The Hindu : Opinion / News Analysis : Legislation should redefine `industry'

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Friday, Jun 10, 2005

Opinion

Opinion - News Analysis

Legislation should redefine `industry'

R. Gopalakrishnan

Major policy issues are best decided by the legislative and not the judicial process.

THE RULING by a five-judge Supreme Court Bench, recommending the setting up of a larger Bench to review the definition of "industry" as interpreted in law since 1978, is a wake up call to the legislature and the executive. The crux of the issue before the court (in State of Uttar Pradesh vs Jas Bir Singh, taken up along with nine other civil appeals) was whether, for purposes of application of the Industrial Disputes Act (IDA) 1947, a landmark 1978 ruling of the apex court that amplified the definition of "industry" should continue to be the law of the land.

The 1978 ruling, delivered by a seven-member Bench headed by Justice V.R. Krishna Iyer (in Bangalore Water Supply and Sewerage Board vs A. Rajappa) was the result of disputes arising in establishments that are not manufacturing industry but belong to categories such as hospitals, educational and research institutions, government departments, public utilities, professions and clubs. The Krishna Iyer Bench order had expanded the definition of industry, for purposes of interpretation of Section 2(j) of the IDA, to cover most establishments that involved employer-employee relationship, irrespective of the objectives of the organisation concerned and its ownership and structure.

Employers in many service establishments and Government departments, aggrieved by the ruling, raised demands for their exclusion from the ambit of the IDA. Parliament subsequently passed in 1982 an amendment to the IDA, which sought to exclude many kinds of establishments from the definition. However, the amendment was never notified.

The latest order of the Bench headed by Justice N. Santosh Hegde holds that the Iyer Bench order needs a review in view of the executive's failure to notify and enforce the amended restrictive definition of "industry". (The Government had explained before courts that the 1982 amendment was not notified in view of the fact that no alternative machinery for redress of grievances of employees in establishments excluded by the amendment had been provided).

The Hegde Bench itself has pointed out that it was only in the absence of an unambiguous definition of industry in the IDA that the apex court delivered its ruling in 1978. And that, at the same time, Justice Krishna Iyer had said that "our judgment has no pontifical flavour but seeks to serve the future hour till changes in the law or in industrial culture occur."

No doubt, the question of a differentiated piece of industrial relations legislation for service establishments is becoming ever more relevant because the role of the service sector in the economy is growing. Services are also becoming a subject of international trade negotiations and are being opened to foreign capital. Many service activities such as health care, education, water and power supply, for long either the obligation or the prerogative of governments, are now undertaken by private entrepreneurs.

There is a need, on the one side, to protect the legitimate interests and democratic rights of workers in these sectors, and, on the other, to minimise the scope for disruption of industrial peace in these vital sectors to protect the interests of the public. All these reasons are important enough to warrant a separate law for these services.

However, some observations made by the Hegde Bench in favour of a legal review of the 1978 ruling are on quite different lines and highly debatable. The order says that there is an "overemphasis on the rights of workers" in industrial law and that this has resulted in payment of "huge amounts as back wages" to workers illegally terminated or retrenched and that these awards "sometimes take away the very substratum of industry."

Justice Krishna Iyer had remarked in his ruling (quoted by the Hegde order itself) that the "working class, unfamiliar with the sophistications of definitions and shower of decisions, unable to secure expert legal opinion, what with poverty pricing them out of the justice market and denying them the staying power to withstand the multi-decked litigative process, de facto is denied social justice if legal drafting is vagarious, definitions indefinite and court rulings contradictory." These remarks were made in support of an expansive definition of "industry."

The Hegde Bench ruling attributes what it calls "the inhibitions and the difficulties which are being exercised by the legislature and the executive in bringing into force the amended industrial law" to the interpretation of the definition of "industry" in the 1978 judgment. This also ignores the explanation given by the Government for non-enforcement of the restrictive amendment.

Only assumptions?

The apex court says that "an over-expansive interpretation of the definition of industry might be a deterrent to private enterprise in India where public employment opportunities are scarce."

However, neither economic theory nor the decades of growth of the market economy in developed countries testifies to protection of employees' basic rights being a hurdle to progress. Thus the remarks on macroeconomic tendencies made by the latest ruling seem to be no more than assumptions.

Justice Chandrachud, a member of the Bench that delivered the 1978 verdict, had said that the "problem [of definition of industry] is far too policy-oriented to be satisfactorily settled by judicial decisions. Parliament must step in and legislate in a manner which will leave no doubt as to its intention."

These are wise words.

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