on the observations of Isaacs,  J.  quoted earlier  and  in a later case (The  Federated  State  School Teachers’ Association of Australia v. The State of  Victoria and Others(2). In  the  next case Ahmedabad Textile Industry  Research  As- sociation v. State of Bombay(3) the question was whether  an Association for research maintained by the textile  industry and  employing technical and other staff was industry.   The case  repeated the tests stated in the Hospital(1) case  and applied them.  It was held (1) [1960] 2 S.C.R. 866.            (2) 41 C.L.R. 569. (3) [1961] 2 S.C.R. 480. 751 that  the Association was providing material services  to  a part  of  the  community, was carried on with  the  help  of employees,  was  organised  in a manner in  which  trade  or business  is  organised and there was  co-operation  between employers  and employees.  For the first time a  fresh  test was added that as the employees had no rights in the results of  their labour or in the nature of business and trade  the partnership  is  only association between the  employer  and employee. However,  in the next case of National Union  of  Commercial Employees v. M. R. Meher(1) where the employees of a firm of solicitors  demanded bonus and the case satisfied the  tests so far enumerated, a new test was added that the association of  capital  and labour must be direct and  essential.   The service of a solicitor was regarded as individual  depending upon  his personal qualifications and ability, to which  the employees did not contribute directly or essentially.  Their contribution, it was held, bad no direct or essential  nexus with  the advice or services.  In this way  learned  profes- sions were excluded. In  the next two cases the difficulty of laying  down  tests from  case to case was felt.  In Harinagar Cane Farm v.  The Stale  of  Bihar(2)  a cane farm was purchased  by  a  sugar factory and worked As a department for supply of sugar cane. The  agricultural operations were held to be an industry  on the  facts  but  it  was held  that  agriculture  under  all circumstances  could not be called an industry.  This  Court reversed  its  method of looking for the  tests  from  other cases  and  referred to them only after it had  reached  its conclusion observing that the Court must refrain from laying down unduly broad or categorical propositions. In the next case (University of Delhi and Anr. v. Ramnath(3) the  question  was  whether  bus  drivers  employed  by  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 17  

University  were  workmen.   The  concept  of  service   was narrowed  and it was held that the educational  institutions were  not  an  industry.  Their aim was  education  and  the teachers’ profession was not to be assimilated to industrial workers.   This  Court  again stated that  it  must  not  be understood as laying down a general proposition. The  changes made in the meaning of the expressions used  in the   definition  of  industry  in  the  Act,   disclose   a procrustean  approach to the problem.  The words  must  mean something  definite,  but  some  of  the  tests  were  found unsatisfactory  to  cover new cases as the creation  of  new tests  clearly shows.  For example, the  emphasis  resulting from  the extension of the definition in its latter part  to include  services of employees, received little  recognition in  the later cases.  Too much insistence  upon  partnership between   employers   and  employees  is  evident   in   the Solicitor’s(1) case and (1)  [1962] Supp. 3 S.C.R. 157. (2)  [1964] 2 S.C.R. 458. (3)  [1964] 2 S.C.R. 703. 752 too  little  in  the Association(1) case.   And  yet  it  is impossible  to  think  that this test  is  universal.   What partnership  can exist between the Company and/or  Board  of Directors  on the one hand and the menial staff employed  to sweep floors on the other?  What direct and essential  nexus is there between such employees and production?  This proves that  what  must  be  established is  the  existence  of  an industry viewed from the angle of what the employer is doing and  if  the  definition from the angle  of  the  employer’s occupation  is  satisfied, all who render service  and  fall within  the  definition of workman come within the  fold  of industry  irrespective  of what they do.  There is  then  no need to establish a partnership as such in the production of material goods or material services.  Each person doing  his appointed  task  in an Organisation will be a  part  of  the industry  whether he, attends to a loom or  merely  polishes door  handles.  The fact of employment as envisaged  in  the second part is enough provided there is an industry and  the employee  is  a workman.  The learned  professions  are  not industry  not because there is absence of  such  partnership but  because  viewed  from  the  angle  of  the   employer’s occupation,  they  do. not satisfy the  test.   A  solicitor earns  his  livelihood  by his own  efforts.   If  his  work requires  him to take help from menials and other  employees who carry out certain assigned duties, the character of  the solicitor’s  work is not altered.  What matters is  not  the nexus between the employee and the product of the employer’s efforts but the nature of the employer’s occupation.  If his work cannot be described as an industry his workmen are  not industrial workmen and the disputes arising between them are not industrial disputes.  The cardinal test is thus to  find out whether there is an industry according to the denotation of  the word in the first part.  The second part  will  then show what will be included from the angle of employees.   We shall now apply this approach to the definition in the light of  the earlier decisions of this Court in so, far  as  they are  consistent and then determine whether the club in  this case can come within the meaning of ’industry’ as determined by us. The  definitions  have been set out by us  earlier  in  this judgment.    The  definitions  are  inter-related  and   are obviously  knit together.  Stated broadly the definition  of ’industrial dispute’ contains two limitations.  Firstly, the adjective Industrial’ relates the dispute to an industry  as

