“NGO Not an Industry, states court, dismissing case”
This has
reference to a Report in the Mumbai Mirror of Sunday, 28th
May 2017 captioned: “NGO Not an Industry,
states court, dismissing case”
reference to a Report in the Mumbai Mirror of Sunday, 28th
May 2017 captioned: “NGO Not an Industry,
states court, dismissing case”
The report
states: “Seven years after an NGO employee approached the Labour
Court alleging unfair labour practices in the organisation, which is
run by an ex-MLA, the court has dismissed the complaint saying that
salaried NGO workers cannot approach Labour Courts.”
states: “Seven years after an NGO employee approached the Labour
Court alleging unfair labour practices in the organisation, which is
run by an ex-MLA, the court has dismissed the complaint saying that
salaried NGO workers cannot approach Labour Courts.”
Read more
at:
http://mumbaimirror.indiatimes.com/mumbai/other/ngo-not-an-industry-says-court-dismissing-case/articleshow/58876577.cms
at:
http://mumbaimirror.indiatimes.com/mumbai/other/ngo-not-an-industry-says-court-dismissing-case/articleshow/58876577.cms
In our view,
this matter has been examined over three decades ago by the Supreme
Court in the landmark case “Bangalore Water Supply and Sewerage
Board v. R. Rajappa” and whether a charitable institution is an
industry or not is now a settled case law! The recent verdict can
easily be challenged at a higher court of law.
this matter has been examined over three decades ago by the Supreme
Court in the landmark case “Bangalore Water Supply and Sewerage
Board v. R. Rajappa” and whether a charitable institution is an
industry or not is now a settled case law! The recent verdict can
easily be challenged at a higher court of law.
What is
Industry?
Industry?
Section 2(j)
of the Industrial Disputes Act, 1947 defines ‘Industry’ as “any
business, trade, undertaking,
manufacture, or calling of employers and includes any calling,
service, employment, handicraft or industrial occupation or avocation
of workmen”.
of the Industrial Disputes Act, 1947 defines ‘Industry’ as “any
business, trade, undertaking,
manufacture, or calling of employers and includes any calling,
service, employment, handicraft or industrial occupation or avocation
of workmen”.
The first
principle we need to understand is, industry
exists only when there is relationship between employers and
employees.
principle we need to understand is, industry
exists only when there is relationship between employers and
employees.
The Supreme
Court had held: “Any activity will be
industry if it fulfills the ‘triple test’, as under:
Court had held: “Any activity will be
industry if it fulfills the ‘triple test’, as under:
-
Systematic
and organized activity; -
With
the cooperation between Employers and employees; -
For
the production and distribution of good and services whether or not
capital has been invested for this activity.”
The Supreme
Court was clear in the understanding that it is immaterial whether or
not there is profit motive or whether or not there is capital. If the
organization is a trade or business it does not cease to be one
because of philanthropy overriding or overshadowing the triple test
and such organizations therefore cannot be exempted from the scope of
definition of industry.
Court was clear in the understanding that it is immaterial whether or
not there is profit motive or whether or not there is capital. If the
organization is a trade or business it does not cease to be one
because of philanthropy overriding or overshadowing the triple test
and such organizations therefore cannot be exempted from the scope of
definition of industry.
There is
also the “Dominant nature” test. Where there are complex
activities, the test would be predominant nature of services and
integrated nature of departments.
also the “Dominant nature” test. Where there are complex
activities, the test would be predominant nature of services and
integrated nature of departments.
The
exceptions to industry are:
exceptions to industry are:
-
Casual
activities (because they are not systematic); -
Small
clubs, cooperatives, research labs, gurukuls
which have an essentially volunteer or
non-employee character; -
Single
door lawyer taking help from clerk (because there is no organized
labour); -
Charitable
activities carried on through volunteers e.g. free legal or medical
service; -
Sovereign
functions, i.e., maintenance of law and order, legislative functions
and judicial function.
Charitable
institutions fall under three categories:
institutions fall under three categories:
-
Those
that generate profit (or surplus income), but the profits or surplus
income is used only for charitable purposes; -
Those
that make no profit or surplus income, but, hire the service of
employees as in any other business, but the goods/ services which
are the output, are made available at a low/subsidized or no cost to
the indigent poor; and -
Those
that are driven by mission to serve humanity and fulfilled by men
and women who work, not because they are paid wages, but because
they share the passion for the cause and derive job satisfaction.
