On 28th September 2020, four new labour law codes were introduced by the Central Government which dealt with the subject matter of industrial relations, social security, occupational health, safety and working conditions as well as wages of the employees. Under the Industrial Relations Code, 2020, (hereinafter,IR Code”) three major legislations, i.e., Industrial Disputes Act, 1947, Trade Unions Act, 1926 and Industrial Employment (Standing Orders) Act, 1946, were bunched together for resolving the complex and dynamic relations which originate as a consequence of employment. The IR code has brought about multiple conundrums in the labour laws regarding the definition of industry as well as which kind of institutions shall fall under the ambit and scope of industry. One such conundrum revolves around whether a government hospital comes under the definition of industry or not.

Unfolding the Definition of Industry under IR Code

The‌ ‌term‌ ‌”industry”‌ ‌has‌ ‌seen‌ ‌numerous interpretations ‌over‌ ‌the‌ ‌years‌ ‌throughout‌ ‌the‌ ‌Indian‌ labour law ‌jurisprudence. This is a consequence ‌of‌ ‌uniform‌ ‌legislation‌ ‌and‌ a minimal yet unavoidable amplitude ‌of‌ ‌vagueness‌ ‌in‌ ‌interpretation, ‌as‌ ‌seen‌ in‌ ‌various‌ judicial precedents.‌ ‌However, the IR Code, 2020 provides a broader yet not so exhaustive definition of the term “Industry” as under Section 2 (p). The Section defines an industry as “all corporation activities which are systematic in nature, and are between employer and employee for the purpose of production, distribution or supply of various services as well as goods with an intention of satisfaction of human desire and wants are deemed to be industrial activities. Although, wants shall not be spiritual or religious. As per sub-clause (i) & (ii), the term does not depend upon the capital investment or profit motive of the said institution.” 

In addition to this, as per Section 2 (p) (ii), certain exclusions are provided for, from the definition of an industry. Institutions which are entirely or partially owned or operated by groups which involve a voluntary, charitable or humanitarian service, operations of Government which relate to a sovereign function and domestic services have been expressly excluded from being termed as an “industry” ·          

The definition given by IR Code is different from the definition provided in Section 2 (j) of the Industrial Disputes Act, 1947. It excluded institutions such as scientific research, hospitals and educational institutions from “industry”. 

The Bangalore Water Supply Case and Triple Test

Since no such complete exclusion is provided in the IR Code, it can be concluded that this definition gains its essence from the landmark pronouncements in the case of Bangalore Water Supply & Sewerage Board v. A. Rajappa&Ors.(hereinafter, “Bangalore Water Supply Case), which provided a similar definition. Multiple developments in the definition of the term “industry”, along with the highly crucial triple test were laid down through this decision. The Triple Test states that an “industry”, prima facie, includes:

  1. Systematic and organized action.
  2. Collaboration and cooperation between employer and employee.
  3. Production and distribution of goods or services for want satisfaction.

The Bangalore Water supply case sanctioned certain other notable points in the decision as well. The decision established that capital investment and profit generation motives are immaterial to the definition. Nature of activity and relation between employer and employee shall be the deciding factors for concluding as to whether an institution is an industry or not. It excluded spiritual as well as religious institutions from the scope of industries.

Apart from the most crucial triple test, another test was laid down by the decision, i.e., the Dominant Nature Test, which explains that in case there is a combination of activities that both pass and fail the triple test, activities with predominant nature will be considered and accordingly, the inclusion within the term industry will be decided.

Are State Run Hospitals Industry?

A variety of contentions can be presented to decide whether a hospital that is managed and operated by Government Authorities falls within the ambit of industry or not. The provision of material relief to the citizens and the fact that profit motive is considered immaterial to the scope of industry are the main prongs to the argument. Several Supreme Court judgements have dealt with this question at length. 

Firstly, in the case of State of Bombay v. Hospital MazdoorSabha, hospital services by the government were held to be an industry since (a) they provide material relief to people through systematic activities with the help of workers and (b) whether an activity is carried out with a profit motive or not, does not create a difference in its character for being an industry.

Further, in the case of LalitHariAyurvedic College of Pharmacy vs. Workers Union, this rule was reiterated, wherein a hospital providing medical services to students was put under the ambit of industry. However, the decision of Mazdoor Sabha was overturned by Management of Safdarjung Hospital v. Kuldip Singh, which held that since the Government does not aim at profits, such hospitals cannot fall within the definition of an “industry”. Finally, in the judgement of the Bangalore Water Supply Case, this decision was overruled through the triple test.

Secondly, according to Section 2 (p), for hospitals that are maintained by the Government, it is crucial to understand the nature of the activity undertaken by the authorities. Article 47 of the Constitution defines the duty of the State for uplifting nutrition levels and standard of living along with improving public health at large. Although, as per Article 298, a commercial activity can also be taken up by the Government. Mere contention that the employer is Government cannot circle out its possibility of being an industry.

In D.N. Banerji v. P. R. Mukherjee, it was held that the crucial element is to look at whether the services provided by an institution are monetary and marketable or not. Services of mere spiritual value do not constitute industry, i.e., services by charitable institutions which are solely based on philanthropic intent. However, hospital services which are provided by the Government are not philanthropic in nature but are rather commercial; it includes services which are distributed to the society at large.

Another factor that needs to be addressed is the relationship between employee and employer for the provision of material services. In the Bangalore Water Supply Case, it was ruled by the court that hospitals provide material services as well as retain employer-employee relation and hence fall within the scope of an industry, irrespective of the fact whether it’s maintained by a public or private agency.

Even in the case of a State-run hospital conducting research activities, as contained in the dominant test given under Bangalore Water Supply case, the research activity would be superseded by the hospital facility as it is predominant. In reference to the provision of Section 2 (p), it becomes pertinent that a hospital run by the Government is an industry since the hospital facilities and research activities are providing the public with material services.

Therefore, from the above jurisprudence, it can be concluded that a hospital run by the Government for the purpose of providing medical facilities to patients, may it be for profit motive or not, will fall under the ambit of industry in accordance with Section 2 (p) and Triple test as laid down in Bangalore Water Supply Case’.

Exception to the General Rule

Although it has been established that a State-run Hospital shall be termed as an industry, there still remains the question as to whether there exists an exception to the general rule. Both commercial as well as charitable hospitals managed by the Government, which pass the triple test are termed an “industry”. However, those Government hospitals that indulge in a sovereign function will not come under the purview of “industry”. The exclusion clause (ii) of Section 2 (p) of IR Code states that operations of the Government that relate to a sovereign function, including defence, atomic research, and space shall be excluded from the definition. Thus, the hospitals run by the Government which are related to sovereign functions such as a ‘Military Hospital’ or a hospital under the DRDO, shall not be considered under the ambit of industry. 


The IR Code combines multiple prominent labour legislations into a single unified statute, which was called for, after the judgement of Bangalore Water Supply Case. The case streamlined the judicial interpretation of the definition of an industry. It aimed at clearing out the flaws and confusions regarding whether certain institutions such as a hospital run by the Government shall fall under the ambit of industry or not. The conundrum is solved through a catena of judgments as well as the legislative provisions being read in proper context, that such a hospital will come under the purview of industry, since the profit motive of the hospital is immaterial and it involves a systematic activity which leads to material relief to the citizens. Despite the fact that there is an exception, which is a hospital serving a sovereign function such as a military hospital, it can be concluded that a State-run hospital is an industry, as the general rule.

Sakshi Shrivastava, a Third Year Student at, HNLU, Raipur.

Picture credits: Times of India







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