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Section 2 of Industrial Disputes Act 1947 Bare Act & Notes

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Section 2 of Industrial Disputes Act 1947

Structure, Objectives, and Fundamental concepts of the ID Act

The ID Act has been divided into seven chapters, which in themselves include multiple sub-chapters in many places and consists of forty Sections. It further has five schedules.

From the preamble of the Act, the objectives of introducing the legislation can be culled out, and these have been spelt out in Dimakuchi Tea Estate Case. These are as follows:

  • Promotion of measures for securing and preserving amity and good relations between employer and employee, through tools like collective bargaining for instance.
  • Investigating and settling industrial disputes. The Act broadly provides for three modes of resolution; one, through investigation, two, through settlement, and three, through adjudication.
  • Preventing illegal strikes and lockouts. This objective becomes even more important in case of public utility services, and elaborate laws have been laid down with respect to strikes and lockouts in these sectors.
  • Providing relief for workmen in situations of layoff, retrenchment, closure etcetera.
  • Providing for tools of negotiation such as collective bargaining in situations of bipartite settlement.
  • Regulating the past, present, and future relations between the employers and the workmen.

Section 2 of Industrial Disputes Act 1947- Definitions

S.2(a)-Appropriate government

  • The Section talks about what would be the appropriate government in case of an industrial dispute, and the meaning of the Section is simply that when the industry is owned, established, controlled, and/or funded by the central government, then the appropriate government would be the central government, and if the previously mentioned things are done by the state government, then the appropriate government would be the state government. In case of industrial establishments which do not fall under either category, i.e. private industrial establishments, the appropriate government would be the state government.

S.2(j) – Industry

The concept of “industry” is extremely important for ID Act because the ID Act is applicable only to industries as per Section 2(j), i.e. an industrial dispute can be raised only in case of industry. The industry has been defined as any business, trade, undertaking, manufacture or calling of employers and includes calling, service, employment, handicraft or industrial occupation or avocation of workers.

Section 2(j) is divided into two parts, one which is from the perspective of the employer, and the other which is from the perspective of the workman, and both parts have to be read together. Despite its immense importance, however, Section 2(j) is only illustrative in nature and does not give any test or formula to determine what is an industry. Due to this, the term has been interpreted in various landmark judgements.

In D.N Banerjee v. P.R Mukherjee, the municipality was held to be an ‘industry’, under the term ‘undertaking’. The argument that the word ‘undertaking’ derives it meaning from four other words in the first part of the definition was rejected, and thus municipalities and non-profit organisations were considered to be industries.

The issues of whether the Corporation of Nagpur was an industry under the C.P and Berar ID Act 1947, was resolved in the case of Corporation of City Nagpur v. Employees. Here, instead of bringing municipality within “undertaking”, it was interpreted to be industry within “trade, business”. Here, the court made a distinction between regal and municipal functions and found that the corporation was analogous to business and not regal.

In State of Bombay v. Hospital Mazdoor Sabha, it was held that a hospital run by the government comes within the meaning of “industry”. Further, profit motive and investment of capital were not considered to be necessary, and it was held that even if a hospital is being run by the government without profit, it would be covered under “industry”.

The Corporation of the city of Nagpur and Hospital Mazdoor Sabha cases were overruled by subsequent Supreme Court judgements which held that firm of solicitors, educational institutions, members’ clubs such as the Gymkhana Club, and charitable government hospitals are not industries. These subsequent judgements were overruled and the Corporation of City of Nagpur and Hospital Mazdoor Sabha cases restored by the Bangalore Water Supply Case wherein Justice Krishna Iyer gave the triple test for determining whether the establishment in question is an industry or not:

  1. It should be a systematic activity.
  2. It should be organised by the cooperation between the employer and employees.
  3. It should be for the production/ distribution of goods and services calculated to satisfy human wants and wishes.

The result was that professions, clubs, educational institutions, co-operatives, research institutions, charitable projects, and other similar activities if they fulfilled the triple test, would come under the definition of “industry”.

Section 2(s)- “Workman”

As per the ID Act, workman includes an apprentice. The essential condition for being a workman is that the person must be employed in an industry, i.e. there must be a relationship between the employer and him as an employer and employee. Therefore, there must necessarily be a contract of service.

The “control test”, or its variations, is widely used to determine whether there was a contract of employment or not and whether the person can be said to be a workman.

The case of Short v. J W Henderson, the House of Lords gave four indicators for the contract of service-

  1. The master’s power of selection of his servant.
  2. The payment of wages or other remuneration.
  3. The master’s right to control the method of doing the work.
  4. The master’s right of suspension or dismissal.

In Dharangdhara Chemical Works v. State of Saurashtra it was held that the test for determining employer-employee relationship is the existence of the right in the master to supervise and control the work done by the servant, not only in directing what work the servant is to do, but also the manner in which he shall do his work.

With respect to the difference between a worker and an independent contractor, the main point of difference is that while the worker himself agrees to work, the contractor agrees to get other persons to work. What determines whether a person is a workman or not depends on whether he has agreed to work personally or not. If he has agreed to work personally, then he would be considered to be a workman and the fact that he takes assistance from other persons would not affect his status.

In M/S Shining Tailors v. Industrial Tribunal II, U.P Lucknow, it was held that payment on piece rate by itself does not disprove the master-servant relationship. On facts, the right to reject work or refuse further work establishes a master-servant relationship.

Section 2(k)- Industrial Dispute

There must be the following essential elements for a dispute to be considered as an industrial dispute-

  1. There must be dispute or difference 
  2. The dispute must be between – employer and employees; employers and workmen; workmen and workmen.
  3. The dispute must be connected with the employment or with conditions of labour of any person.

Landmark Judgement on Section 2 of Industrial Disputes Act 1947

A landmark judgement in this respect is Dimakuchi Tea Estate Case, wherein the meaning and scope of “any person” as given in Section 2(k) were interpreted, and it was held that the expression “any person” occurring in the third part of the definition of an industrial dispute as given in Section 2(k) cannot mean anybody and everybody. The expression was held to mean a person who may not be a workman but he may be someone in whose employment, terms of employment or conditions of labour, the workmen as a class have a direct or substantial interest with whom they have, under the scheme of the Act, community of interest. This interpretation has been followed in numerous cases that followed the judgement.

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