PHYSICAL RESEARCH LABORATORY

K.G. SHARMA

APRIL 8, 1997

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

Labour Law:

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

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

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

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

Words and Phrases :

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

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

The Labour Court rejected the contention of the appellant that PRL was not an 'industry' within the meaning of Section of 2 (j) of the Industrial H

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

B Hence this appeal.

Allowing the appeal, this Court

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

1.2. PRL is an institution under the Government of India's Department of Space. It is engaged in pore research in space science. The purpose F of the research is to acquire knowledge about the formation and evolution of the universe but the knowledge thus acquired is not intended for sale.

The Labour Court has recorded a categorical finding that the research work carried on by PRL is not connected with production, supply or distribution of material goods or services. The material on record further discloses that PRL is conducting research not for the benefit or use of G others. TI10ugh the results of the research work done by it are occasionally published they have never been sold. There is no material to show that the knowledge so acquired by PRL is marketable or has any commercial value.

It has not been pointed out how the knowledge acquired by PRL or the results of the research occasionally published by it will be useful to persons H other than those engaged in such type of study. The material discloses that

PHYSICAL REASEARCH LABO RA TORY v. K.G. SHARMA 735

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

1.3. Neither from the nature of its organisation nor from the nature and character of the activity carried on by PRL, can it be said to be an B 'undertaking' analogous to business or trade. It is not engaged in a 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 C and a domestic enterprise than a commercial enterprise. PRL, therefore, is not an industry even though it is carrying on the activity of research in a systematic manner with the help of its employees as it lacks that element which would make it an organisation carrying on of a trade or business; it is not producing and distributing services which are intended or meant for satisfying human wants and needs, as ordinarily understood.

[743-H; 744-A-C]

Bangalore Water Supply & Sewerage Board v. A. Rajappa, [1978) 2 SCC 213; Chief Co11se1vatorof Forests &Anr. v.Jagannath Mamti Kondliare,

[1996) 2 SCC 293 and Sub-Divisional Inspector of Post, Vaikam & Ors., [19961 8 sec 489, relied on.

I.I. Shrimali v. District Development Officer, (1989) 1 GLR 396, approved.

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

Physical Research Laboratory Employees' Union v. A.N. Ram, SCA No. 1082 of 1979 (Guj.), overruled.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2663 of 1997.

From the Judgment and Order dated 7.5.92 of the Presiding Officer,

Labour Court, Ahmedabad in R. No. 105 of 1982.

A Ashok Desai, Attorney General, Sanjanwalla, P.H. Parekh and Ms.

Bina Madhavan for the Appellant. .. ; ' Mrs. S. Bagga for the Respondent.

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

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

The facts and circumstances which gave rise to this question are as follows. The respondent was appointed by PRL as Scientific Glass Blower on 25.10.48. He continued to work as such till 11.5.76 when he was transferred to Photography Documentation Services on a post which was D non-technical and administrative. On 31.12.78 he attained the age of 58 years. He was, therefore, retired from service with effect from 1.1.79 Feeling aggrieved by his retirement at the age of 58 years and not at 60 he filed a writ petition in the High Court of Gujarat but it was withdrawn. He then filed a complaint before the Labour Commissioner who, on the basis thereof, made a reference to the Labour Court at Ahmcdabad.

The Labour Court rejected the contention of the appellant that it was not an 'industry' within the meaning of Section 2(j) of the AD. Act.

Though it recorded a finding that PRL is purely a research institute and the research work carried on by it is not connected with production supply F or distribution of goods or services yet it took the aforesaid view following the decision of this Court in Bangalore Water Supply & Sewerage Board v.

A. Rajappa, (1978] 2 SCC 213 as it further found that PRL is carrying on, in an organised and systematic manner, the activity of research in its laboratory hy active co-operation between itself and its employees and the discoveries and inventions made would be eligible for sale. In taking the G view that PRL is an 'industry' it also followed the decision of the Gujarat High Court in Pllysical Research Laboratory Employees Union v. A.N. Ram (Special Civil Application No. 1082 of 1979), a case under the Trade Unions Act, wherein it was observed that "In view of the decision of the Supreme Court in Bangalore Water Supply & Sewerage Board v. A. Rajappa H and Others, A.LR. (1978) S.C. 548, it is not open to doubt that the

PHYSICAL REASEARCH LABO RA TORY v. K.G. SHARMA [NANA VAT!, J.] 737

employees working with the Physical Research Laboratory 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 upto the age of 60 years. Therefore, the order, retiring him earlier, was declared as bad and it was held that he was entitled to reinstatement with full back wages. As the respondent had already completed the age of 60 years by them no order of reinstatement was passed but only back wages for those two years were ordered to be paid.

