866 SUPREME COURT REPORTS [1960(2)]

I960 to the Government. The licence issued by the Govern-

-

ment is

an exercise of the statutory power under the

J. v. Goilal & Co. relevant Act. Whether the petitioner sold the goods

Ass~·tant to the Government or to a third party, he had to

Collector of obtain a licence. Indeed in the present case, the

Sales-Tax• licence was given to the seller with the express object

of fulfilling the contracts with the Government and

Subba Rao J. was issued several days after the contracts were

executed,

and indeed the Government took the licence

from

the seller and cleared the goods through their

officer.

Ig60

January 29

For all the foregoing reasons we hold that the

property in the goods passed to the Government of

India when the shipping documents were delivered

to them against payment. It follows that the sale

of the gooQ.s by the petitioner to the Government of

India took place when the goods were on the high

seas.

That being so, the sales in question must be held

to have taken place in the course of the impor~ into

India and therefore they would be exempted from

sales tax under Art. 286(1)(b) of the Constitution.

In this view, no other question. would arise for

consideration.

In the result the order of the Assistant

Collector of Sales Tax is set aside and that of the Sales Tax Officer is restored. The respondents will

pay the costs of the petitioner.

Petition allowed.

STATE 0]' BOMBAY & OTHERS

v.

THE HOSPITAL MAZDOOR SABHA & OTHERS

(P. B. GAJENDRAGADKAR, K. SUBBA RAO AND

K. 0. DAS GUPTA, JJ.)

Industrial Dispu.te-Retrenchment of worhmen by hospital

without compc11satio11-V

alidity-H ospital, if an industry­' l ndustry' Meaning-Industrial Disputes Act. I947 (I4 of Ig47).

ss.

2(j). 25F. 25r.

The

serYices of respondents 2 and 3, · engaged as 'vard

eervants in the J. J. Group of Hospital, Bombay, under State

'

-

control and management were retrenched without payment of ...

compensation as required bys. 25F(b) of the Industrial Disputes ...

;

-

-

S.C.R. SUPREME COURT REPORTS 867

Act, 1947. The respondents applied to the High Court for a

writ of mandamus under Art. 226 of the Constitution. The

Ig6o

single Judge who heard the matter held that non-payment of State of Bombay

retrenchment compensation did not render the retrenchment

orders invalid as s. 251 of the Act provided a specific remedy for

its recovery and dismissed the application. The Division Bench

on appeal reversed the decision

of the single Judge upholding the

v.

The Hospital

Mazdoor

Sabha

respondents' contention that the said hospitals were an industry Gajendragadkar ].

as defined by s. 2(j) of the Act and non-payment of retrenchment

compensation rendered the retrenchment

bad in law.

On appeal

by the State of Bombay.

Held, that the decision of the Division Bench was right and

must be affirmed.

The mandatory language

of s.

· 25F(b) of the Industrial

Disputes Act, 1947, plain and unambiguous in effect, leaves no

manner

of doubt that the payment of compensation as required

by it is a condition precedent to retrenchment and that s.

251 of

the Act is intended to provide for the recovery of other monies

that became due to the employees under Ch. V of the Act.

The object and the scope of the Act, as apparent from its

various provisions, made

it amply clear that the Legislature in

defining

the the word 'industry' in s. 2(j) of the Act was

deliberately using

term of wide import in its first clause and

referring to several other industries in the second in an inclusive

way obviously denoting extention.-

In construing the definition,

therefore,

it is inappropriate to apply the maxim noscitur a sociis

so as to restrict its meaning. The maxim is a rule of construction

and can apply only where the intention of the Legislature in

associating terms

of wider import with those or narrower import

or

the meaning of the wider terms used is in doubt.

The corporation of Glasgow v. Glasgow Tramway and Omnibus

Co. Ltd.,

1898 A. C. 631, referred to.

Nor can undue importance be attached to the conventional

meaning

attributed to trade or business in construing the wide

words

of the definition since it has lost some of its force and can

no longer be wholly valid for the purpose

of industrial adjudica­

tion in a modern welfare state.

It is clear that the presence of a

profit motive or

the investment of capital, traditionally associated

with notion

of trade and business, can be no indispensible

requisite for an industry under

s. 2(j) of the Act.

Such activities of the Governm~nt as can properly be

decribed as regal or sovereign activities easily fall outside

the

scope of the definition: But the field of such activities cannot be

extended to cover. other activities which are undertaken

by

the

State in implementation of the Directive Principles of State

Policy and the ideal of a welfare State.

Coomber v. Justices of Berks, 9 A. C. 6r, referred to.

Although

it 'may not be possible to enumerate all possible

attributes that can make an activity an undertaking

under s. 2(j)

as being analogous to trade or business, the working principle

should be

that

any activity systematically and habitually under-

868 SUPREME COURT REPORTS [1960(2)]

taken for the production or distribution of goods or for the

rendering of material services to the community or a part of it

State of Bombay with the help of employees organised or arranged in the manner

v.

The Hospital

M azdoor Sabha

of a trade or business in such an undertaking.

No question of the application of the doctrine of qu.id pro qtto

can arise in deciding such a matter, for that would only be

raising the question of profit motive in another form.

