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PETITIONER:

PHYSICAL RESEARCH LABORATORY

Vs.

RESPONDENT:

K.G. SHARMA

DATE OF JUDGMENT: 08/04/1997

BENCH:

K. RAMASWAMY, G.T. NANAVATI

ACT:

HEADNOTE:

JUDGMENT:

J U D G M E N T

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 '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 word

as such till 11.5.76 when he was transferred to photography

Documentation services on a post which was non-technical and

administrative. On 31.12.78 he attained the age of 58 years.

He was, therefore. retired from service with effect form

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 by it was with He then filed a complaint

before the Labour commissioner who, on the basis thereof,

made a reference to the Labour court at Ahmedabad.

The Labour Court rejected the contention of the

appellant that it was not an 'industry' within the meaning

of Section 2(j) of the I.D. 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 or distribution of goos or services yet it

took the aforesaid view following the decision of this court

in Bangalore Water Supply & Sewerage Board Vs. 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 by active co-operation between

itself and its employees and the discoveries and invention

made would be eligible for sale. in taking the view that PRL

is an 'industry' it also followed the decision of the

Gujarat High court in physical Research Laboratory Employees

Union vs. 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 and

others A.I.R. 1978 S.C. 548, it is not open to doubt that

the employees working with the physical Research Laboratory

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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

up to 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 then

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 of the Labour court as the Gujarat High

court has already taken the views that PRL is an 'industry'

and different High court 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 2(j) 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 counsel for the appellant that irrespective

of the decision on merits this court should decide whether

research institute 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.

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 bu Dr. Vikram Sarabhai for

research in space and allied science. It is financed mainly

by the central Government by making provision in that behalf

in the Union Budget and nominally by the Government of

Gujarat, Karmakshetra Education Foundation and Ahmedabad

Eduction 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 science 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 of indirectly carrying on any trade or business and

its activities do not result into production or distribution

of 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 atmosphere of the earth is not an

'industry' as defined by section 2(j). He further submitted

that the activity of research is carried on mainly by the

scientists engaged for that purpose and incidentally with

the help of a few other employees. He also submit that the

research work carried on by the PRL is more in the nature of

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venture and, therefore, also it would not fall within the

purview of section 2(j) 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 :

"I

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 employer and employee (the

direct and substantial element is

chimerical) (ii) for the production

and/or distribution of goods and

services calculated to satisfy

human wants and wishes (not

spiritual or religious but

inclusive of material things or

services geared to celestial bliss

e.g. making, on a large scale

prasad or food) , prima 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 nature

of the activity with speical

emphasis on the employer-employee

relations.

(d) If the organization is a trade

or business it does not case to be

one because of philanthropy

animating the undertaking.

II

141. Although section 2(j) 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

shrinkage a explained in Banerji

(supra) and in this judgment; so

also, service calling and the like.

This yields the inference that all

organized in I (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 the fold

of 'industry' 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 employee, may be

dissimilar. It does not matter, if

on the employment terms there is

analogy.

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III

142. Application of these

guidelines should not stop short of

their logical reach by invocation

of creeds, cults or inner sense of

incongruity or outer sense of

motivation for or resultant of the

economic operations. The ideology

of the Act being industrial pease,

regulation and workmen, the range

of this statutory must inform the

reach of the statutory definition.

Nothing less, nothing more

(a) The consequences are (i)

professions, (ii) clubs, (iii)

educational instituions, (vi) co-

operative (v) research institutes,

(vi) charitable projects and (vii)

other kindred adventures, if they

fulfil the triple tests listed in

I(supra), cannot be exempted from

the scope of section 2(j).

(b) A restricted category of

professions clubs, co-operative and

even gurukulas and little research

labs, may 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-employe

character of the unit.

(c) If in a pious or altruistic

mission many employ themselves,

free or for small honoraria or like

return, 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 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 servants 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

IV

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

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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 for

Nagpur (supra), will be, 'industry'

although those are not 'workmen' by

definition may not benefit by the

status.

(b) Notwithstanding the previous

clauses, sovereign function,

strictly understood, (alone)

qualify for exemption, not the

welfare activities or economic

adventures undertaking by

government or statutory bodies.

(c) Even in departments discharging

sovereign function, if there are

units which are industries and they

are substantially severable, then

they can be considered to come

within section 2(j)

(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 a sociis' was applied and it was held that they

would be 'industry' only if they are found to be analogous

to trade of business. Furthermore an activity undertaken by

the Government cannot be regarded as 'industry' if it is

done in discharge of its sovereign function. 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 function or as regards the other aspects dealt

with by the court.

In this context, it is useful to chief Conservator of

Forests and another vs. Jagannath Maruthi Kondhare ,

1969(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 talking of such a view would

erode the ratio in Bangalore water supply, case. Observed

that "the dichotomy of sovereign and non-sovereign function

does not really exit - it would all depend on the nature or

the power and manner of its exercise" After referring to the

three traditional sovereign function namely legislative

power the administration of laws and the exercise of the

judicial power and also the decision of the exercise of the

judicial power and also the decision of the Gujarat High

court in J.J. Shrimali vs. District Development Officer

1989(1) GLR 396, wherein famine and drought relier works

undertaken by the state Government were held not to and

'industry' this court observed that "what really follows

from this judgment is that apart from the aforesaid three

functions there may be some others functions also regarding

which a view could be taken that the same too is a sovereign

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function".

In sub-Divisional Inspector of Post, Vaikam and others

vs. Theyyam Joseph and others, 1996 (8) SCC 489, this court

had to sub-Divisional Inspector of post at Vaikam is an

'industry'. Therein this court has observed that "India as a

sovereign, socialist, secular, democratic republic has to

establish an egalitarian social order under rule of law. The

welfare measures partake the character of sovereign

function 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 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 the Extra-Departmental

Agents employed said establishment are governed by the

statutory rules and 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 function the

change in the concept of sovereign function of a

constitutional government has to be kept in mind. Relying

upon these two in chief conservator of Forests vs. Jagannath

Maruthi Kondhare (supra ) and sub-Divisional Inspector of

post vs. Theyyam Joseph and others (supra), it was contended

by the learned 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 employee are

the scientists, para - scientists

and other personnel. Is scientific

research service ? Undoubtedly. It

is. Its discoveries are valuable

contributions to the wealth of the

nations, such discoveries may be

sold for a heavy price in the

industrial of other markets.

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 . it has been said that

his brain had the highest cash

value in history for he made the

word vibrate with the miraculous

discovery of recorded sound. unlike

most inventors he did not have 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

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the many industries 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 inventions and useful

solutions which benefit individual

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 institution under the Government of India`s

Department of Space. It is engaged in pure 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 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 other than discloses that the object 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 services to others nor in fact it

does so expect in an indirect manner.

It is nobody`s 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 by it, it can 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 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 no order as to

costs.