Shedding light on the definition of ‘industry’ under the Industrial Disputes Act, 1947 (ID Act) the Jammu and Kashmir and Ladakh High Court has observed that the essential criterion for an organisation to be considered an ‘industry’ is the nexus between the services provided by an employee and those rendered by the institute.

Explaining the contours of the term “Industry” used in the Act Justice Sanjeev Kumar observed,

“The nexus, direct or indirect between the services provided by an employee and the services rendered by the Institute is sine qua non to bring an organization within the scope of the term „industry‟ as defined in Section 2(j) of the Act”.

The case involved Ashok Kumar, a daily wage peon at the Small Industries Service Institute (SISI) in Jammu, who challenged the termination of his services before the Central Government Industrial Tribunal-cum-Labour Court, Chandigarh (Tribunal). Kumar had argued that the SISI was an ‘industry’ under the ID Act and therefore, the termination was illegal.

The SISI contested this claim and emphasised their primary function as providing consultancy services to entrepreneurs and assisting the state government in implementing central government policies. They argued that these activities did not qualify them as an ‘industry’ under the ID Act.

The Tribunal, however, referred the dispute back to the government, deeming it not maintainable due to the nature of SISI’s work. Kumar then approached the High Court challenging this decision.

In order to address the moot controversy Justice Kuamr referenced judgments like Bangalore Water Supply Board v. R. Rajappa (1978) and D.N. Banerji v. P.R. Mukherjee (1953), and reaffirmed the ‘triple test’ to determine if an organization is an ‘industry’ which constitute;

1. Systematic activity carried out by the organization

2. Activity organized by cooperation between employer and employee

3. Activity for production and/or distribution of goods and services to satisfy human wants (excluding religious or spiritual services).

The court further clarified that considerations like profit motive, the employer being the government, or the nature of the organization (public, private etc.) are irrelevant.

Justice Kumar meticulously examined the SISI’s functions and concluded that while their consultancy services were a systematic activity providing services, the crucial element of cooperation between employer and employee was missing.

Observing that the daily wage peon’s services did not directly or indirectly contribute to the core function of providing consultancy the bench recorded,

“Not only the predominant object but also the only object of the respondent-Institute is to provide services in the form of consultancy to the State Government in implementation of the Central Government policies and to the entrepreneurs in establishing their ventures. The duties performed by a person in the office as Class-IV do not directly or even remotely contribute towards the performance of duties of consultancy and the experts providing the intended services to the beneficiaries”

Distinguishing the activities of experts and consultants providing services and those of peripheral staff like peons, the court held that the ‘direct or indirect nexus’ between the services provided by an employee and the services rendered by the organization is essential for it to be considered an ‘industry’ under the ID Act.

Based on these considerations the court upheld the Tribunal’s decision and dismissed Ashok Kumar’s petition.

Case Title: Ashok Kumar Vs Union of India through Secretary to Govt Industries Department.

Citation: 2024 LiveLaw (JKL)