So judged there could be no doubt that the State in running

the hospitals in question was carrying on an industry within the

meaning of the Act.

D.

N. Banerji v.

P.R. Mukherjee, (r953) S. C.R. 302, Baroda

Borough Mitnicipality v. Its Workmen, (r957) S. C. R. 33, Sri

Vishitddhananda Saraswathi Marwari Hospital v. Their Workmen

(r952) II L. L. J. 327 and The Federated State School Teachers'

Association

of Australia v. The State of Victoria

& Ors., (r929) 4r

C. L. R. 569, referred to.

Brij Mohan Bagaria v. Chatterjee (N. C.) (r958) L. L. J. r90,

disapproved.

CIVIL APPELLATE JURISDICTION: Civil Appeal

No. 712

of 1957.

Appeal from

the judgment and order dated

April 18, 1956, of the Bombay High

Court in Appeal

No.

65of1955, arising out of the judgment and order

dated July 28, 1955, of the said High

Court is Misc.

Petition No. 113 of 1955.

G. K Daphtary, Solicitor-General of India, and

R. H. Dhebar, for the appellants.

K. R. Chaudhuri, T. S. Venkataraman and

K. R. Sharma, for the respondents.

1960. January 29. The Judgment of the Court

Gajendragadka. ]. was delivered by . .

GAJENDRAGADKAR, J.-Thrs rs an appeal by the

State of Bombay (hereinafter called the appellant)

and two others and it arises from a writ petition filed

against it by the Hospital Mazdoor Sabha, a trade

union registered under the Industrial Trade Unions

Act XIV of 1926 and two of its members Mrs.

Vatsala Narayan and Mrs. Ruth Isaac (hereinafter

called respondents 1

to 3). Respondents 2 and 3

were employed

as Ward servants in the J. J. group

of Hospitals. The superintendent of this said group

of Hospitals informed the said respondents by notices

issued respectively

against them that their services

would be

terminated with effect from the dates

mentioned in the said notices and in accordance with

the said notices their services were in fact terminated;

'

-

-

-

-

S.O.R. SPPREME COURT REPORTS 869

subsequently in their place two State servants who 1960

were discharged from the Civil Supplies Department

were appointed. The writ petition filed by the State of Bombay

v.

respondents alleged that the retrenchment of Tie Hospital

respondents 2 and 3 was void as it did not comply Mazdoor Sabha

with the mandatory provisions of ss. 25F and 25H of

the lndustrial Disputes Act, 1947 (14 of 1947) Gojendragadkar ].

(hereinafter called the Act) and it claimed a writ of

mandamus directing the appellant to reinstate them

in their posts. This petition was resisted by the

appellant on several grounds. It was urged that the

orders terminating the services of respondents 2 and 3

were

not void and so the respondents' claim for a

writ was unjustified on the merits and it was argued

that the writ application was wholly misconceived

inasmuch as the J. J group of Hospitals did not

constitute an industry and so the relevant provisions

of the Act were inapplicable to the respondent's

case.

This writ petition was heard by Tendolkar J.

The learned judge did not think it necessary to

consider what he called the somewhat ticklish

question

as to whether the group of Hospitals cons-

·

titutes an industry because he held that even

assuming that the relevant provisions of the Act were

applicable

and could be invoked by the respondents

it was not shown that the impugned orders were void.

In his opinion non-compliance with the provisions

Of

s. 25]' did not invalidate the said orders, and it was

open

to the respondents to seek for an appropriate

remedy under s. 251 of the Act. He also held that

the question about the application of s. 25H did not

arise.

On these findings the writ petition filed by

the respondents was dismissed.

The matter was then taken before the Court of

Appeal. The Court of Appeal held that the impugned

orders

had not complied with the mandatory provisions

of s. 25F and so they were invalid and inoperative.

That is why the question as to whether s. 25H

applied was not considered by it. The finding that

the impugned orders were invalid for contravention

of the mandatory provisions of s. 25F made it

neces­

sary to decide the larger issue as to whether the Act

870 SUPREME COURT REPORTS [1960(2)]

1

9

60

applied to the Hospitals. The Court of Appeal has

observed that it was first· inclined to send the matter

Sta.le of liombay

v. back to Tendolkar J. but it was requested by the

The H0>pital learned counsel appearing for both the parties that it

M"zdou• Sabha would be better if the said question was decided by it

--as it was a question of law and the decision of the

Gajendmgadko• f. said issue by the Court of Appeal would a,void a

remand and a further a.ppeal. That is how the iswc

was considered by the Court of Appeal and answered

in favour of the raspondents. In the result the

decision of Tendolkar J. was reversed, the writ

petition was allowed and a writ in the nature' of

mandamus was issued against the appellant.

The appellant then applied for and obtained a

certificate

of fitness from the Bombay High

Court

and with the said certificate it has brought the present

appeal before us. On behalf of the appellant two

points have been raised for our decision in the present

appeal: Was the Appellate Court justified in holding

that the contravention of the material provisions of

s. 25ll' of the Act rendered the impugned orders

invalid; and do the relevant provisions of the Act

apply to the group of Hospitals run by the appellant;

are they an industry within the meaning of the Act ?

