Preface
The term Industry has been defined under Section 2(p) of the Industrial Relations Code, 2020 (hereinafter “IRC”). The amalgamation of multifaceted and scattered statutes into one IRC has “arguably” resolved the issue of multiplicity and ambiguity ensuing Labour and Employment Laws in India.
The contention as to whether “Charitable Educational Institutions” fall within the purview of an Industry has not yet been specifically dealt with under any judgement. However, the courts, on multiple occasions, have discretely established that educational institutes can be termed as industry and secondly, charitable institutions also, conditionally, fall within the purview of industries. Hence, this shall be established by separately corroborating these two propositions and then amalgamating both to reach a plausible conclusion.
Educational Institutes Are Industries
Educational Institutions have been deemed as an industry in the most recent case laws and developments. After much contemplation, the SC in its landmark judgement of the Bangalore Water-Supply & Other vs. R. Rajappa & Others (Hereinafter “Bangalore Water Supply Case”) has laid down that Educational Institutions ought to be considered as Industriesunder the purview of the definition of Industry under the IDA, 1947 and now, the IRC, 2020.
The University of Delhi & Anr. v. Ramnath & Ors., 1973 (Hereinafter “University Case”) case was struck down by the Supreme Court (Hereinafter “SC”) in the Bangalore Water Supply case,1978. The SC in the University Case noted that the predominant activity of the University of Delhi or any educational institution is to impart education and hence, teaching cannot be said to have a commercial motive. It was also held that the subordinate staff can be said to carry minor or incidental activities that may fall within the purview of an industry, however they are too insignificant to decide the University’s predominant nature of activity.
The SC in 1978 revisited the University Case while deciding the Bangalore Water Supply Case wherein the court curated its previous ruling and adjudged that the University of Delhi case was wrongly decided and that educational institution can be and is, in its institutional form, an industry.
“With evening classes, correspondence courses, admissions unlimited, fees and government grants escalating, and certificates and degrees for prices, education legal, medical, technological, school level or collegiate-education-is a riskless trade for cultural entrepreneurs”.
Charitable Institutions Are, Conditionally, Industries
The determination of charitable institutions being an industry was made in the Bangalore Water Supply Case by recognizing three types of such institutions on the basis of their nature of activity. The first two categories were then conclusively considered to fall under the purview of an “industry” whereas the third category was ruled out.
- The first category is the one where the enterprise yields profit but dispenses them for altruistic purposes.
“If a business is run for production and or supply of goods and services with an eye ‘on profit, it is plainly an industry”. In the light of the same, a parliamentary panel on Labour in its 8th Report on The Industrial Relations Code, 2019 had put forward to the Ministry of Labour and Employment that all charitable, social and philanthropic institutions should not be excluded from the definition of an Industry.
The judgement also laid down that if an economic activity yields profit and all or a substantial part of the profits is entirely put to charitable avenues it would still not change the nature of that economic activity so as to remove it from the purview of an industry. However, it is essential that it involves “co-operation of employer and employee and results in the production of goods and services” irrespective of the destination of the profits.
Therefore, to put this into perspective the Gates Foundation could fall under the first category since it has varied sources of profit which are ultimately utilised with a philanthropic motive. Therefore, it can, prima facie, be deduced by the preceding observations that the educational institutions run by charity do not fall under this category. This is because the capital that is involved for running the school itself comes from charity and hence, the predominant motive/purpose of the institution is not to generate profit at all. Hence, it cannot fall under this category.
- The second category is one where the institution makes no profit but hires the services of employees as in other like businesses but the goods and services, which are the output, are made available, at low or no cost, to the indigent needy who are priced out of the market.
This category puts forward tricky but most colloquially sound characteristics to suit any educational institutions that are financially supported by a charitable organisation. Hence, if one is to analyse these institutions, generally, they can be said to fall under the second category.
This is because the educational institutions run through charity comply with the requirements mentioned in the second category. This is because these institutions do possess a workable relationship between the employer and the employees where the employer is either the charitable institutions’ committee, or a person appointed by them to do so. The employees in these cases are the teachers. Hence, it can safely be stated that such charitable educational institutions fitting these conditions can be called an industry.
- “The third category is where the establishment is oriented on a humane mission fulfilled by men who work, not because they are paid wages, but because they share the passion for the cause and derive job satisfaction from their contribution”.
The arguendo to the generic observation made in the second category is this third category. Say, if there are charitable educational institutions that treat the employers and employees all at par and the primary motive is not to earn wages but voluntarily give in themselves to serve the community by imparting education akin to religious gurukuls or sponsored educational institutions that have honorary passionate faculty members, and no fees or minimalistic fee is charged to the students then such institutions cannot be deemed as industries.
Conclusion
The present analysis suggests that though Charitable Institutions, mostly, and Educational Institutions, entirely, come under the purview of industries yet the nature of amalgamation of the two is subjective and “conditional”. It has been established above that educational institutions per se are an industry. It is this additional element of being charitable that will make it peculiar for the court to decide the position.
When analysed through the lenses of three categories according to their modus operandi those charitable educational institutions that happen to fall under the third category, cannot be deemed to be industries under Section 2(p) of the IRC. However, when observed plainly these institutions, in most probabilities, can fairly be put under the second category of charitable institutions ergo; be deemed as industries. In that case, a plausible suggestion while analysing such cases could be one on the basis of a hypothesis. The hypothesis being that these institutions fall under the second category and hence, are industries. The court could, if required, eventually negate this assertion if the factual matrix of the case indicates otherwise. However, the hypothesis-based analysis can be very beneficial since, most such institutions comply with such assertion save exceptional cases and hence, this will aid in expediting the judicial process.
Manvi Mehta,
a third year student at HNLU, Raipur.
Image credits: M3M Foundation
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