The appellant has approached this Court directly against the award D of the Labour Court as the Gujarat High Court has already taken the view that PRL is an 'industry' and different High Courts and Tribunals have expressed conflicting views on the question whether research institutes run by the Government can be said to be 'industry' as defined by Section 2G) of the I.D. Act. On 1.2.93, when Special Leave Petition, out of which this appeal arises, was listed for hearing a statement was made by the learned E counsel for the appellant that irrespective of the decision on merits this Court should decide whether research instiiute of the type of PRL can be said to be 'industry'. This Court passed an order for issuing notice indicating that the matter will be finally disposed of at the notice stage itself.

F Our attention was first drawn by the learned Attorney General who appeared for the appellant to the facts which are not in dispute. PRL is a public trust registered under the Bombay Public Trust Act, 1950. It is a research institute and was established by Dr. Vikram Sarabhai for research in space and allied sciences. It is finance mainly by the Central Government by making provision in that behalf in the Union Budget and nominally by G the Government of Gujarat, Karmakshetra Education Foundation and Ahmcdabad Education Society. It is virtually an institute falling under Government of India's Department of Space. Its object is to conduct and is, therefore, engaged in conducting advance research in (1) astronomy and astrophysics, (2) planetary atmosphere and aeronomy, (3) earth sciences H

A and solar system studies and (4) theoretical physics. It is the case of the appellant that the research work is done in the institute by eminent scientists who engage themselves in resolving problems of fundamental sciences on their own. It is not directly or indirectly carrying on any trade or business and its activities do not result into production or distribution

B or goods or services calculated to satisfy human wants and wishes. The knowledge acquired as a result of the research carried on by it is not sold but is utilised for the benefit of the Government. It was, therefore, 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 atmos- C phere of the earth is not an 'industry' as defined by Section 2(j). He further submitted that the activity of m.earch is carried on mainly by the scientists engaged for that purpose and incidentally with the help of a few other employees. He also submitted that the research work carried on by the PRL is more in the nature of governmental or sovereign function than a D commercial venture and, therefore, also it would not fall within the purview of Section 2 (i) of the I.D. Act.

The question : What is an 'industry' under the Industrial Disputes Act? has been answered by this Court in Bangalore Water Supply case

(supra) as under :

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 employcr and employee (the direct and substantial element is chimcrcial) (ii) for the production and/or distribution of goods and services calculated to satisly human wants and wishes (not spiritual or religious but inclusive of material things or services geared to celestial bfas e.g. making , on a large scale prasad or food), plima facie, there is an 'industry' in that enterprise.

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

( c) The true focus is functional and the decisive test is the

PHYSICAL REASEARCII LABO RA TORY v. K.G. SHARMA (NANA VAT!, J.] 739

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

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

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

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

III

142. A µplication of these guidelines should not stop short of their logical reach by invocation of creeds, cults or inner sen5e of F incongruity or outer sense of motivation for or resultant of the economic operations. The ideology of the Act being industrial peace, regulation and resolution of industrial disputes between employer and workmen, the range of this statutory ideology must inform the reach of the statutory definition. Nothing less, nothing G more.

(a) The consequences are (i) professions, (ii) clubs, (iii) educational institutions, (iv) co-operatives, (v) research institutes, (vi) charitable projects and (vii) other kidred adventures, if they fulfil the triple tests listed in I (supra), cannot be exempted from the H

A scope of Section 20).

(b) A restricted category of professions, clubs, co-operatives and even gurukulas and little research labs, may qualify for exemption if, in simple ventures, 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-employee character of the unit.

( c) If, in a pious or alturistic mission many employ themselves, free or for small honoraria or like return, mainly drawn by sharing in the purpose or cause, such as lawyers volunteering to run a free legal services clinic or doctors serving in their spare hours in a 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 servant 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.

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 goods and services if isolated, even then, the predominant nature of the services and the integrated nature of the departments as explained in the Corporation of Nagpur (supra), will be the true test. The whole undertaking will be 'industry' although those are not 'workmen' by definition may not benefit by the status.

(b) Notwithstanding the previous clauses, sovereign functions, strictly understood, (alone) quality for exemption, not the welfare activities or economic adventures undertaken by government or statutory bodies.

PHYSICAL REASEARCH LABORATORY"· K.G. SHARMA [NANA VAT!, J.] 741

(c) Even in departments discharging sovereign functions, if there A are units which are industries and they are substantially severable, then they can be considered to come within Section 20).

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

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 <: sociis' was applied and it was held that they would be 'industry' only if they are found to be analogous to trade or business. Furthermore, an activity undertaken by the Government cannot be regarded as 'industry' if it is done in discharge of its sovereign functions.

One more aspect to be kept in mind is that the aforesaid principles are not exhaustive either as regards what can be said to be sovereign functions or as regards the other aspects dealt with by the court.