Before dealing with these points it would be

relevant to state the materia,l facts in regard to the

group of Hospitals themselves which are not in

dispute. This group consists of five Hospitals. It

appears that in 1835 Sir Robert Grant, the then

Governor of Bombay, desired tci start an institution

for the purposes of imparting medical education in

the Presidency of Bombay. His proposal in that

behalf was sanctioned by the Board of Directors of

the East India Company and funds amounting to

Rs. 44,000 were collected for the purpose and an

equal amount was contributed by the Directors to

defray the cost of construction of the College buil­

ding.

In 1843 the foundation of the

Medical College

building

was laid and the same was completed in

1845. About that time an idea of building a hospital

for the sick people of all classes and castes was

mooted and

Sir Jamsetjee .Jeejibhoy offered donation

and some contribution was made by the Government

+•

-

4

-

-

S.C.R. SUPREME COURT REPORTS 871

with which the J. J. Hospital was constructed and it

1960

was formally opened on May 15, 1845. Similarly the State of Bomba_v

other four Hospitals in the group were built in course v.

of time from donations. Except for a small amount The Ho,pital

qf Rs. 10,000 the rest of the expenditure which is in the Mazdoor Sabha

neighbourhood of Rs. 27 lakhs is entirely met by the

appellant out of the grant sanctioned in the budget Gajendragadkar J.

under the head "38-Medicial ". The group is under

the administrative control of the Surgeon-General

of the appellant and its day-to-day affairs are conduc-

ted and controlled by the Superintendent who is a full

time employee of the appellant; the residential staff:

including the Resident Medical Officers, Assistant

Medical Officers, Housemen, Nurses and others are all

full-time employees

of the

appellant and their salaries

are drawn on the establish.ment pay bills every month

and paid entirely by the appellant. This group

serves'

as a clinical training ground for students of the

Grant Medical

College which is a Government Medical

College run and managed by the appellant for

imparting medical sciences leading to the Degrees of

Bachelor of Medicine and Bachelor of 1:-\urgery of the

Bombay University as well as various Post-Graduate

qualifications of the said University and the College

of Physicians and Surgeons, Boru bay; the group is

thus run and managed by the appellant to provide

medical relief

and to promote the health of the

people of Bombay.

Now,

turning to the first point, it may be stated that

the facts on which the respondents' plea is based are

not in dispute. It is conceded that the services of

respondents 2 and 3 have been retrenched though it

may be for the purpose of making room for other

Government servants with a longer record of service

who

had to be retrenched owing to the closure of the

appellant's

Civil Supplies Department. It is also not

disputed that the said respondents had not been paid

at the time of retrenchment compensation as

prescribed by s. 25F(b). The respondents' contention

is

that the failure to comply with the said

require­

ment makes the order of retrenchment invalid. This

plea has been upheld by the Court of Appeal.

Section 25F (b) provides that no workman employed

UI

872 SUPREME COURT REPORTS [1960(2)]

z96o in any industry who has been in continuous service

for

not less than one year under an employer shall be

State of Bombay h d b 1 h b

"d

retrenc e y that employer unti he as een pa1

Th' Z~spital at the time of retrenchment compensation which

Mazdaor Sabha shall be equivalent to fifteen days' average pay for

every completed year of service or any part thereof

Gajmdragadkar ]. in excess of six months. Clauses (a) and (c) of the

said section prescribe similar conditions but we are

not concerned with them. On a plain reading of

s. 25F (b) it is clear that the requirement prescribed

by it is a condition precedent for the retrenchment

of the workman. The section provides that no

workman shall he retrenched until the condition in

question has been satisfied. It is difficult to accede to

the argument that when the section imposes in

mandatory terms a condition precedent, non-com­

pliance with the said condition would not render the

impugned retrenchment invalid. The argument

which appealed to Tendolkar, J., however, was that

the consequence of non-compliance with the require­

ment of s. 25F (b) was not to render the impugned

retrenchment invalid, because he thought that by

s. 251 a specific provision has been made for the

recovery of the amount prescribed by s. 25F (b).

Section 251 provides for the recovery of monies due

from employers under Ch. V, and according to

Tendolkor J. this provision covers the amount due to

the workman by way of compensation under s. 25F (b).

In our opinion, this view is untenable. Having

regard to the fact that the words used in s. 25F (b)

are mandatory and their effect is plain and unam­

biguous it seems to us that the Court of Appeal was

right in holding thats. 251 covered cases of recovery

of monies other than those specified ins. 25F (b), and

it is obvious that there are several other cases in

which monies become due from the employers to the

employees under Ch. V; it is for the recovery of these

monies that s. 251 had been enacted. Therefore, we

see no

substance in the argument that the

Court of

Appeal has misconstrued s. 25F (b ). That being so.

failure

to comply with the said provision renders the

impugned orders invalid

·and inoperatjve,

-

.-

.,

-

-

S.C.R.· SUPREME COURT REPORTS 873

Does the said provision apply to the present z96o

proceedings ? In other words, is the Act itself

State of Bombay

applicable to the group of Hospitals with which we v •

. are concerned? That is the next question which The Hospital

calls for an answer in the present appeal. Indeed it Mazdoor Sabha

is this general question which has been strenuously --

argued before us by the learned Solicitor-General on Gajendragadkar J.

behalf of the appellant. The decision of this question

depends upon

the interpretation of the

dt:;finition of

"industry" prescribed by s. 2(j) of the Act.

