India: Housing Society Is Not An Industry Under The Industrial Disputes Act, Even If It Earns Profit: Bombay High Court

In a recent judgment in Arihant Siddhi Co. Op. Hg. Soc. Ltd. Vs. Pushpa Vishnu More and Ors. (MANU/MH/1927/2018), the Bombay High Court has held that a co-operative housing society cannot be said to be an 'industry' within the meaning of Section 2(j) of the Industrial Disputes Act.

Facts

The Petitioner, a co-operative housing society had engaged Respondent No. 1 as a watchman. Upon his completion of 60 years of age, his services were terminated with effect from 1st November, 2000. The Petitioner stated that the termination was with mutual consent and that the Watchman (Respondent) was paid ex-gratia/retirement benefit, which was accepted by him. The Respondent, thereafter, raised a demand for reinstatement.

Contentions of the Parties

The watchman (respondent no.1) contended that he was a permanent employee of the Petitioner and was terminated without any enquiry or offering proper retrenchment compensation. The reference was resisted by the Petitioner on the ground that the Petitioner was a housing society; that the services rendered by Respondent No. 1 were personal services; and that the society not being an industry nor Respondent No. 1 its Workman within the meaning of the term under the Industrial Disputes Act, the reference was not maintainable.

Impugned Order of the Labour Court

While allowing the plea of the Respondent in the impugned order, the Labour Court had held that though the Petitioner was a co-operative housing society, it earned profits by way of additional income from its members and accordingly, fell within the definition of Industry. The Court held that the profit motive was proved and that the society could not be termed merely as a housing society. Accordingly, it held the reference to be maintainable and then proceeded to decide the other issues concerning legality of the termination and the reliefs to be granted to Respondent.

Observations

The High Court observed that the Labour Court seems to have been swayed by the fact that the society was charging advertisement charges for the neon signs put up by few members carrying on businesses such as coaching classes and dispensary in the society. The Court also observed that the services rendered by Respondent No. 1 to the society and its members in the premises could not be termed as personal services. The High Court stated that there was a fundamental fallacy in the reasoning of the Labour Court that since society was earning income in the premises, it could not be termed as a mere housing society. In the present case, merely because the society charged some extra charges from a few of its members for display of neon signs, the society cannot be treated as an Industry carrying on business of hiring out of neon signs or allowing display of advertisements.

Decision of the High Court

This Court while setting aside the order of the Labour Court relied on in its judgment in the case of M/s. Shantivan-II Co. Op. Hsg. Society vs. Smt. Manjula Govind Mahida (W.P. No. 360 of 2007 dated June 21, 2018). In the said judgment, the court had held that a co-operative housing society cannot be termed as an industry within the meaning of Section 2(j) of the Industrial Disputes Act merely because it carries on some commercial activity, not as its predominant activity, but as an adjunct to its main activity. This Court has held that such society is not an industry. In a case like this, that is to say, where there is a complex of activities, some of which may qualify the undertaking as an industry and some would not, what one has to consider is the predominant nature of services or activities. This Court also relied on the true test laid down by the Apex Court in the case of Bangalore Water Supply and Sewerage Board vs. A. Rajappa MANU/SC/0257/1978 : 1978(ii) SCC Page 213, wherein it was held that if the predominant nature is to render services to its own members and the other activities are merely an adjunct, the undertaking is not an industry. Accordingly, the order of reinstatement and full back wages of the watchman as an industrial worker was set aside.

Conclusion

Section 2 of the Industrial Disputes Act, 1967, 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. However, as held by the Supreme Court in the case of Bangalore Water Supply mentioned above and re-iterated in the present case, when there are multiple activities carried on by an establishment, its dominant function is to be considered. If the predominant function of an undertaking/establishment is not commercial, its employees shall not be entitled to the benefits of a workman of an industry under the Industrial Disputes Act, 1947.

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