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 17  

defined  in the Act and, secondly, the definition  expressly states  that  not disputes and differences of an  sorts  but only those which bear upon the relationship of employers and workmen and the terms of employment and conditions of labour are  contemplated.   As  such  dispute  may  arise   between different  parties,  the Act equally  contemplates  disputes between  employers  and employers or between  employers  and workmen  or between workmen and workmen.  The definition  of the  expression  ’industrial  dispute’  further  shows  that certain disputes can never be considered under the Act.  For example, disputes between Government (1)  [1961] 2 S.C.R. 480.                             753 and an industrial establishment or between workmen and  non- workmen  are not the kind of disputes of which the Act  take notice. The  word ’employer’ is not specifically defined but  merely indicates  who is to be considered an employer for  purposes of  an  industry  carried  on by or  under  authority  of  a department  of  Government and by or on behalf  of  a  local authority.  This definition gives little assistance  because it  is  intended  to  operate in  relation  to  an  activity properly describable as an industry and this takes one  back to   the  definition  of  ’industry’.   The  definition   of ’workman’ is a little better.  Although it again refers  one back to an industry, it gives some guidance.  Workman  means any  person  employed  to do skilled  or  unskilled  manual, supervisory, technical or clerical work for hire or  reward. The  expression, however, does not include persons  employed in  some named services of Government.  Even in an  industry those  employed  mainly: in a managerial  or  administrative capacity  and  supervisors drawing more  than  live  hundred rupees  as  wages  or  exercising  functions  mainly  of   a managerial   nature,  are  also  to  be  left  out  of   the definition.  In this way the general nature of the  dispute, the  parties to the dispute and the contents of the  dispute are, therefore, reasonably clear.  A dispute must however be an industrial dispute or, as the several definitions already noticed say, must arise in relation to an industry.  This is where the difficulty begins because the statutory definition of  ’industry’  has led to some divergence of views  in  the Labour Tribunals, the High Courts and even in this Court. The definition of ’industry’ is in two parts.  In its  first part it means any business, trade, undertaking,  manufacture or  calling  of  employers.  This part  of  the  definition: determines  an  industry  by  reference  to  occupation   of employers   in   respect  of  certain   activities.    These activities  are specified by five words and  they  determine what an industry is and what the cognate expression  ’indus- trial’ is intended to convey.  This is the denotation of the term  or what the word denotes.  We shall presently  discuss what the words "business, trade, undertaking manufacture  or calling". comprehend.  The second part views the matter from the angle of employees and is designed to include  something more in what the term primarily denotes.  By the second part of   the  definition  any  calling,   service,   employment, handicraft or industrial occupation or avocation of  workmen is included in the concept of industry.  This part gives the extended  connotation.  If the activity can be described  as an  industry  with  reference  to  the  occupation  of   the employers, the ambit of the industry, under the force of the second part, takes in the different kinds of activity of the employees mentioned in the second part.  But the second part standing alone cannot define ’industry’.  An industry is not to  be  found in every case of employment  or  service.   An