Let us first read the definition. Section 2(j) provi­

dies that " industry" means any business, trade,

undertaking, manufacture o!' calling of employers and

includes any calling, service, employment, handicraft,

or industrial occupation or a.vocation of workmen.

It would be noticed that the words used in the

definition are very wide in their import and even so

its latter part purports to provide an inclusive

definition.

The word

"undertaking" according to

Webster means "anything undertaken; any business,

work

or project which one engages in or attempts, an

enterprise ''.

· Similarly, "trade " according to

Halsbury, in its primary meaning, is "exchange of

goods for goods or goods for money", and in its

secondary meaning it is " 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"; whereas "busi­

ness" is a wider term not synonymous with trade

and means practically " anything which is an occupa­

tion as distinguished from a pleasure". The word

" calling " again is very wide; it means " one's usual

occupation, vocation, business

or

trade"; so is the

word " service " very wide in its import. Prima

facie, if the definition has deliberately used words of

such wide import, it would be necessary to read those

words

in their wide denotation; and so read,

Hos­

pitals cannot be excluded from the definition.

It is, however, contended that, in construing the

definition, we must adopt the rule of construction

noscuntur a sociis. This rule, according to Maxwell,

. means that, when two· or more words which are

susce;ptible of analogous meaning are coupled toge-

874 SUPREME COURT REPORTS [1960(2)]

z960 ther they are understood to be used in their cognate

sense. They take as it were their colour from each

State of Bombay h h h 1 d

v. ot er, t at is, t e more genera is restricte to a sense

The Ho<pital analogous to a less general. The same rule is thus

.Wazdo°' Sabha interpreted in "Words and Phrases" (Vol. XIV,

. -- p. 207) : "Associated words take their meaning from

GaJendrngadkar J. one another under the doctrine of noscuntur a sociis,

the philosophy of which is that the meaning of a

doubtful word may be ascertained by reference to the

meaning of words associated with it; such doctrine

is broader than the maxim Ejusdem Generis." In

fact the latter . maxim "is only an illustration or

specific application of the broader maxim noscuntur a

sociis ". The argument is that certain essential

features

or attributes are invariably associated with

the words

" business and trade " as understood in the

popular and conventional sense, and it is the colour

of these attributes which is taken by the other words

used

in the definition though t.heir normal import

may be much wider. We are not impressed by this

argument. It must be borne in mind that noscuntur

a sociis

is merely a rule of construction and it cannot

prevail in cases where it is clear that the wider words

have been deliberately used in order to make the

scope of the defined word correspondingly wider. It

is only where the intention of the Legislature in

associating wider words with words of

narrower

significance is doubtful, or otherwise not clear that

the present rule of construction can be usefully

applied.

It can also be applied where the meaning

of the words of wider import is doubtful; but, where

the object of the Legislature in using wider words is clear and free of ambiguity, the rule of construction

in question cannot be pressed into service. As has

been observed by Earl of Hals bury, L. C., in The

Corporation of

Glasgow v. Glasgow Tramway and Omnibus Co. Ltd. (1), in dealing with the wider words

used

in s. 6 of Valuation of Lands (Scotland) Act, 1854, "the words 'free from all expenses whatever in

connection with the said tramways' appear to me to

be so wide

in their application that I should have

thought it impossible to qualify or cut them down by

their being associated with other words on the

·

i (1898) A.C 631 at p. 634,

-

S.C.R. SUPREME COURT REPORTS 875

principle of their being ejusdem generis with the r9

6

o

P

revious won.ls enumerated". lf the object and scope

of the statute are considered there would be no

State of Bomba;y

v.

difficulty in holding that the relevant words of wide The Hospitat

import have been deliberately used by the Legislature Mazdoor Sabha

in defining "industry,; in s. 2(j). The object of the

Act was to make provision for the investigation and Gajendragadkar ].

settlement of industrial disputes, and the extent and

scope of its provisions would be realised if we bear in

. mind the definition of" industrial dispute" given by

s. 2(k), of" wages" by s. 2(rr), "workman " by s. 2(s),

and of" employer" by s. 2(g). Besides, the definition

of public utility service prescribed by s. 2(m) is very

significant. One has merely to glance at. the six

categories

of public utility service mentioned by

s. 2(m) to realise that the rule of construction on

which the appellant relies is inapplicable in interpret­

ing the definition prescribed by s. 2(j).

There is another point which cannot be ignored. Section 2(j) does not define " industry " in the usual

manner by prescribing what it means: the first clause

of the definition gives the statutory meaning of

"industry" and the second clause deliberately refers

to several other.}tems of industry and brings them in

the definition in an inclusive way. It is obvious that

the words used in an inclusive definition denote

extension and cannot be treated as restricted in any.

sense. (Vide: Stroud's "Judicial Dictionary",

Vol. 2, p. 1415). Where we are dealing with an

inclusive definition it would be inappropriate to put

a restrictive interpretation upon terms of wider

denotation.

