Predominant Function Of Undertakings Performing Several Functions Must Be Considered For Determination Of Status As 'Industry' Under ID Act: Delhi High Court

It was further observed that associations and societies of apartment owners employ workers for personal service. Therefore, those workers would not be considered as workmen and such societies would not be considered as industry under the Industrial Disputes Act.

Brief Facts:

The matter pertained to a dispute concerning the employment status of workers involved in the maintenance and security operations of the Kanchanjunga building. Initially, the building's promoters, M/s Kailash Nath & Associates, engaged individuals for these tasks. However, this arrangement shifted over time, with the flat owners forming an association, Kanchanjanga Flat Owners Association, to manage these responsibilities. Subsequently, an agreement was made with M/s Goliath Securities Pvt. Ltd. to handle security and maintenance services, leading to the transfer of workers through intermediary contractors.

The workers, dissatisfied with their employment status, raised an industrial dispute seeking regularization of their services. This dispute was referred to the Industrial Tribunal, which, in an award, ruled against the workers, denying them relief. The workers, aggrieved by this decision, filed a petition in the Delhi High Court (“High Court”) to challenge the award.

The workers' union argued that the Tribunal erred in denying regularization, emphasizing the workers' long-standing service and the purported misuse of contractual arrangements to deprive them of benefits. Conversely, the Association contended that the award was rightfully passed. It argued against the validity of the petition, stating that the union was not registered.

Observations by the High Court:

Even though the Tribunal ruled against the regularisation of Workmen, the High Court noted that the Tribunal held that the society employed workers for the security and maintenance of common areas rather than for residential purposes. Based on this, the Tribunal concluded that the society's activities fell within the definition of an industry under Section 2(j) of the Industrial Disputes Act, 1947.

However, the High Court held that the law regarding whether a society or association of flat owners constitutes an industry has been clarified by various Supreme Court decisions such as Bangalore Water Supply & Sewerage Board v. A. Rajappa [(1978) 2 SCC 213]. In this case, it was held that 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, the employees working there shall not be entitled to the benefits of a workman of an industry under the ID Act. Therefore, the High Court held that the dominant function of the establishment is crucial in determining whether it qualifies as an industry.

Further, the High Court referred to Som Vihar Apartment Owners' Housing Maintenance Society Ltd. v. Workmen [(2002) 9 SCC 652], wherein it was held that when an association or society of apartment owners employs workers for personal services to its members, those workers do not qualify as workmen under the Act, and the association does not fall under the definition of an industry.

Without interfering with the finding of the Tribunal concerning the non-entitlement of regularization of Workmen's services, the High Court held that Respondent no. 1 was not an industry as per the definition of Section 2 (j) of the ID Act since its dominant function does not include providing or conducting commercial activities rather the workmen deployed in the respondent society is merely to provide personal services through the contractor.

Regarding the invocation of Article 226 of the Constitution of India, the High Court reiterated that to invoke its writ jurisdiction, it must be proven that the lower court exceeded its jurisdiction, acted illegally, or made errors apparent on the face of the record. The High Court found no such grounds and therefore upheld the Tribunal's decision regarding the regularization issue.

Therefore, the High Court dismissed the petition, upholding the Tribunal's decision regarding the non-entitlement of the workmen to regularization and setting aside the finding that the society constituted an industry under Section 2(j) of the Act.

Case Title: Kanchanjunga Building Employees Union Vs Kanchanjunga Flat Owner's Society & Anr

Citation: 2024 LiveLaw (Del) 545

Case Number:W.P.(C) 6193/2008

Advocate for the Petitioner: Mr. Manoj Joshi, Advocate

Advocate for the Respondent: Mr. Harvinder Singh, Advocate for R-1 (Through VC)