The Delhi High Court has recently held that the office of a Controller General of Patents, Designs and Trademarks is an industry under Section 2(j) of the Industrial Disputes Act and it directed reinstatement of workers illegally retrenched from their services.

It also held that the Supreme Court’s verdict in Umadevi vs State of Karnataka, (2006) 4 SCC 1, does not impact the powers of a labour court or power of judicial review of the high court under Article 227 of the Constitution, to order reinstatement of victims of unfair labour practices. The Court also resisted an argument stating that the office of Controller General was performing a ‘sovereign function’ and that it did not qualify the dominant nature test, stipulated by the seven-judge Constitution Bench of the supreme Court in Bangalore Water Supply & Sewage Board v a. Rajappa, (1978) 2 SCC 213.

The Court resisted the argument that the office of Controller General was performing a ‘sovereign function’ and that it did not qualify the dominant nature test, stipulated by the seven-judge Constitution Bench of the Supreme Court in Bangalore Water Supply & Sewerage Board vs. A. Rajappa, (1978) 2 SCC 213.

Justice C Hari Shankar also stated that,

  1. Every function rendered by the Government, is not sovereign.
  2. All sovereign functions are not insulated from Section 2(j) of the ID Act, and
  3. Sovereign Functions, which are core, maintainable and, thus, ‘strictly’ sovereign, alone, escape the clutches of Section 2(j)

This was based on the case of chief Conservator of Forests v. Jagannath Maruti Kondhare, (1996) 2 SCC 293, whereby it was held that ‘strict’ sovereign functions, alone, are excepted from the ambit of Section 2(j) of the ID Act.

Justice Hari Shankar also observed that,” Only such functions may be regarded as ‘inalienably sovereign’ as could not, constitutionally and at any point of time, ever be delegated to a private authority, as they are incapable of being discharged by private persons. The fact that, in view of the statutory dispensation, existing at a particular point of time, the function is required to be discharged by the Government, or by a Government authority, would not, ipso facto, be sufficient to characterize the function as ‘sovereign’.”

The case of State of Bombay vs. Hospital Mazdoor Sabha, was cited whereby the Supreme Court had held that “if a business or activity could not be carried on by a private individual or group individuals, It could not be an industry; while if it could be, it might fall within the scope of ‘industry’.

The Court held that ‘analogy’ with trade or business is an essential sine qua non for an establishment to be an ‘industry’ within the meaning of Section 2(j) of the ID Act; and this analogy could be inferred in the running of the establishment, not in the manner in which its proceeds are used. In the Bangalore Water Supply case, a ‘triple-test’ was mentioned, which was used as a reference in this judgment.

Link to image: http://bit.ly/36kWpmr

Link to judgment: Union of India v. Raju Kumar Shah & ors.