Definition of 'Industry' & the Bangalore Water Supply Case

The word “industry” is the gateway to the whole IR Code — if an establishment is not an “industry”, the dispute-settlement machinery, trade-union and standing-order provisions simply do not apply.

Definition — Sec. 2(p) IR Code 2020

flowchart TD
    IND["INDUSTRY — Sec. 2(p) IR Code 2020"]:::root
    IND --> Y["Systematic activity<br/>+ cooperation between employer and worker<br/>+ for production of goods or services"]:::yes
    IND --> N["Excluded categories"]:::no
    N --> E1["Sovereign functions — courts, legislature, police"]:::excl
    N --> E2["Charitable / religious activity without commercial character"]:::excl
    N --> E3["Khadi and village industries"]:::excl
    N --> E4["Hospitals / educational institutions run without commercial motive"]:::excl

    classDef root fill:#FFF8DC,stroke:#000,stroke-width:1px,color:#000;
    classDef yes fill:#D8F0D8,stroke:#2E7D32,color:#000;
    classDef no fill:#FFE4E1,stroke:#8B0000,color:#000;
    classDef excl fill:#FFF0F0,stroke:#C62828,color:#000;
    linkStyle default stroke:#888,stroke-width:1px;

The Bangalore Water Supply Triple Test

Bangalore Water Supply v. Rajappa (1978) — a 7-judge bench laid down a broad three-part test still cited today:

The case held that municipalities, hospitals and even charitable organisations could be an “industry” if they carry on systematic activity with employer–worker cooperation, even without profit. The IR Code 2020 partly narrows this by expressly excluding sovereign and non-commercial charitable functions.

Industrial Dispute vs Individual Dispute

Conversion rule: an individual dispute becomes an industrial dispute if a union or a substantial number of workmen espouse it — Workmen of Dimakuchi Tea Estate v. Management (1958).

✏️ Sample Solved Problem (IRAC Method)

Problem: A hospital run by a charitable trust employs 300 doctors, nurses and staff. The nurses strike for a wage revision. The trust argues it is not an “industry”, so no industrial dispute can exist. Is the trust correct?

I — Issue

Whether a hospital run by a charitable trust is an “industry” under the IR Code, and whether the nurses’ wage demand is an industrial dispute.

R — Rule

Sec. 2(p) — industry is systematic activity organised by employer–worker cooperation for producing goods/services; the charitable exclusion applies to the activity, not merely the label. Bangalore Water Supply v. Rajappa (1978) — hospitals are industries where services are rendered systematically, even without profit. Sec. 2(q) — an industrial dispute includes any dispute over terms of employment.

A — Analysis

The trust runs a 300-employee hospital on a regular, systematic basis; patients pay, staff draw wages, and there is organised employer–worker cooperation. The label “charitable trust” does not exempt a full-scale fee-charging hospital — the exclusion is narrow and covers genuinely non-commercial charity. Under the Bangalore Water Supply test the hospital is an industry, and the nurses’ pay demand is a classic Sec. 2(q) dispute.

C — Conclusion

The trust is incorrect. The hospital is an industry, the wage demand is an industrial dispute, and the nurses may invoke the IR Code machinery — Grievance Committee, conciliation, and if needed the Industrial Tribunal.

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