The first
two categories are industries, but not the third, on the assumption
that they all involve co-operation between employers and employees.
two categories are industries, but not the third, on the assumption
that they all involve co-operation between employers and employees.
What is
an Undertaking?
an Undertaking?
Ultimately,
it is the character of the activity in question which attracts the
provisions of Sec. 2 (j). Who conducts the activity (a business or a
charitable institution) and whether it is conducted for profit or
not, does not make any material difference. 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’.
it is the character of the activity in question which attracts the
provisions of Sec. 2 (j). Who conducts the activity (a business or a
charitable institution) and whether it is conducted for profit or
not, does not make any material difference. 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’.
Activities
that have no commercial implications, such as hospitals with
philanthropic motives would be covered by the expression
‘undertaking’. The mere fact that Government or a charitable
trust runs such activity is immaterial.
that have no commercial implications, such as hospitals with
philanthropic motives would be covered by the expression
‘undertaking’. The mere fact that Government or a charitable
trust runs such activity is immaterial.
In
Management of Safdarjung Hospital v. Kuldip
Singh, it was held that a place of treatment
of patients run as a department of the government was not an industry
because it was a part of the functions of the government. Charitable
hospitals run by Government or even private associations cannot be
included in the definition of industry because they have not embarked
upon economic activities analogous to trade or business. If
hospitals, nursing home or a dispensary is run as a business in a
commercial way, there may be elements of industry.
Management of Safdarjung Hospital v. Kuldip
Singh, it was held that a place of treatment
of patients run as a department of the government was not an industry
because it was a part of the functions of the government. Charitable
hospitals run by Government or even private associations cannot be
included in the definition of industry because they have not embarked
upon economic activities analogous to trade or business. If
hospitals, nursing home or a dispensary is run as a business in a
commercial way, there may be elements of industry.
In
Dhanrajgiri Hospital v. Workmen,
the main activity of the hospital was imparting of training in
nursing and the beds in the hospital were meant for their practical
training. It was held not to be an industry, as it was not carrying
on any economic activity in the nature of trade or business.
Dhanrajgiri Hospital v. Workmen,
the main activity of the hospital was imparting of training in
nursing and the beds in the hospital were meant for their practical
training. It was held not to be an industry, as it was not carrying
on any economic activity in the nature of trade or business.
However, in
Bangalore Water Supply v A. Rajappa,
the Supreme Court overruled Safdarjung Hospital and Dhanrajgiri
Hospital cases, and approved the law laid down in Hospital Mazdoor
Sabha case. It was held that hospital
facilities are surely services and hence industries.
The government departments while undertaking welfare activities
cannot be said to be engaged in discharging sovereign functions and
hence outside the ambit of Sec.2(j) of the Act.
Bangalore Water Supply v A. Rajappa,
the Supreme Court overruled Safdarjung Hospital and Dhanrajgiri
Hospital cases, and approved the law laid down in Hospital Mazdoor
Sabha case. It was held that hospital
facilities are surely services and hence industries.
The government departments while undertaking welfare activities
cannot be said to be engaged in discharging sovereign functions and
hence outside the ambit of Sec.2(j) of the Act.
Therefore, a
charitable hospital run by a private trust, offering free services
and employing a permanent staff is an industry as there is a
systematic activity, a cooperation between employer and employees and
rendering of services which satisfies human wants and wishes.
charitable hospital run by a private trust, offering free services
and employing a permanent staff is an industry as there is a
systematic activity, a cooperation between employer and employees and
rendering of services which satisfies human wants and wishes.
Conclusion
Is NGO and
Industry or not?
Industry or not?
Yes, NGO is
an industry if there is a systematic activity, a cooperation between
employer and employees and rendering of services which satisfies
human wants and wishes. It matters not if the NGO runs solely on
grants or donations or whether there is capital, profit or surplus or
otherwise.
an industry if there is a systematic activity, a cooperation between
employer and employees and rendering of services which satisfies
human wants and wishes. It matters not if the NGO runs solely on
grants or donations or whether there is capital, profit or surplus or
otherwise.
for any further queries, write to connect@capindia.in