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 17  

individual who employs a cook gets service from his employee whose avocation is to serve as a cook but as the activity of the individual is neither business, nor trade, nor an 754 undertaking,  nor manufacture, nor calling of  an  employer, there  is  no  industry.   By  the  inclusive  part  of  the definition tile labour force employed in an industry is made an integral part of the industry for purposes of  industrial disputes  although  industry is ordinarily  something  which employers create or undertake. The definitions in the Industrial Disputes Act are  borrowed from other statutes.  The definition of ’industrial dispute’ is  taken  from  an  Act of 1906 (6 Edw.   VII  c.  47)  and slightly modified.  There the definition ran-               "  any dispute between employers and  workmen,               which  is  connected with the  employment,  or               non-employment, or the terms of the employment               or  with  the  conditions of  labour,  of  any               person".               Our  definition  only  adds  to  the  list  of               disputes one between employers and  employers.               Similarly,  the latter part of the  definition               of ’industry’ which has caused us some trouble               is  taken  from  s.  4  of  the   Commonwealth               Conciliation and Arbitration Act which  inclu-               des in the concept of industry--               " any calling, service, employment, handicraft               or  industrial  occupation  or  avocation   of               employers on land and water."               Decisions  rendered on these definitions  (and               some  others  very  similar)  have   naurtally               influenced opinion-making in this Court.   The               Australian  cases  in  particular  have   been               subrosa all the time.  The difficulty in using               Australian cases with a text-book approach  is               perhaps   not   quite   noticed.    The   term               ’industrial dispute’ which the Australian High               Court was defining was from s. 51(XXXV) of the               Constitution Act.  There was no definition  of               the expression and it was recognised that  the               common  understanding of that  expression  was               not  what was meant but  something  different.               In a great body of cases the problem presented               its   many   facets  and  the   approach   was               pragmatic.   Higgins,  J. in, 26 Com.   L.  R.               cautioned   against  giving   a   crystallised               meaning to the expression.  He observed:               "It   is  not  necessary--or,  as   I   think,               desirable-that  we  should, in  answering  the               specific   question   asked  of   us,   commit               ourselves to a final, exhaustive definition of               a  popular  phrase as that in  question."  (p.               574).               In   the  Harinagar  Cane  Farm(1)   and   the               University(2)  cases  this Court also  made  a               similar  observation.   In the former  it  was               observed:               "We  have referred to these decisions only  to               emphasise  the  point  that  this  Court   has               consistently refrained from laying down unduly               broad or categorical propositions...". (1)  [1964] 2 S.C.R. 458 (2)  2 S.C.R, 703. 755 The  attempt to avoid generalisations (however  commendable)