In this context, it is useful to refer to Chief Conservator of Forests and Another v. Jagannath Maruti Kondhare, (1996) 2 SCC 293, wherein this Court, while rejecting the contention that as sovereignty vests in the people the concept of sovereign functions would include all welfare activities, on the ground that taking of such a view would erode the ratio in Bangalore Water Supply case, observed that "the dichotomy of sovereign and nonsovereign functions does not really exist - it would all depend on the nature of the power and manner of its exercise". After referring to the three traditional sovereign functions namely legislative power, the administration of laws and the exercise of the judicial power and also the decision of the Gujarat High Court in J.J. Shrimali v. Distlict Development Officer, (1989)

1 GLR 396, wherein famine and drought relief works undertaken by the G Sfate Government were held not to be an 'industry', this Court observed that "What really follows from this judgment is that apart from the aforesaid three functions, there may be some other functions also regarding which a view could be taken that the same too is a sovereign function".

fn Sub-Divisio11al Inspector of Post, Vaikam a11d Others v. 771eyya111 H

A Joseph and Others, (1996] 8 sec 489, this Court had to consider whether the establishment of Sub-Divisional Inspector of Post at Vaikam is an 'industry'. Therein this Court has observed that "India as a sovereign, socialist, secular, democractic republic has to establish an egalitarian social order under rule of law. The welfare measures partake the character of

B sovereign functions 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 C of the State as a welfare State. It is not, therefore, an industry". While taking this view this Court was also influenced by the fact that, the method of recruitment, the conditions of service, the scale of pay and the conduct rules regulating the service conditions of the Extra-Departmental Agents employed by the. said establishment are governed by the statutory rules and D regulations and that those employees are civil servants. Therefore, while applying the traditional test, approved by this Court in Bangalore Water Supply case to determine what can be regarded as sovereign functions, the change in the concept of sovereign functions of a constitutional government has to be kept in mind. Relying upon these two in Chief Conse1vator of Forests v. Jagannath Marnti Kondhare (supra) and Sub-Divisional Inspector E of Post v. T71eyyam Joseph and Others (supra), it was contended by the learned Attorney General that the research work carried on by PRL should be regarded as a sovereign or governmental function.

With respect to research institutes this Court in Bangalore Water Supply has observed as under :

"Does research involve collaboration between employer and employee? It does. The employer is the institution, the employees are the scientists, para-scientists and other pers_onnel. Is scientific research service? Undoubtedly it is. Its discoveries are valuable contributions to the wealth of the nation. Such discoveries may be sold for a heavy price in the industrial or other market. Technology has to be paid for any technological inventions and innovations may be patented and sold. In our scientific and technological age nothing has more case value, as intangible goods and invaluable services, than discoveries. For instance, the discoveries of Thomas

PHYSICAL REASEARCH LABORATORY v. K.G. SHARMA [NANA VAT!, J.] 743

Alva Edison made him fabulously rich. It has been said that his A brain had the highest cash value in history for he made the world vibrate with the miraculous discovery of recorded sound. Unlike most inventors, he did not have to wait to get his reward in heaven; he received it munificently on this gratified and grateful earth, thanks to conversion of his inventions into money aplenty. Research benefits industry. Even though a research institute may be a separate entity disconnected from the many indnstries which funded the institute may be a separate entity disconnected from

the many industries which funded the institute itself, it can be regarded as an organisation, propelled by systematic activity modelled on co-operation between employer and employee and C calculated to throw up discoveries and inventions and useful solutions which benefit individnal industries and the nation in terms of goods and services and wealth. It follows that research institutes, albeit run without profit-motive, are industries."

PRL is an institntion under the Government of India's Department of Space. It is engaged in pure research in space science. What is the nature of its research work is already stated earlier. The purpose of the research is to acquire knowledge about the formation and evolution of the universe but the knowledge thus acquired is not intended for sale. The Labour Court has recorded a categorical finding that the research work carried on 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 PRL is marketable or has any commercial value. It has not been pointed out how the knowledge acquired by PRL or the results of the research occasionally published by it will be useful to persons other than those engaged in such type of study. The material discloses that the object with which the research activity is undertaken by PRL is to obtain knowledge

for the benefit of the Department of Space. Its object is not to render G services to others nor in fact it does so except in an indirect manner.

It is nobody's case that PRL is engaged in an activity which can be called business trade or manufacture. Neither from the nature of its organisation nor from the nature and character of the activity carried on H

A by it, can it be said to be an 'undertaking' analogous to business or trade.

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

We, therefore, allow this appeal and set aside the award passed by the Labour Court at Ahmedabad in Reference No. LCA 105 of 1982.

However, in view of the facts and circumstances of the case there shall be D no order as to costs.

v.s.s.

Appeal allowed.