Besides, it would be relevant to point out that

too much reliance cannot be placed on what are

described as the essential attributes or features of

trade or business as conventionally understood.

The conventional meaning attributed to the words

"trade and business" has lost some of it validity

for the purpose of industrial adjudication. Indus­

trial adjudication has necessarily to be aware of

the current of socio-economic thought around; it must

recognise that. in the modern welfare State healthy

indutitrial relations are a matter of paramount import.

876 SUPREME COURT REPORTS [1960(2))

r960 ance and its essential function is to assist the State

by helping a solution of industrial disputes which

State of Bombay t• t d. · d · h f

cons 1tu e a IStrnct an persistent p enomenon o

The ;:;spital modern industrialised States. In attempting to solve

Mazdoor Sabha industrial disputes industrial adjudication does not

-. aud should not adopt a doctrinnaire approach. It

Gajendragadkar f. must evolve some working principles and should

generally avoid formulating or adopting abstract

generalisations. Nevertheless it cannot harp back to

old.age notions about the relations between employer

and employee or to the doctrine of laissez faire which

then governed the regulation of the said relations.

That is why, we think, in construing the wide words

used in s. 2(j) it would be erroneous to attach undue

importance to attributes associated with business or

trade in the popular mind in days gone by.

It is clear, however, that though s. 2(j) uses words

of very wide denotation, a line would have to be

drawn in a fair and just manner so as to exclude

some callings, services

or undertakings. If all the

words used are given their widest meaning, all services

and all callings would come within the purview of

the definition; even service rendered by a servant

purely in a personal or domestic

matter or even in a

casual

way would fall within the definition. It is not

and cannot be suggested that in its wide sweep the

. word

"service" is intended to include service howso­

ever rendered in whatsoever capacity and for whatso­

ever reason. We must, therefore, consider where the

line should be drawn and what limitations can and

should be reasonably implied in interpreting the wide

words used

in s. 2(j); and that no doubt is a somewhat

difficult problem to decide.

It is true that under the old-world notion prevailing

under the capitalist form of society industry

generally means an economic activity involving

invest­

ment of capital systematically carried on for profit for

the production or sale of goods by the employment of

labour. When it is urged by the appellant that an

undertaking should be analogous to trade or business

what is really intended is that unless the undertaking

in question shares the aforesaid essential features

associated

with the conventional notion of

tra.:ie or

..

..

S.C.R. SUPREME COURT REPORTS 877

business it should not be treated as falling under s. 2(j). I9

60

There are two serious difficulties in accepting such a State of Bombay

suggestion, and indeed the appellant concedes the v.

presence of these two difficulties. It is not disputed The Hospital

that under s. 2(j) an activity can and must be regarded Mazdoor Sabha

as an industry even though in carrying it out profit . -

motive

may be absent. It is also common ground

Ga1endragadkar J.

that the absence of investment of any capital

would not make a material difference to the applicabi-

lity of s. 2(j). Thus, two of the important attributes

conventionally associated with trade or business are

not necessarily predicated in interpreting s. 2(j). What

then can be said to be the attributes or features which

should be common between

trade and business on the

one hand and an undertaking and other items mention-

. ed

in s. 2(j) on the other ?

It

would be possible to exclude some activities from

s. 2(j) without any difficulty. Negatively stated the

activities of the Government which can be properly

described

as regal or sovereign activities are outside

the scope of s. 2(j). These are functions which a

constitutional Government can and must undertake

for governance and which no private citizen can

undertake. This position is not in dispute. An

attempt is, however, made by the appellant to suggest

that in view of the Directive Principles enunciated in Part IV of the Constitution and in view of the ideal

of a welfare State which has been placed before the

country, Governments, both at the level of the States

as well as at the Centre, undertake several welfare

activities; and the argument is that the field of

governmental or regal activities which are excluded

from

the operation of s. 2(j) should

be extended to

cover other activities undertaken by the Governments

in pursuit of their welfare policies. In our opinion,

this contention cannot be accepted. The activities

which do

not fall within s. 2(j) and which are described

as governmental or regal or sovereign have been

pithily described by Lord Watson as

"the primary

and inalienable functions of a constitutional Govern­

ment" (Vide : Coomber v. Justices of Berks(

1

) ) ;

and it

is only these activities that are outside the scope of

s. 2(j). It sounds incongruous

and self-contradictory

(l) h88;!) App. cas, 61. •

878 SUPREME COURT REPORTS [1960(2)]

,,6° to suggest that activities undertaken by the Govern­

ment in the interests of socio-economic progress of

State of Bombay fi l

the country as bene cia measures should be exempted

The ;;~,p,tal from the operation of the Act which in substance is a

Mazdoor Sabha very important beneficial measure itself.

In this connection it would be relevant to point out

Gajendragodkor J. that the definition of the word "employer" given by

s. 2(g) is not without significance: an "employer"

means under s. 2(g) (i) "in relation to an industry

carried on by or under the authority of any depart­

ment of the Central Government or State Government

authority prescribed in this behalf, or where no

authority is prescribed the head of the department."