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 17  

has one disadvantage.  In Australia the Courts were  dealing with, the problem without a definition and thought that they should  move  cautiously to avoid hardening  any  particular view  too  far.   We have all the  terms  except  ’employer’ defined by the statute.  Our task is to give meanings to the words  which are intended to lay down the full  connotation. Taking each operation by itself and determining on the basis of  facts  whether it is an industry without  attempting  to pin-point  whether  it  is a business, or  a  trade,  or  an undertaking, or manufacture. or calling of employers, is  to ignore somewhat the guidance afforded by the statute through its  own dictionary.  Therefore, while we accept  the  views expressed   uniformly   we  think  any  view   which   seems contradicted by later decisions because it was unrelated  to the  words  of  the definitions should  not  be  allowed  to harden.   We also take the opportunity of relying  a  little more on the guidance from the Act. The  principles  so far settled come to this.   Every  human activity  in which enters the relationship of employers  and employees,  is  not  necessarily creative  of  an  industry. Personal  services rendered by domestic and other  servants, administrative services of public officials, service in  aid of  occupations  of professional men, such  as  doctors  and lawyers, etc. employment of teachers and so on may result in relationships  in which there are employers on the one  side and employees on the other but they must be excluded because they  do  not come within the denotation of  the  term  ’in- dustry’.   Primarily, therefore, industrial  disputes  occur when the operation undertaken rests upon cooperation between employers  and  employees  with a  view  to  production  and distribution of material goods, in other words, wealth,  but they  may  arise also in cases where the cooperation  is  to produce  material services.  The 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 and manufacture.  The word ’trade’ in this  context bears the meaning which may be taken from Halsbury’s Laws of England, Third Edn.  Vol. 38 p. 8- (a)  exchange of goods for goods or goods for money; (b)  any business carried on with a view to profit,  whether manual,  or  mercantile, as distinguished from  the  liberal arts or learned professions and from agriculture; and  business means an enterprise which is an occupation  as distinguished  from  pleasure.   Manufacture is  a  kind  of productive  industry  in  which the making  of  articles  or material  (often on a large scale) is by physical labour  or mechanical  power.   Calling  denotes  the  following  of  a profession or trade. These  words have a clear signification and are intended  to lay  down definite tests.  Therefore the principal  question (and the only 756 legitimate  method)  is  to  see  where  under  the  several categories  mentioned, a particular venture can be  brought. Of  these  categories  ’undertaking’ is  the  most  elastic. According  to  Webster’s  dictionary,  ’undertaking’   means ’anything undertaken or ’any business, work or project which one  engages in or attempts, as an enterprise’.  It is  this category  which has figured in the cases of this Court.   It may be stated that this Court began by stating in  Banerji’s case(2) that the word ’undertaking’ is not to be interpreted by association with the words that precede or follow it, but after the Solicitor’s(2) and the University(3) cases, it  is obvious   that   liberal  arts  and   learned   professions, educational undertakings and professional services dependent

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 17  

on  the personal qualifications and ability of the donor  of services are not included.  Although business may result  in service  the service is not regarded as material.   That  is how  the service of a Solicitor firm is  distinguished  from the  service of a building corporation.  Otherwise  what  is the difference between the services of a typist in a factory and  those of another typist in a Solicitor’s office or  the service  of  a  bus driver in a municipality and  of  a  bus driver in a University?  The only visible difference is that in  the  one case the operation is a part  of  a  commercial establishment producing material goods or material  services and in the other there is a non-commercial undertaking.  The distinction  of an essential or direct connection  does  not appear  to be so strong as the distinction that in  the  one case  the  result  is the production of  material  goods  or services and in the other not. It is, therefore, clear that before the work engaged it  can be  described  as  an industry, it must  bear  the  definite character  of  ’trade’  or ’business’  or  ’manufacture’  or ’calling’  or  must  be capable of  being  described  as  an undertaking   resulting  in  material  goods   or   material services.    Now  in  the  application  of  the   Act,   the undertaking may be an enterprise of a private individual  or individuals.   On  the other hand, it may not.   It  is  not necessary  that  the  employer  must  always  be  a  private individual who carries on the operation with his own capital and  with  a  view  to his own profit.   The  Act  in  terms contemplates   cases  of  industrial  disputes   where   the Government or a local authority or a public utility  service may  be  the  employer.  The expansion  of  Governmental  or municipal  activity  in fields of productive industry  is  a feature   of  all  developing  welfare  states.    This   is considered  necessary  because it leads to  welfare  without exploitation of workmen and makes the production of material goods   and   services  cheaper  by   eliminating   profits. Government  and local authorities act as individuals do  and the  policy  of  the  Act is to  put  Government  and  local authorities   on  a  par  with  private  individuals.    But Government (1)  [1953] S.C.R. 302. (2) [1962] Supp. 3 S.C.R. 157. (3) [1964] 2 S.C.R. 703.                             757 cannot  be  regarded as an employer within the  Act  if  the operations are governmental or administrative in  character. The  local authorities also cannot be regarded  as  industry unless  they  produce  material  goods  or  render  material services  and  do not share by  delegation  in  governmental functions  or  functions  incidental thereto.  There  is  no essential difference between educational institutions run by municipalities  and  those run by universities.  And  yet  a distinction  is sought to be made on the dichotomy or  regal and municipal functions.  Therefore, the word  ’undertaking’ must  be  defined as "any business or any  work  or  project which  one engages in orattempts as an enterprise  analogous to  business  or  trade."  This is the  test  laid  down  in Banerji’s  case(1)  and  followed  in  the  Baroda   Borough Municipality  case(2).   Its extension  in  the  Corporation case(3) was unfortunate and contradicted the earlier cases. Next where the activity is to be considered as an  industry, it  must  not be casual but must be  distinctly  systematic. The  work for which labour of workmen is required,  must  be productive and the workmen must be following an  employment, calling  or industrial avocation.  The salient fact in  this context  is that the workmen are not their own  masters  but

