What can fairly be regarded as a sufficiently elastic or flexible working principle for this purpose has been discussed in a number of decisions of this Court of which we may refer only to three, namely, the Hospital Mazdoor Sabha case (AIR 1960 SC 610), The Madras Gymkhana case (AIR 1968 SC 554) and the Safdarjung Hospital case (AIR 1970 SC 1407). Though the language used in these decisions to state the working principle is not uniform and there are minor variations in the formulation according as one aspect is more emphasised than the other, the working principle laid down is basically the same. Gajendragadkar, J., (as he then was) speaking on behalf of the Court in the Hospital Mazdoor Sabha case stated the working principle in these terms:
“……as a working principle it may be stated that an activity systematically or habitually undertaken for the production or distribution of goods or for the rendering of material services to the community at large or a part of such community with the help of employees is an undertaking. Such an activity generally involves the cooperation of the employer and the employees; and its object is the satisfaction of material human needs. It must be organised or arranged in a manner in which trade or business is generally organised or arranged. It must not be casual nor must it be for oneself nor for pleasure. Thus the manner in which the activity in question is organised or arranged, the condition of the co-operation between employer and the employee necessary for its success and its object to render material service to the community can be regarded as some of the features which are distinctive of activities to which Section 2(j ) applies.” It was the same working principle which was pithily expressed by this Court through Hidayatullah J., (as he then was) in the Madras Gymkhana case where it was stated:”……before the work engaged in can be described as an industry, it must bear the definite character of ‘trade’ or ‘business’ or manufacture’ or ‘calling’ or must be capable of being described as an undertaking resulting in material goods or material services”. This last proposition taken from the judgment in the Madras Gymkhana case was in so many terms accepted as valid in the Safdarjung Hospital case:vide page 189 of the Report. This Court speaking through Hidayatullah C. J., pointed out in the Safdarjung Hospital case at pages 186 and 187 of the Report .
“But in the collocation of the terms and their definitions these terms have a definite economic content of a particular type and on the authorities of this Court have been uniformly accepted as excluding professions and are only concerned with the production, distribution and consumption of wealth and the production and availability of material services. Industry has thus been accepted to mean only trade and business, manufacture, or undertaking analogous to trade or business for the production of material goods or wealth and material services.”
What is meant by ‘material’ services in this context was explained by the learned Chief Justice in these words:
“Material services are not services which depend wholly or largely upon the contribution of professional knowledge, skill or dexterity for the production of a result. Such services being given individually and by individuals are services no doubt but not material services. Even an establishment where many such operate cannot be said to convert their professional services into material services. Material services involve an activity carried on through cooperation between employers and employees to provide the community with the use of something such as electric power, water, transportation, mail delivery, telephones and the like, In providing these services, there may be employment of trained men and even professional men, but the emphasis is not on what these men do but upon the productivity of a service organised as an industry and commercially valuable. Thus the services of professional men involving benefit to individuals according to their needs, such as doctors, teachers, lawyers, solicitors etc, are easily distinguishable from an activity such as transport service. The latter is of a commercial character in which something is brought into existence quite apart from the benefit to particular individuals. It is the production of this something which is described as the production of material services.”
The learned Chief Justice then proceeded to explain why professions must be held to be outside the ambit of industry. This is what he said:
“A profession ordinarily is an occupation requiring intellectual skill, often coupled with manual skill. Thus a teacher uses purely intellectual skill while a painter uses both. In any event, they are not engaged in an occupation in which employers and employees co-operate in the production or sale of commodities or arrangement for their production or sale or distribution and their services cannot be described as material services.” It was for this reason, observed the learned Chief Justice, that the establishment of a solicitor was held not to be an industry “because there the services rendered by employees were in aid of professional men and not productive of material goods or wealth or material services”, National Union of Commercial Employees v. M R Meher, (1962) Supp (3) SCR157 . The learned Chief Justice pointed out that in the University of Delhi v. Ramnath. (1964) 2 SCR 703 the University was also held to be outside the ambit of industry for the same reason. The learned Chief Justice then summarised the working principle-the broad test or criterion for determining what is an undertaking analogous to trade or business – in these terms:
“It, therefore, follows that before an industrial dispute can be raised between employers and their employees or between employers and employers or between employees and employees in relation to the employment or non-employment or the terms of employment or with the conditions of labour of any person, there must be first established a relationship of employers and employees associating together, the former following a trade, business, manufacture, undertaking or calling of employer in the production of material goods and material services and the latter following any calling service, employment, handicraft, or industrial occupation or avocation of workmen in aid of the employers’ enterprise. It is not necessary that there must be a profit motive but the enterprise must be analogous to trade or business in a commercial sense.”
and after referring to the observations of Isaacs and Rich. JJ., in Federated Municipal and Shire Council Employees of Australia v. Melbourne Corporation, 26 CLR 508 (Aus) pointed out that these observations showed that “industrial disputes occur in operations in which employers and employees associate to provide what people want and desire, in other words, where there is production of material goods or material services.” (emphasis added).
It would thus be seen that the broad test for determining when an undertaking can be said to be analogous to trade or business laid down in the Safdarjung Hospital case (AIR 1970 SC 1407) was the same as in the Hospital Mazdoor Sabha case (AIR 1960 SC 610). The Safdarjung Hospital case did not make any real departure from the enunciation of this test. It is only in the application of this test to the case of hospitals that the Safdarjung Hospital case took a different view and observed that the judgment in the Hospital Mazdoor Sabha case had taken “an extreme view of the matter which was not justified”. There was also one other ground on which the decision in the Safdarjung Hospital case disapproved of the view taken in the Hospital Mazdoor Sabha case and that ground was that the decision in the Hospital Mazdoor Sabha case proceeded on an erroneous basis that an activity, in order to be an undertaking analogous to trade or business, need not be an economic activity and applied a wrong test, namely, ‘can such activity be carried on by private individuals or group of individuals?’ It would, therefore, seem that, in view of the decision in Safdarjung Hospital case, this last test applied in the Hospital Mazdoor Sabha case must be rejected as irrelevant and it must be held that an activity, in order to be recognised as an undertaking analogous to trade or business, must be an economic activity in the sense that it is productive of material goods or material services.