This dt;Jinition clearly indicates that the Legislature

intended the application of the Act to activities of

the Government which fall within s. 2(j).

In considering the question as to whether the group

of Hospitals run by the appellant undoubtedly for the

purpose of giving medical relief to the citizens and

for helping to impart medical education are an under­

taking or not, it would be pertinent to enquire

whether an activity of a like nature would be an

undertaking if it is carried on by a private citizen or

a group of private citizens. There is no doubt that if

a hospital is run by private citizens for profit it would

be

an undertaking very much like the trade or busi­

ness in

their conventional sense. We have already

stated that the presence of profit motive is not essen­

tial for bringing an undertaking within s. 2 (j). If

that be so, if a private citizen runs a hospital without

charging any fees from the patients treated in it, it

would nevertheless be an undertaking under s. 2(j).

Thus the character of the activity involved in running

a hospital brings the institution of the hospital within

s. 2(j). Does it make any difference that the hospital

is run by the Government in the interpretation of the

word

"undertaking" in s. 2(j) ? In our opinion, the

answer to this question must be in the negative. It

is the character of the activity which decides the

question as to whether the activity in question

attracts the provision of s. 2(j); who conducts the

activity and whether it is conducted for profit or

not do ~ot make a material difference,

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S.C.R. SUPREME COURT REPORTS 870

We have yet to decide which are the attributes the i9rin

P

resence

of which makes an activity an undertaking

5 -

1

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. . . . . tate o om ay

w1thm s. 2(J), on the ground that it is analogous to

trade or business. It is difficult to state these possible The Jl;spital

atkibutes definitely or exhaustively; as a working Mazdoor Sabha

principle it may be stated that an activity syste---

matically or habitually undertaken for the production Gajendragadkar J.

or distribution of goods or for the rendering of mate-

rial services to the community at large or a part of

such community with the help of employees is an

undertaking. Such an activity generally involves

the co-operation of the employer and the employees;

and its object is the satisfaction C?f material human

needs. It must be organised or arranged in a manner

in which trade or business is generally organised or

arranged. It must not be casual nor must it be for

oneself

nor for pleasure. Thus the manner in which

the activity in question is organised or arranged, the

condi.tion of the co-operation between employer and

the employee necessary for its success and its object

to render material service to the community can be

regarded as some of the features which are distinctive

of activities to which s. 2(j) applies. Judged by this

test there would be no difficulty in holding that the

State is carrying on an undertaking when it runs the

group of Hospitals in question.

,

Is quid pro quo necessary for bringing an activity

under s. 2(j) ? It has been urged before us that

though profit motive may not be essential, it is

never­

theless necessary that the person who carries on the

activity should receive some consideration in return ;

and it is only if the test of quid pro quo is satisfied

that an activity should be treated as an undertaking.

Though this argument is put in a slightly different

form, in

substance it is really based on the idea that

profit motive is necessary to make any activity an

undertaking analogous to trade or business. If the

absence of profit motive is immaterial why should an

activity be excluded from s. 2(j) merely because the

person responsible for the conduct of the activity

expects no consideration, does not want any quid

pro

quri and is actuated by philanthropic or charitable

motive? In our opinion, in deciding the question as

IIZ

8SO SUPR.EME COUHT REPORTS [l!lG0(2)1

r960 to whether any activity in question is an undertaking

under s. 2(j) the doctrine of quid pro quo can have no

State of Hombay

application. Therefore, we arc sati~ficd that the

v.

The Ho>pital High Court was right. in coming to the conclusion

Mazda°' Sabha that the conduct and running of the group ofHospitfils

by the appellant fimotmted to an undertaking under

Gajendragadkar ]. s. 2 (j) find the relevant provisions of the Act were

applicfible.

In this connection it would be relevant to refer to

the fact that in the First Schedule to the Aet which

enumerates industries which may be declared as public

utility service under s 2(n)(vi), three entries have bcPn

added by Act 36 of 1956. They are Defence Establish­

ment, services in hospitals and dispensari<•s, and Fire

Brigade service. In other words, by the addition of

these three entries the Legislfiture has clearly indic"ted

its intention that service in hospitals find dispensaries

can be declared to be a public utility sPrvice under

s. 2(n)(vi); and there is no doubt that unless the service

in hospitals falls under s. 2(j) and is treated as an

industry it cannot be declared to be a public utili1y

service.

It is true

that this p»rticnlar entry bad not

been included in the First Schedule at the time when

the present reference waR made, but its subs<·quent

inclusion can be reasonably taken as evidence of legis­

lative intention, and, if on a construction of s. 2(j) we

have independently reached the conclusion that service

in hospitals is service or the conduct of hospitals is an

undertaking, we may reasonably seek to derive

corroboration to our coJtclusion by this sub,equent

legislative enactment,. After tho addition of the

relevant entry in the First Schedule it would 11ot he

open to anybody to suggest that service in hospita,Js

does

not fall under s. 2(j).