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 17  

render service at the behest of masters.  This follows  from the  second part of the definition of industry.  Then  again when private individuals are the employers, the industry  is run  with  capital and with a view to  profits.   These  two circumstances  may not exist when Government or a local  au- thority  enter  upon  business,  trade.  manufacture  or  an undertaking analogous to trade. The labour force includes not only manual or technical work- men   but  also  those  whose  services  are  necessary   or considered ancillary to the productive labour of others  but does  not include any one who, in an industrial sense,  will be  regarded,  by  reason of his employment  or  duties.  as ranged  on  the  side of the employers.   Such  are  persons working in a managerial capacity or highly paid supervisors. Further  the words are ’industrial dispute’ and  not  ’trade dispute’.  Trade is only one aspect of industrial  activity; business  and manufacture are two others.  The word also  is not  industry  in  the abstract  which  means  diligence  or assiduity  in any task or effort but a branch of  productive labour.   ’This  requires cooperation in some  form  between employers and workmen and the result is directly the product of  this  association but not necessarily  commercial.   The expressions ’terms of employment’ and ’Conditions of labour’ indicate  the kind of conflict between those engaged in  in- dustry on opposite but cooperating sides.  These words  take in  dispute  as  to the share in which  the  receipts  in  a commercial venture (1)  [1953] S.C.R. 302. (2) [1957] 1 L.L.J. 8. (3)  [1960] 2 S.C.R. 942. L/P(N)78CI---9(a) 758 shall be divided and generally cover hours of work and rest, recognition of representative bodies of workmen, payment for piece work, wage ordinary and overtime, benefits,  holidays, etc.  The definition takes in disputes between employees and employees such as demarcation disputes and disputes  between employers  and  employers such as wage warfare  in  an  area where  labour  is scarce and disputes of a  like  character. The   whole  paraphernalia  of   settlement,   conciliation, arbitration  (voluntary as well as  compulsory)  agreements, awards  etc. shows that human labour has value  beyond  what the   wages   represent  and  therefore   is   entitled   to corresponding ’rights in an industry and employers must give them their due.  Industry is the nexus between employers and employees  and  it is this nexus which brings  two  distinct bodies  together to produce a result.  We do not think  that the  test that the workmen must not share in the product  of their  labours  adopted  in  one case  can  be  regarded  as universal.   There  may be occasions when  the  workmen  may receive a share of the produce either as part of their wages or as bonus or as a benefit. This ends discussion of what is an industry.  We are now  in a  position  to consider whether the  Madras  Gymkhana  Club fulfills the tests laid down by this Court and accepted here by us. in sup. port of the claim on behalf of the  Employees Union,  our  attention  was drawn to two  decisions  of  the Calcutta High Court relating to the Bengal Club Ltd.(1)  and Royal  Calcutta  Golf  Club(2).  Both  decisions  are  by  a learned  single  Judge.   They were  cases  of  incorporated companies  running clubs for profit and as business.   There are,  however, observations which are clearly  obiter,  that even  a  non-proprietary  members’  club  is  an   industry. Founding  itself  on those observations the  Union  contends that the club in the present case must also be treated as an

