Bangalore Water Supply & Sewerage Board v. A. Rajappa, (1978) 2 SCC 213

BANGALORE WATER SUPPLY AND SEWAGE BOARD V. RAJAPPA

ISSUE:

Whether a statutory body engaged in activities essential for the provision of basic amenities to citizens can be classified as an “industry” under the definition in Section 2(j) of the Industrial Disputes Act 1947?

RULE:

Dominant nature test, which applies when an entity performs both industrial and non-industrial functions. The dominant or predominant nature of the entity’s activities determines whether the organization qualifies as an industry. Only strictly sovereign functions, such as defense and law enforcement, are excluded from the definition of “industry.”

Triple test to determine whether an entity qualifies as an industry:

a) Systematic Activity: The entity must engage in an organized and systematic activity.

b) Employer-Employee Cooperation: The activity should involve the cooperation of employers and employees.

c) Production of Goods or Services for Human Needs: The activity must produce goods or services intended for human consumption or use, whether or not for profit.

FACTS:

The employees of the Bangalore Water Supply and Sewerage Board challenged penalties imposed on them by the Board, leading to a claim under Section 33C(2) of the Industrial Disputes Act.
The Board argued it was not an industry under Section 2(j), as it was a statutory body performing “regal” functions (sovereign in nature).
Both the Karnataka High Court and Supreme Court rejected this argument, ruling that the Board was an industry under the Act.

HELD:

The Supreme Court held that the Bangalore water supply and sewage board would fall under the ambit of the definition of section 2(j) under the Industrial Disputes Act 1947 and that the organization, whether it was profit-oriented or not, was to be considered an industry.
The Court also held that the word “industry” is required to be given a broad and clear interpretation under section 2(j), and every factor, especially the Triple Test, must be applied in order to do the same. The Court held that even though the term must be interpreted broadly, it must not overstep the bounds.