It now remains to consider some of the decisions to

which our attention was invited. In D. N. Banerji v. P.R. jjfukherjee & Ors. (

1

), this Court was dealing with

an industrial dispute raised by the Municipal Workers'

Union of the Budge Budge Municipality, on behalf of

the Sanitary Inspector and Head Clerk of the said

Municipality on the ground that the dismissal of the

said two Municipal employees was unjustified and

(1) [1953] S.C.H. 302,

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S.C.R. SUPREME COURT REPORT8 881

illegal,

and that they were entitled to an order

®f

1

v6o

reinstatement. The dispute thus referred to the

Industrial Tribunal was decided in favour of the Union

State of Bombay

v.

and an award was made directing the Municipality to The Hospital

reinstate the said two employees. The Municipality MazdJor Sabha

then took the matter to the High Court at Calcutta by -

means of a petition for a writ of certiorari under Arts. Gajendragadkar J.

226_ and 227 of the Constitution. It was urged in

support of the petition that the Act was inapplicable

to the dispute in question and that there was really

no industrial dispute which could be validly referred to

the Industria,l Tribunal. Other contentions were also

raised

but it is unnecessary to refer to them. The

High

Court rejected all the·pleas raised by the Munici-

pality and dismissed the application for a writ. The

Municipality then brought the dispute to this Court

under Art. 132(1) of the Constitution. This Court

dismissed the appeal preferred by the Municipality

and confirmed the order of the High Court. In

dealing with the appeal this Court laid down certain

propositions which

are relevant for our purpose in the

present appeal. It was observed

that'· in determining

the meaning of the word "industry" and " industrial

dispute" it was necessary to leave aside the original

meaning attributed to the words in a simpler state of

society; then the contention of the Municipality that

its activities in question did not amount to an

industry were dealt with in these words : " The only

ground on which one could say that what would

amount to the carrying on of an industry if it is· done

by a private person ceases to be so if the same work

is carried on by a local body like the Municipality is

that in the latter there is nothing like the investment of

any capital or the existence of a profit earning notice as

there generally is in a buisiness. But neither the one nor

the other seems a sine qua ~on or necessary element in

the modern conception of industry ". It is because of

this positive decision that the appellant has fairly

conceded in

the course

0£ the argument before us that

the absence of the profit motive or of investment of

capital would not make a material difference in deter-

mining the character of any activity. This Court

has also examined the other relevant fiwtpx:s pertaining

882 SUPREME COURT REPORTS [1960 (2)]

r96o to the construction of the word "industry " and

"industrial dispute" and has declared its deci-

State of Rombay H

sion thus; aving regard to the definitions found

Th' ;;;,p;tal . in our Act the aim or objective that the Legislature

Mazda" Sabha had in view and the nature, variety and range of

disputes that occur between employers and employees,

Gaj,ndmgadlwr J. we are forced to the conclusion that the definitions in

our Act include also disputes that might arise between

municipalities and their employees in branches of

work that {Jan be said to be analogus to tbe carrying

out of a trade or business". In the prrnent appeal

we have to decide the question as to what attributes

or features can be said to make an activity in question

analogous to trade or business. Incidentally we may

add that quite apart from the relevant considerations

which we have already discussed it would be difficult

to suggest that though the sanitary department of a

local

body is an undertaking under s. 2(j) a hospital

run by a Government is not.

This decision has been referred to by this

Court in

Baroda Borough 111unicipality v. Its Workmen('), and

it has been observed that it is now finally settled that

a municipal undertaking of the nature with which the

court was then concerned is an industry within the

meaning of the definition of that word ins. 2(j) of the

Act, and that the expression "industrial dispute" in

that Act includes disputes between municipalities and

their employees in branches of work that can be

regarded as analogous to the carrying on of a trade or

business. In that case this Court was concerned with

the claim for bonus made by the workmen of the

Baroda Borough Municipality and it was rejected;

comment has been made by learned counsel on some

of the grounds accepted by this Court in support of

its final decision, but in the present appeal we are not

concerned with the claim for bonus and it is not

necessary for us to refer to the said comment or to

deal with it.

So far as the decisions of the Industrial Tribunals

are concerned it appears that the Labour Appellate

Tribunal has held as early as 1952 that a hospital is

an undertaking within the meaning ofs. 2(j). In

, ·(1) [r957J s.c.R. 33-

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S.C.R. SUPREME COURT REPORTS 883

Sri Vishuddhananda Sa.raswathi Marwari Hospital v. x960

Their W or km en (1) the Labour Appellate 'lribunal

b

State of Bombay

considered at length the policy and o ject of the Act,

several judgments cited before it and came to the The ;;~spital

conclusion that the definition of industry in s. 2(j) was Mazdoor Sabha

of wide amplitude and that there was no good reason

for cutting down its natural meaning so as to limitGajendragadkar J.

its operation to profit-making enterprises only. It has

not been suggested before us that this view has ever

been doubted or dissented from in any subsequent

industrial adjudication. ·

In judicial discussions about the scope and character

of the concept of industry as it has developed in a .

modern democratic State the decision of the High

Court of Australia in The Federated State School

Teachers' -1ssociation of Australia And The State of

Victoria & Ors (

2

), is generally cited. In that case,

according to the majority decision it was held that the

educational activities of the 8taLe carried on under the

appropriate statutes and statutory regulations of each

State relating to education did not constitute an

industry with the meaning of s. 4 of the Commonwealth

Conciliation and

Arbitration Act,

1904-1928; that the

occupation of teachers so employed was not an

industrial occupation; and that the dispute which

existed between the State and the teachers

employed by them was therefore, not an indus­

trial dispute within s. 51 (xxxv) of the Constitu­

tion.