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 17  

industry.   In  fine  the claim is based  on  the  following considerations (a)  that the club is organised as an industry is  organised on  a  vast  scale with multifarious  activities,  (b)  that facilities of accommodation, catering, sale of alcoholic and non-alcoholic  beverages, games etc. are provided, (c)  that the club runs parties at which guests are freely entertained and   (d)   that  the  club   has   established   reciprocal arrangements  with  other  clubs for its  members.   In  our opinion  none  of  these  considerations  is  sufficient  to establish that the club is an industry within the Industrial Disputes Act We,  cannot go by the size of the club or the  largeness  of its membership or the number or extent of there  activities. We  have  to consider the essential character  of  the  Club activity  in relation to the definition of industry.  As  we said before, the definition is in two parts.  The first part which  we called the denotation or the meaning of  the  word shows what an industry really is and the (1) A.I.R. 1956.  Cal. 545.  (2)  A.I.R. Cal. 550. 759 second,  part contains the extended connotation to  indicate who  will be considered an integral part of the industry  on the  side of employees.  Beginning with the second part,  it may  at  once be conceded that the activity of the  club  is conducted  with the aid of employees who follow callings  or avocations.   Therefore if the activity of the employers  is within  the realm of industry, the answer must be in  favour of  the Union.  But the first part of the definition it  may also  be  said  that the club does not  follow  a  trade  or business.   Its activity cannot be described as  manufacture and  the running of clubs is not the calling of the  members or  its managing committee.  The only question is, is it  an undertaking? Here  the appearances are somewhat against the club.  It  is not  of  any  consequence that there  is  no  profit  motive because that is considered immaterial.  It is also true that the  affairs of the club are, organised in the way  business is  organised. and that there is production of material  and other  services and in a limited way production of  material goods   mainly  in  the  catering  department.   But   these circumstances  are not truly representative in the  case  of the club because the services are to the members  themselves for their own pleasure and amusement and the material  goods are for their consumption.  In other words, the club  exists for its members.  No doubt occasionally strangers also  take benefit  from  its  services  but they can  only  do  so  on invitation  of members.  No one outside the list of  members has  the advantage of these services as of right.   Nor  can these privileges be bought.  In fact they are available only to members or through members. If  today  the  club were to stop  entry  of  outsiders,  no essential  change  in its character  vis-a-vis  the  members would  take  place.  In other words, the  circumstance  that guests  are admitted is irrelevant to determine if the  club is  an  industry.  Even with the admission of  guests  being open  the club remains the same. that is to say, a  member’s self-serving  institution.  No doubt the material  needs  or wants of a section of the community is catered for but  that is  not  enough.   This must be done as  part  of  trade  or business or as an undertaking anlogous to trade or business. This element is completely missing in a members’ club. It is contended that, although there is no incorporation  as such,  the club has attained an existence distinct from  its members.   It may be said that members come and  members  go

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 17  

but the club goes on for ever.  That is true in a sense.  We are not concerned with members who go out.  The club belongs to  members  for the time being on its list of  members  and that is what matters.  Those members can deal with the  club as  they like.  Therefore, the club is identified  with  its members  at a given point of time.  Thus it cannot  be  said that the club has an existence apart from the members. 760 It  is said that the case of the club  is  indistinguishable from  the Hospital(1) case.  That case is one which  may  be said to be on the verge.  There are reasons to think that it took the extreme view of an industry.  We need not pause  to consider the Hospital(1) case because the case of a members’ club  is beyond even the confines established by that  case. In  our judgment the Madras Gymkhana Club being  a  members’ club  is  not an industry and the Tribunal was right  in  so declaring. The appeal fails and is dismissed but we make no order about costs. G. C.                       Appeal dismissed. (1) [1960] 2 S.C.R. 866. 761