Isaacs J., however, struck an emphatic note

of dissent, and the principles enunciated in this note

of

di><sent have received approval from industrial

tribunals in this country, and they have been rightly

accepted by the Bombay High Court as affording

valuable assistance in deciding the question in the

present proceedings. Isaacs J. has uttered a note of

caution that in dealing with industrial disputes indus­

trial adjudicators must be conversant with the current

knowledge on the subject ahd they should not ignore

the constant currents of life around them for other­

wise it would introduce a serious infirmity in their

approach. Dealing with the general characteristics

of industrial enterprises the learned judge observed

(r) [19521 II L.L.J. 327. (2) [1929] 4 C.LR. 569, ·.

884 SUPREME COURT REPORTS [1960 (2)]

I960 that they contribute more or less to tbe general

welfare

of the community; and he has reiterated his

State of

Bonibay

earlier observations on the point in these words:

v.

The Hospital "Industrial disputes occur when in relation to opera-

Mazdoor Sabha tions in which capital and labour are contributed in

co-operation for the satisfaction of human wants or

Gnjendragadkar J.desires, those engaged in co-operation dispute as to

basis to be observed by the parties engaged, respecting

either a share of the product or any other terms or

conditions of their co-operation ". According to the

learned judge; the question must always be decided by

determing the true character of the activity in ques­

tion. It is these tests which the High Court has

·applied in deciding the present dispute and we are in

general agreement with the decision of the High

Court. We ought to make it clear that in the present

appeal we are not expressing any opinion on the

question as to whether running an educational institu­

tion would be an industry under the Act; that question

does

not arise in the present proceedings.

There are two more decisions to which reference

may. be

made before we part with this appeal. In

Brij

~Mohan Bagaria And Chatterjee (N.C.) & Ors. \

1

),

the Calcutta High Court was dealing with a dispute

between an attorney of the court and some of his

e.mployees who

had been dismissed by him ; and it

was held that the said dispute was outside the purview

of the Act.

Sinha J., who heard the petition filed by

the attorney, observed that "however extended the

meaning be given to the word industry or to industrial

dispute or to undertaking or calling we cannot include

within their concept the case of an individual who

carries on a profession dependent upon its own intel­

lectual skill". The learned judge has then added that

" every case must be decided upon its own facts". It

appears that, according to the learned judge, if an

attorney or a doctor or a lawyer who follows a

liberal profession, the pursuit of which depends upon

his own education, intellectual attainments and special

equipment, engages employees, that would not mean

that the employer is engaging in an industry under

s. 2(j); but with the question of the attorney or doctor

(1) (1958) II L.L,J. 190.

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S.C.R. SUPREME COURT REPORTS. 885

or the lawyer we are not directly concerned in the 1,60

present appeal. We have, however, referred to this

decision because, in the course of discussion, the State of llombay

learned judge has expressed his dissent from the view. The ;;~spital

taken by the Bombay High Court in regard to Mazdoor Sabha

hospitalE<, and we wish to make it clear that, in ou.r · ... -·

opinion, the criticiEm made by the learned judgeGayendragadkar J .

against the inclusion of hospitals within s. 2(j) is not

well-founded. Dealing with a similar case of an

attorney, the Bombay High Court ha.s taken the same

view in

National

Union of Commercial Employees &

Anr. And Meher (M.R.) & Ors. (Pereira Fazalbhoy &

Co.)(

1

).

We would accordingly hold that the High Court was

right in holding t.hat the dispute between the appel­

lant and the respondents was an industrial dispute to

which s. 25F of the Act applied. The order passed by

the High Court on the writ petition filed by the respon­

dents is confirmed· and the appea.l is dismissed with

costs.

Appeal dismissed.

S. N. NAMASIVAYAM CHETTIAR

v.

THE COMMISSIONER OF INCOME-TAX, .

MADRAS

(With connected appeals)

(J. L. KAPUR AND M. HIDAYATULLAH, JJ.) ..

Income Tax-Assessment-Rejection of accounts and estimate of

profits-C amputation of profits supported by cases of other assessees­

Stock

register-Effect of

non-production-In'dian Income-tax Act;.

r922 (XI of r922) s. I] proviso.

The appellant, a resident and ordinarily resident in India,

carried on

trade in

Colombo in grains and foodstuffs for cattle.

For the relevant assessment years the Income-tax Officer rejected

the acr.ounts produred by the appellant on the grounds inter alia

that there was absence of vouchers and that the stock account

and the manufacturing account had not been kept or produced ·

and he then made an estimate of the profits. The Appellat~

Tribunal also agreed with the Income-tax Officer and held that

the correci: profits could not be deduced from the books produced

by the assessee and that therefore the proviso to s. 13 of the

(r) \19~9} II L.L.J. 38.

1960

February, 3